Banks are now becoming sufficiently sensitive to the needs of small business that they are at least promoting the fact that they are providing small business loans. Before jumping for joy, understand that "this year" numbers compare to "last year" numbers, which were the worst in history. However, if you are looking for a small business loan, these are good places to start:
Bank of America
Leading their effort to boost the small business economy, Bank of America promised to increase lending by $5 billion this year. With the halfway point behind them, the bank has already met that goal. In the first six months Bank of America made $45.4 billion in loans – already $9 billion more than was loaned during the same time period last year. In addition to their push to increase small business credit, the bank has improved policies on their small business credit accounts and pledged to increase spending over the next five years. While credit account holders will benefit from no rate increases, small- and medium-sized businesses stand to benefit from $10 billion in purchases of products and services from vendors in their sector over the next five years.
Wells Fargo
Well-known as the owner of Wachovia, Wells Fargo has done their part to enhance small businesses financing opportunities. After conducting small business surveys, the bank found that an increased number of owners no longer expected increases of revenue, cash flow, and spending from their businesses over the next year. During the last quarter, Wells Fargo combated those fears by increasing small-business lending by approximately 30 percent. They also committed to getting more money into the small business community by taking a second look at applicants that were previously declined. By increasing their lending and giving potential loan recipients another chance, Wells Fargo hopes to turn around the perception of small business lending and get other lenders to follow suit.
Citigroup
Citigroup made its pledge to help boost the small business community by targeting economically depressed areas. Citigroup has found its niche in finding small businesses that have gone from being a standard applicant to a high risk because of the economy. The bank has promised funds to below-market-rate loans to qualified business owners in this category. Over the last six months, Citigroup has doubled its small-business lending.
JP Morgan Chase
Similar to its competitors, JP Morgan Chase has set a lofty goal of making $10 billion in new loans to companies with under $20 million in revenue. If met, this goal would increase their 2009 goal by $6 billion. In the first half of 2010, JP Morgan Chase has increased its lending (which includes credit cards) by 37%. In addition to hiring 235 new small-business bankers, the company has also awarded $110 million in loans to small business applicants that were originally turned down. The “second-look loans” that have become popular with JP Morgan and Wells Fargo indicate that banks are reevaluating their business lending processes.
Regional Banks
Although the actions of the national banks are encouraging, many business owners remain concerned about smaller, regional banks. Traditionally these banks were advocates for small businesses and accounted for a large portion of overall small-business loans due to their palatable qualification requirements. Unfortunately, these banks are still facing big financial difficulties. The hope is that lending increases from the “power-house” banks will give smaller banks and the small business community the boost they need to find financial success for all parties involved.
Wednesday, September 01, 2010
Friday, August 27, 2010
Women, Walk Away From This Kind Of Bank
There is a bank in Utah that is introducing special services for women entrepreneurs. That bank shall remain nameless since this is not a flattering review.
The press release stated:
The press release stated:
Seeing that women business owners were underserved by financial institutions in Southern Utah, we developed a robust set of dedicated banking products and services for this growing market.Women’s Banking products and services include a free “no minimum balance” business account, a micro business line of credit, free business courier, use of Town & Country’s board room, a free safe deposit box and more. The bank also plans to co-sponsor various women’s interest events, and donate funds to women-oriented programs.
Well, how about that. Micro loans. Free safe deposit box. No minimum balance account. There is nothing wrong with any of these services, but why are they restricted to women? Why are women categorized as tiny enterprises? And why it is assumed that only women could benefit from these services? How about ALL minorites? In fact, how about making it available to all entrepreneurs. Period. No exceptions.
If I were a woman, I would find this kind of discrimination insulting.
The world of business needs help. Everyone. So make it available to everyone.
Thursday, August 26, 2010
The Key Ingredient For A Successful Business Plan
People do business with people they know. Unless you are really a jerk, that is the absolute truth.
There's a mentality in life that says we can deal with the problems we know, even mediocre service, a lot easier than we can try new products and services. And the more money that is involved, the truer this becomes. We might well try out a new gas station in the area, but when our Mercedes needs fixed, we will go to a known repair shop.
That is what makes it so critical for new businesses to really plan to jump start businesses, right at the very beginning. Deep discounts, parties, PR stories, sports sponsorships, media blasts -- all of these things become increasingly important as the cost of your product/service rises.
That is also what we have said for years, that a business plan is not about money. It is about energy. It is about having the ability to get the job done. It is about having the ability to sell your product or service. Without this ability, it truly does not matter whether you are looking for $1,000 or $10,000,000 -- you won't get it.
In truth, the marketing plan portion of the business plan is more important than the financial summaries. Anybody can jockey numbers around to show a successful business in the financials. Not everyone can create a winning marketing plan. Bankers know it as well as you do. Of course, to really hit a home run, you need both sections, and more. But focus on the marketing. The financials will take care of themselves.
There's a mentality in life that says we can deal with the problems we know, even mediocre service, a lot easier than we can try new products and services. And the more money that is involved, the truer this becomes. We might well try out a new gas station in the area, but when our Mercedes needs fixed, we will go to a known repair shop.
That is what makes it so critical for new businesses to really plan to jump start businesses, right at the very beginning. Deep discounts, parties, PR stories, sports sponsorships, media blasts -- all of these things become increasingly important as the cost of your product/service rises.
That is also what we have said for years, that a business plan is not about money. It is about energy. It is about having the ability to get the job done. It is about having the ability to sell your product or service. Without this ability, it truly does not matter whether you are looking for $1,000 or $10,000,000 -- you won't get it.
In truth, the marketing plan portion of the business plan is more important than the financial summaries. Anybody can jockey numbers around to show a successful business in the financials. Not everyone can create a winning marketing plan. Bankers know it as well as you do. Of course, to really hit a home run, you need both sections, and more. But focus on the marketing. The financials will take care of themselves.
Are You Ready To Go International? The US Government Will Help
About 97% of all exporters in the US are small businesses. That's logical because big businesses just establish manufacturing and distribution centers around the world.
Those small business exporters sell nearly $500 billion annually. Now that's a number to catch your attention. So the SBA is setting up programs to help small businesses export more. The New York/ New Jersey area is one of the lucky areas to host an Export Matchmaker Trade Fair & Conference.
The Trade Fair & Conference at the Westin Hotel in Jersey City, N.J., on September 20, 2010. The event, organized in the context of the President’s National Export Initiative, aims to assist New York-New Jersey small business manufacturers and suppliers with exporting their products.
The matchmaking conference is designed to bring together small businesses looking for additional markets together with export management companies (EMC), export trading companies (ETC), brokers and agents. Also known as trade intermediaries, EMCs and ETCs are export specialists that will buy a company’s products and sell them in foreign markets or represent a company’s products in foreign markets through a distribution or similar contract.
Working with an EMC or ETC is often the fastest way for small businesses to either begin exporting or expand export sales because they do not need to commit additional staff to the effort. By using trade intermediaries, small businesses can make it easier and quicker to begin marketing and selling to the nearly 96 percent of the world’s population living outside the U.S.
“One of President Obama’s goals stated in the National Export Initiative is to double U.S. exports in five years,” said SBA Administrator Karen Mills. “Tapping the export potential of more small businesses through events like this will get us closer to that goal.”
The SBA is encouraging trade intermediaries from across the country, as well as foreign buying missions and other trade facilitators such as foreign consulates and bi-national chambers of commerce, shippers, and other trade- or export-services organizations to participate in the event.
For more information and to register for the event, visit www.exportmatchmaker.org.
Those small business exporters sell nearly $500 billion annually. Now that's a number to catch your attention. So the SBA is setting up programs to help small businesses export more. The New York/ New Jersey area is one of the lucky areas to host an Export Matchmaker Trade Fair & Conference.
The Trade Fair & Conference at the Westin Hotel in Jersey City, N.J., on September 20, 2010. The event, organized in the context of the President’s National Export Initiative, aims to assist New York-New Jersey small business manufacturers and suppliers with exporting their products.
The matchmaking conference is designed to bring together small businesses looking for additional markets together with export management companies (EMC), export trading companies (ETC), brokers and agents. Also known as trade intermediaries, EMCs and ETCs are export specialists that will buy a company’s products and sell them in foreign markets or represent a company’s products in foreign markets through a distribution or similar contract.
Working with an EMC or ETC is often the fastest way for small businesses to either begin exporting or expand export sales because they do not need to commit additional staff to the effort. By using trade intermediaries, small businesses can make it easier and quicker to begin marketing and selling to the nearly 96 percent of the world’s population living outside the U.S.
“One of President Obama’s goals stated in the National Export Initiative is to double U.S. exports in five years,” said SBA Administrator Karen Mills. “Tapping the export potential of more small businesses through events like this will get us closer to that goal.”
The SBA is encouraging trade intermediaries from across the country, as well as foreign buying missions and other trade facilitators such as foreign consulates and bi-national chambers of commerce, shippers, and other trade- or export-services organizations to participate in the event.
For more information and to register for the event, visit www.exportmatchmaker.org.
Saturday, August 07, 2010
Don't Snub Your Nose At Microloans
I got another one today: an email from a reader who scolded me for spending so much time and energy writing about microloans. I won't repeat his language, but he wasn't very happy.
OK, so microloans aren't for everyone. But they can be used very effectively for over 95% of the businesses now starting up, for two very big reasons: (1) a whole lot of start ups are smaller now than they were a few years ago, and (2) a training component usually comes with the microloan, something that many small entrepreneurs would never seek out on their own.
Let's look at that "small" issue. BIG is no longer "in". BIG means that you have an MBA and know how to create a spreadsheet. It doesn't say diddly about your ability to start and successfully run a company. The entrepreneurs who now gain respect are those who use street smarts to build a business from ground up.
The San Francisco Chronicle recently reported on one of these micro-entrepreneurs and the Women's Initiative. Loretta Nguyen took a business training class and scraped together several thousand dollars to start silk screening T-shirts and hoodies that she initially sold at street fairs and over the Web.
Recently Nguyen moved her firm, Fiftyseven-thirtythree, into a storefront on Piedmont Avenue in Oakland, illustrating how microlending and training programs deliver great bang-per-buck when it comes to job creation, advocates say.
"I learned so much about how to put my plan into action," said Nguyen, 33, who took a training course through the Women's Initiative for Self-Employment, a Bay Area nonprofit that is one of a network of microfinance organizations that help people start businesses. Nguyen now employs two full full workers, and two part time workers.
The Women's Initiative recently looked back at 2,600 clients who took 10 or more hours of business training between 2004 and 2008, and discovered that they had created 2,244 jobs - for themselves or for others - at a cost of a little over $4,000 per job.
About 15 percent of Women's Initiative clients also take out small loans in addition to training, but many graduates, like Nguyen, choose businesses that can grow through hard work.
The trick is not to "think small", but to think about "starting small". Let the business grow under its own steam. You will end up with a business that you can be eminently proud of.
OK, so microloans aren't for everyone. But they can be used very effectively for over 95% of the businesses now starting up, for two very big reasons: (1) a whole lot of start ups are smaller now than they were a few years ago, and (2) a training component usually comes with the microloan, something that many small entrepreneurs would never seek out on their own.
Let's look at that "small" issue. BIG is no longer "in". BIG means that you have an MBA and know how to create a spreadsheet. It doesn't say diddly about your ability to start and successfully run a company. The entrepreneurs who now gain respect are those who use street smarts to build a business from ground up.
The San Francisco Chronicle recently reported on one of these micro-entrepreneurs and the Women's Initiative. Loretta Nguyen took a business training class and scraped together several thousand dollars to start silk screening T-shirts and hoodies that she initially sold at street fairs and over the Web.
Recently Nguyen moved her firm, Fiftyseven-thirtythree, into a storefront on Piedmont Avenue in Oakland, illustrating how microlending and training programs deliver great bang-per-buck when it comes to job creation, advocates say.
"I learned so much about how to put my plan into action," said Nguyen, 33, who took a training course through the Women's Initiative for Self-Employment, a Bay Area nonprofit that is one of a network of microfinance organizations that help people start businesses. Nguyen now employs two full full workers, and two part time workers.
The Women's Initiative recently looked back at 2,600 clients who took 10 or more hours of business training between 2004 and 2008, and discovered that they had created 2,244 jobs - for themselves or for others - at a cost of a little over $4,000 per job.
About 15 percent of Women's Initiative clients also take out small loans in addition to training, but many graduates, like Nguyen, choose businesses that can grow through hard work.
The trick is not to "think small", but to think about "starting small". Let the business grow under its own steam. You will end up with a business that you can be eminently proud of.
Thursday, August 05, 2010
Microloans Are Bursting Out All Over
Bank of American has a brand new twist on microloans for small business. B of A has announced that it will give $10 million in grants to nonprofit lenders, which could in turn stimulate a total of $100 million in lending.
Instead of working with direct lending, the grants will provide leverage to non-profit lenders so that they can access many times the actual value of the grants.
The official statement explained, "[N]onprofit lenders participating in these federal loan programs must set aside loan loss reserves at levels of up to 15 percent of the capital provided by the agencies. . . . Bank of America's new microloan reserve grants were created specifically to help CDFIs and other nonprofit lenders meet the required reserve levels, and thereby access millions of dollars in new low-cost capital."
Bank of America hopes to help as many as 8,000 small businesses over the next 12 months as a result.
The interest rates on these loans should be quite low, so be sure to follow the situation if a loan starts to sound like the thing for your firm. And even if it doesn't, this move could help the whole economy.
David Darnell, Bank of America's president of Global Commercial Banking, reasoned, "Even the smallest grant enables a CDFI to leverage as much as ten times that amount to lend to small businesses, which helps initiate a ripple effect impacting job growth, spending and overall economic expansion."
Instead of working with direct lending, the grants will provide leverage to non-profit lenders so that they can access many times the actual value of the grants.
The official statement explained, "[N]onprofit lenders participating in these federal loan programs must set aside loan loss reserves at levels of up to 15 percent of the capital provided by the agencies. . . . Bank of America's new microloan reserve grants were created specifically to help CDFIs and other nonprofit lenders meet the required reserve levels, and thereby access millions of dollars in new low-cost capital."
Bank of America hopes to help as many as 8,000 small businesses over the next 12 months as a result.
The interest rates on these loans should be quite low, so be sure to follow the situation if a loan starts to sound like the thing for your firm. And even if it doesn't, this move could help the whole economy.
David Darnell, Bank of America's president of Global Commercial Banking, reasoned, "Even the smallest grant enables a CDFI to leverage as much as ten times that amount to lend to small businesses, which helps initiate a ripple effect impacting job growth, spending and overall economic expansion."
Friday, July 30, 2010
Franchise Business Plan? NO!
Start your own business. Don't franchise. For about 99.9% of entrepreneurs, that is the best advice we can give. There is one very good reason: FRANCHISES DON'T WORK.
Do you have any idea what the failure rate of franchises is? 2% ? 3%? Well, take a deep breath and take a look at the Franchise Failure Report published by the SBA. [Go ahead, Read it. I'll wait.]
Surprised? So were we. We were under the delusion that franchises are more successful than non-franchises. But it just ain't necessarily so. In fact, overall, INDEPENDENT BUSINESSES ARE MORE SUCCESSFUL THAN FRANCHISES. Sorry to shout, but that is a very important concept. Why in heaven's name would anyone pay all that money when their success will be less likely? I dunno.
I don't mean to ding all franchises. Clearly a MacDonald's franchise of a KFC franchise can be hugely successful, as can many others. The problem is that too many companies jumped on the franchise bandwagon, seeking high franchise fees without delivering value for those fees.
Franchises, too, are famous for "training entrepreneurs". Baloney. If you really want to find out what it's like to be an entrepreneur, go apprentice yourself to a successful entrepreneur in your field. It will cost a whole lot less than a franchise, and you will learn a whole lot more.
Franchises make sense when they have a truly strong reputation or a truly unique product/service. Very few do. I have an excellent maid service, but it is not from a franchise. The lady who cuts my hair does a great job, very inexpensively, and that salon is not part of a franchise. My very favorite local cafe serves food that is fresh from southern California farmers, costs no more than the "biggies" and is not a franchise. The garage that oils and lubes my car is part of a franchise, but only because gas stations have to be franchisees in order to buy gas. There is a row of franchise quickie restaurants down the street, each one just a little greasier than the next.
Can we advise you to NOT franchise? No, we can't. For some people, it will be the best alternative. But do, please really really investigate the option of starting your own independent business. Once you are a franchised business, you will be paying the home company many of thousands of dollars every single year. Make sure it is truly worth it.
Do you have any idea what the failure rate of franchises is? 2% ? 3%? Well, take a deep breath and take a look at the Franchise Failure Report published by the SBA. [Go ahead, Read it. I'll wait.]
Surprised? So were we. We were under the delusion that franchises are more successful than non-franchises. But it just ain't necessarily so. In fact, overall, INDEPENDENT BUSINESSES ARE MORE SUCCESSFUL THAN FRANCHISES. Sorry to shout, but that is a very important concept. Why in heaven's name would anyone pay all that money when their success will be less likely? I dunno.
I don't mean to ding all franchises. Clearly a MacDonald's franchise of a KFC franchise can be hugely successful, as can many others. The problem is that too many companies jumped on the franchise bandwagon, seeking high franchise fees without delivering value for those fees.
Franchises, too, are famous for "training entrepreneurs". Baloney. If you really want to find out what it's like to be an entrepreneur, go apprentice yourself to a successful entrepreneur in your field. It will cost a whole lot less than a franchise, and you will learn a whole lot more.
Franchises make sense when they have a truly strong reputation or a truly unique product/service. Very few do. I have an excellent maid service, but it is not from a franchise. The lady who cuts my hair does a great job, very inexpensively, and that salon is not part of a franchise. My very favorite local cafe serves food that is fresh from southern California farmers, costs no more than the "biggies" and is not a franchise. The garage that oils and lubes my car is part of a franchise, but only because gas stations have to be franchisees in order to buy gas. There is a row of franchise quickie restaurants down the street, each one just a little greasier than the next.
Can we advise you to NOT franchise? No, we can't. For some people, it will be the best alternative. But do, please really really investigate the option of starting your own independent business. Once you are a franchised business, you will be paying the home company many of thousands of dollars every single year. Make sure it is truly worth it.
Tuesday, July 27, 2010
Need A Loan? Match It With Cash. And a little good news ...
Want a loan? You better have cash.
As the saying goes, it takes money to make money and small business loan seekers being asked for alternative collateral--in the form of cash in case of a default--are finding it no different. Commercial banking reps from Bank of America tell the Wall Street Journal that underwriting standards haven't changed. (Borrowers must have sufficient cash flow to support the loan and an alternative source of repayment.) But because that collateral was often a combination accounts receivable, inventory, or real estate, and the value of those assets may have fallen, loans are being denied.
The Wall Street Journal talked to Mi-Box Moving & Storage owner Tony Corso, who sought a $250,000 loan to buy more trucks and storage to meet growing demand. The three banks that were willing to look at Corso's loan application asked him to use his entire business as collateral, sign a personal guarantee, and deposit cash into an account equal to the amount of the loan.
So what's the good news? The Senate overcame a Republican filibuster to support President Obama's $30 billion government fund to help increase lending to small businesses by community banks with less than $10 billion in assets.
As the saying goes, it takes money to make money and small business loan seekers being asked for alternative collateral--in the form of cash in case of a default--are finding it no different. Commercial banking reps from Bank of America tell the Wall Street Journal that underwriting standards haven't changed. (Borrowers must have sufficient cash flow to support the loan and an alternative source of repayment.) But because that collateral was often a combination accounts receivable, inventory, or real estate, and the value of those assets may have fallen, loans are being denied.
The Wall Street Journal talked to Mi-Box Moving & Storage owner Tony Corso, who sought a $250,000 loan to buy more trucks and storage to meet growing demand. The three banks that were willing to look at Corso's loan application asked him to use his entire business as collateral, sign a personal guarantee, and deposit cash into an account equal to the amount of the loan.
So what's the good news? The Senate overcame a Republican filibuster to support President Obama's $30 billion government fund to help increase lending to small businesses by community banks with less than $10 billion in assets.
SBA Regional Cluster Loans
The SBA is looking to work with 10 to 15 existing regional clusters nationwide in fiscal 2010 under its Regional Clusters Initiative. These clusters will create and follow roadmaps that enhance their region's ability to compete on a national and global scale, attract further business investments, and create sustainable job growth. The focus is on technical assistance, business training and other services.
SBA will accept proposals from local and regional cluster initiatives for funding of up to $600,000 per cluster. SBA is launching two programs within the initiative: Regional Innovation Clusters and Advanced Defense Technologies.
SBA support will be targeted toward the needs of entrepreneurs and small businesses. To access the agency's request for proposals to participate, frequently asked questions about the initiative and more information, go to www.sba.gov/clusters/index.html. More info on the RIC and ADT clusters is also available at www.fedbizopps.gov.
For the most part these are small loans for small businesses, not mid size businesses. The credit requirements will be established by each cluster, meaning that there is a chance that some loans will be available for those with less than stellar credit. Check with you local SBA office to see who will be handling the funds in your area.
Monday, July 19, 2010
Venture Capital Drying Up. And Now The Good News ...
The Wall Street Journal reported today that venture capital as we know it may well be on its way out. New funds are a fraction of what they used to be ($1.9 billion last quarter compared to a high of $33 billion in 2000). Perhaps more importantly, venture funds aren't making money for investors. This is devastating news if you happen to be one of the few investors still around.
WSJ stated bluntly, "The sector [venture capital] could shrivel, losing its status as an asset class alongside private equity."
And, yes, there is good news in all of this.
It means, for instance, that venture capital firms are less likely to act like a herd of cattle, following the leader over a cliff, such as happened in the dot-com bust. More prudent investments is good for everyone.
It means that all companies, start ups and expansions, will need to be creative in seeking financing, and more resourceful in using that financing. That makes for better entrepreneurs, and a strong economy all around.
It means that more companies will start small, taking the time to prove their mettle before going for big bucks. That creates a more solid business foundation.
If all venture capital dried up tomorrow, it wouldn't mean the end of entrepreneurship as we know it. Not by a long shot. The money that is there will still be there. It will just be in other types of funds, other types of investment. I see angel investors kicking into higher gear, and taking a real interest in making viable businesses successful. I see credit unions, and yes even banks, with more money to loan. I see more partnerships with large companies. I see more incubators popping up.
I also see new types of businesses. The small one or two or three person business is seeing an upsurge that is going unnoticed by most reporters. These businesses for the most part just don't require heavy investment, and the impact on the economy is be enormous. Since a lot of these businesses are home-based, they are absolutely flying under the radar.
There is a whole new business paradigm emerging, one with energy and ideas and real potential. As we have said many times, it is small business that is going to pull the country out of the doldrums. Not government programs. Not more venture capital. Not even more bank loans. But solid entrepreneurship that doesn't rely on venture capital or government handouts.
So we are not unhappy that venture capital is drying up. There is lots of good news accompanying that announcement.
WSJ stated bluntly, "The sector [venture capital] could shrivel, losing its status as an asset class alongside private equity."
And, yes, there is good news in all of this.
It means, for instance, that venture capital firms are less likely to act like a herd of cattle, following the leader over a cliff, such as happened in the dot-com bust. More prudent investments is good for everyone.
It means that all companies, start ups and expansions, will need to be creative in seeking financing, and more resourceful in using that financing. That makes for better entrepreneurs, and a strong economy all around.
It means that more companies will start small, taking the time to prove their mettle before going for big bucks. That creates a more solid business foundation.
If all venture capital dried up tomorrow, it wouldn't mean the end of entrepreneurship as we know it. Not by a long shot. The money that is there will still be there. It will just be in other types of funds, other types of investment. I see angel investors kicking into higher gear, and taking a real interest in making viable businesses successful. I see credit unions, and yes even banks, with more money to loan. I see more partnerships with large companies. I see more incubators popping up.
I also see new types of businesses. The small one or two or three person business is seeing an upsurge that is going unnoticed by most reporters. These businesses for the most part just don't require heavy investment, and the impact on the economy is be enormous. Since a lot of these businesses are home-based, they are absolutely flying under the radar.
There is a whole new business paradigm emerging, one with energy and ideas and real potential. As we have said many times, it is small business that is going to pull the country out of the doldrums. Not government programs. Not more venture capital. Not even more bank loans. But solid entrepreneurship that doesn't rely on venture capital or government handouts.
So we are not unhappy that venture capital is drying up. There is lots of good news accompanying that announcement.
Wednesday, July 14, 2010
The Best Kept Secret In The Venture Capital World
I've been reading lately about "search funds". This is a strange little investment vehicle where potential investors pay a couple hundred thousand to "searchers" (i.e, "experts" in venture capital investment) to find potentially good deals. Then the investors pay several hundred thousand more to actually invest in the "found" company.
Did I mention that it was investors like these that led to the dot-com bust?
A much, much better option for qualified companies is to approach venture capital firms, even if their companies don't meet the stated requirements of that venture firm. Read that again: ... even if their companies don't meet the stated requirements of that venture firm.
First, make sure there is some sort of connection between your company and the investors' interests. Perhaps you share an interest in suppliers or distribution channel. But if the firm says they don't invest in anything less than $5 million, and your company needs $200,000, well give it a shot. (This is assuming, of course, that your company has the "magic" that venture firms look for. Local retail outlets or restaurants don't usually qualify on that count.)
There are several possible consequences to submitting a business plan to venture capital firm that is clearly not your prime target. First, odds are you will get rejected. And most will reject you outright. So get psychologically prepared for that.
Or there just might be someone in that venture firm who thinks your idea has merit, someone who will champion your cause. Perhaps this someone will provide limited funding. Perhaps s/he will give you an indication of who might fund it. Perhaps s/he will act as an advisor to your company. There are a lot of scenarios here, and each one is a winner.
And this is the best kept secret: No one advertises that they do this. But they do. Not all the time. But they do do it.
The key is to target your approach to right person at the venture fund. Do a bit research. Find a common ground somewhere. If you can go in with a recommendation, do it. And be ready with a great business plan, a strong website presence, a solid Advisory Board, and as much else as you can muster.
These "search funds" are pretty much pie in the sky. They weren't invented at Harvard, as the Wall Street Journal would have us believe. They have been part and parcel of the venture capital world for at least 50 years. They have never really caught on because they don't work.
So put your energy into reaching a real venture capital source, someone engaged in the business on a daily basis, someone who knows what's what and who's who. That's where your success is.
Did I mention that it was investors like these that led to the dot-com bust?
A much, much better option for qualified companies is to approach venture capital firms, even if their companies don't meet the stated requirements of that venture firm. Read that again: ... even if their companies don't meet the stated requirements of that venture firm.
First, make sure there is some sort of connection between your company and the investors' interests. Perhaps you share an interest in suppliers or distribution channel. But if the firm says they don't invest in anything less than $5 million, and your company needs $200,000, well give it a shot. (This is assuming, of course, that your company has the "magic" that venture firms look for. Local retail outlets or restaurants don't usually qualify on that count.)
There are several possible consequences to submitting a business plan to venture capital firm that is clearly not your prime target. First, odds are you will get rejected. And most will reject you outright. So get psychologically prepared for that.
Or there just might be someone in that venture firm who thinks your idea has merit, someone who will champion your cause. Perhaps this someone will provide limited funding. Perhaps s/he will give you an indication of who might fund it. Perhaps s/he will act as an advisor to your company. There are a lot of scenarios here, and each one is a winner.
And this is the best kept secret: No one advertises that they do this. But they do. Not all the time. But they do do it.
The key is to target your approach to right person at the venture fund. Do a bit research. Find a common ground somewhere. If you can go in with a recommendation, do it. And be ready with a great business plan, a strong website presence, a solid Advisory Board, and as much else as you can muster.
These "search funds" are pretty much pie in the sky. They weren't invented at Harvard, as the Wall Street Journal would have us believe. They have been part and parcel of the venture capital world for at least 50 years. They have never really caught on because they don't work.
So put your energy into reaching a real venture capital source, someone engaged in the business on a daily basis, someone who knows what's what and who's who. That's where your success is.
Friday, July 09, 2010
Shoes for Cash
It is truly an axiom that the business world runs on credit. Even those who have no personal debt at all hold to the notion that businesses are somehow required to carry debt to be successful. And there is a valid basis for this assumption.
Assume, for instance, that retail stores were prohibited from carrying debt. We all know that stores can only sell what they've got, so the more they have, the more they will sell. When they lose financing, zap! they are done.
Well, maybe.
Set large businesses aside. Let's look at the 90% of businesses that have fewer than 10 employees. How important is it -- really -- for these businesses to carry debt financing? How about Susie's Sassy Shoes? Does Susie really need business financing so she can buy 5,000 pairs of shoes? That financing costs money, so Susie has to charge more for the shoes to pay for the financing.
And what about Angela's Footwear down the street? Angela has no debt; she buys all her product on cash, and even takes the 2-3% cash discount. Angela doesn't have as many shoes, but her prices are lower because the loan costs don't have to be factored in. Also, because her inventory is lower, her shop is smaller and her rent is lower, as are her utilities.
If we had a contest between these two stores, who would win? Common knowledge says that Susie would. But I am just not so sure.
We live in a very cost conscious age. As a consumer, I am willing to give up some of the stylish things I used to have in order to live a thriftier life, a more debt-free life. I am looking for VALUE. And so, I suspect, are millions of others.
It may be time to re-think that debt financing assumption we have held for so long. The world is being re-build on a new foundation, one that isn't so reliant on debt financing. And business needs to catch up.
Assume, for instance, that retail stores were prohibited from carrying debt. We all know that stores can only sell what they've got, so the more they have, the more they will sell. When they lose financing, zap! they are done.
Well, maybe.
Set large businesses aside. Let's look at the 90% of businesses that have fewer than 10 employees. How important is it -- really -- for these businesses to carry debt financing? How about Susie's Sassy Shoes? Does Susie really need business financing so she can buy 5,000 pairs of shoes? That financing costs money, so Susie has to charge more for the shoes to pay for the financing.
And what about Angela's Footwear down the street? Angela has no debt; she buys all her product on cash, and even takes the 2-3% cash discount. Angela doesn't have as many shoes, but her prices are lower because the loan costs don't have to be factored in. Also, because her inventory is lower, her shop is smaller and her rent is lower, as are her utilities.
If we had a contest between these two stores, who would win? Common knowledge says that Susie would. But I am just not so sure.
We live in a very cost conscious age. As a consumer, I am willing to give up some of the stylish things I used to have in order to live a thriftier life, a more debt-free life. I am looking for VALUE. And so, I suspect, are millions of others.
It may be time to re-think that debt financing assumption we have held for so long. The world is being re-build on a new foundation, one that isn't so reliant on debt financing. And business needs to catch up.
$50 Million in Loans To Go To New York Small Businesses
$50 million here. A billion there. $100 million somewhere else. It is starting to add up. No single program is going to rescue the small business business world, but the more entities that contribute, the better it is going to get.
The most recent addition is the State of New York. A study in October ordered by the Governor's office found that there is a crisis in small business lending. Loans to small businesses shrank from $14 billion in 2006 to only $7 billion last year.
Governor David Paterson has led the brigade to provide $25 million from the State, to be matched with another $25 million from community development financial institutions. These community development financial institutions will then loan funds to small businesses at discounted rates.
The $50 million clearly won't replace the $14 billion that was loaned previously, but it is better have the $50 million than not.
We assume at this point that the various community develop0ment financial institutions will create their own set of rules on who will get the funding. We assume, too, that they will be held to standards of equal opportunity.
The most recent addition is the State of New York. A study in October ordered by the Governor's office found that there is a crisis in small business lending. Loans to small businesses shrank from $14 billion in 2006 to only $7 billion last year.
Governor David Paterson has led the brigade to provide $25 million from the State, to be matched with another $25 million from community development financial institutions. These community development financial institutions will then loan funds to small businesses at discounted rates.
The $50 million clearly won't replace the $14 billion that was loaned previously, but it is better have the $50 million than not.
We assume at this point that the various community develop0ment financial institutions will create their own set of rules on who will get the funding. We assume, too, that they will be held to standards of equal opportunity.
Thursday, July 08, 2010
The Newest Business Financing Scam
I could not believe it. The Wall Street Journal actually had an article about how a baker raised financing from customers by promising them cupcakes. Cupcakes!! And from customers!!
I, and about 600 other people jumped on WSJ for promoting this scam. Scam, you say? Why is this a scam? His customers gave him money. He gave them cupcakes. Sounds like a reasonable transaction.
It is the newest business financing scam on several fronts.
First, it is outrageously unrealistic. I don't know about you, but I am not about to ask my customers for money. If I need money, I will talk with my banker. Period. Maybe my suppliers. Or my landlord. But my customers? Not by a long shot. Never, never do I want my customers to get a hint that I am short on funds ... for any reason.
Second, it is a scam because a cottage business has sprung up overnight, with scam artists selling very expensive "programs" that theortetically help an entrepreneur raise this kind of "crowd" financing. Who the heck do they think they are kidding? A few isolated businesses may get funding this way, but a few isolated businesses also win money in the lottery.
I looked at some of the sites that do this and discovered that there are a couple of groups that do well. For example, non profits do well in raising this type of financing. But by definition, a non-profit is NOT a business, and shouldn't be lumped in with for-profit ventures.
Those that are essentially pre-selling their product do well. For example, a singer pre-selling her next recording raised enough to make the recording. Those who "donated" a certain amount simply received a copy of the recording. There were other fancier gifts for bigger donations, but doners didn't seem interested in those.
Artsy stuff did a lot better than non-artsy stuff, which is fine. It is good that we help out our creative folk.
But where do you and I and 99.9% of other business fall into this? We don't.
And that is why all the hoopla and "programs" are such scams.
I, and about 600 other people jumped on WSJ for promoting this scam. Scam, you say? Why is this a scam? His customers gave him money. He gave them cupcakes. Sounds like a reasonable transaction.
It is the newest business financing scam on several fronts.
First, it is outrageously unrealistic. I don't know about you, but I am not about to ask my customers for money. If I need money, I will talk with my banker. Period. Maybe my suppliers. Or my landlord. But my customers? Not by a long shot. Never, never do I want my customers to get a hint that I am short on funds ... for any reason.
Second, it is a scam because a cottage business has sprung up overnight, with scam artists selling very expensive "programs" that theortetically help an entrepreneur raise this kind of "crowd" financing. Who the heck do they think they are kidding? A few isolated businesses may get funding this way, but a few isolated businesses also win money in the lottery.
I looked at some of the sites that do this and discovered that there are a couple of groups that do well. For example, non profits do well in raising this type of financing. But by definition, a non-profit is NOT a business, and shouldn't be lumped in with for-profit ventures.
Those that are essentially pre-selling their product do well. For example, a singer pre-selling her next recording raised enough to make the recording. Those who "donated" a certain amount simply received a copy of the recording. There were other fancier gifts for bigger donations, but doners didn't seem interested in those.
Artsy stuff did a lot better than non-artsy stuff, which is fine. It is good that we help out our creative folk.
But where do you and I and 99.9% of other business fall into this? We don't.
And that is why all the hoopla and "programs" are such scams.
Tuesday, July 06, 2010
$5,000 to $25,000 SBA Loans Available via Sam's Club!!!
Hallelujah! This is a marriage between Sam's Club and Superior Financial Group that will benefit thousands of small entrepreneurs.
Superior Financial Group is the largest SBA lender in the country. Sam's Club is certainly one of the largest retailers in the country. Now, every member of Sam's Club is invited to apply for a $5,000 to $25,000 SBA loan administered by Superior Finance.
This is truly a win-win-win scenario.
The form is a simple online form. No business plan needed.
No collateral is required. (Good credit is required.)
No pre-payment penalties or balloon payments.
To come prepared to pay several hundred dollars in up front costs, so serious entrepreneurs only.
Although Sam's doesn't say so, my guess is that these loans are possible due to economies of electronic filing and tracking. Small loans have always been a hassle for banks due to the time involved in reviewing and tracking them. Sam's and Superior Financial Group are cutting through all that red tape and just getting the money into the hands of entrepreneurs who can use it. Huge kudos to these two major companies for watching out for the small guy.
Check it out on Sam's site.
There is another HUGE benefit that isn't mentioned: Forcing banks into similar action. If anyone can do it, Sam's can. Sam's is a subsidiary of Walmart, the biggest low end retailer in the world. Walmart forced thousands of businesses to rethink pricing, forcing down the price on untold millions of items. If Sam's is now entering the SBA banking arena, this can only be great news for small entrepreneurs.
This is definitely a red letter day for SBA loans. May the loan be with you!
Superior Financial Group is the largest SBA lender in the country. Sam's Club is certainly one of the largest retailers in the country. Now, every member of Sam's Club is invited to apply for a $5,000 to $25,000 SBA loan administered by Superior Finance.
This is truly a win-win-win scenario.
The form is a simple online form. No business plan needed.
No collateral is required. (Good credit is required.)
No pre-payment penalties or balloon payments.
To come prepared to pay several hundred dollars in up front costs, so serious entrepreneurs only.
Although Sam's doesn't say so, my guess is that these loans are possible due to economies of electronic filing and tracking. Small loans have always been a hassle for banks due to the time involved in reviewing and tracking them. Sam's and Superior Financial Group are cutting through all that red tape and just getting the money into the hands of entrepreneurs who can use it. Huge kudos to these two major companies for watching out for the small guy.
Check it out on Sam's site.
There is another HUGE benefit that isn't mentioned: Forcing banks into similar action. If anyone can do it, Sam's can. Sam's is a subsidiary of Walmart, the biggest low end retailer in the world. Walmart forced thousands of businesses to rethink pricing, forcing down the price on untold millions of items. If Sam's is now entering the SBA banking arena, this can only be great news for small entrepreneurs.
This is definitely a red letter day for SBA loans. May the loan be with you!
Monday, July 05, 2010
Bootstrapping: With A Little Help From My Friends
At its most basic, the Bootstrap Group is a super support group. "Super" as in above and beyond all reason. But it is truly much more than that.
In an age of information overload, a new style of networking is getting entrepreneurs' attention. Unlike most business groups, the Bootstrap Network emerged organically, starting with a few friends of an entrepreneur named Bijoy Goswami. Each of these entrepreneurs was running business on his own dime, bootstrapping it -- a tactic far more common that most of us admit. In under three years the Bootstrap Network grew to more than 500 members in Austin, Texas, and inspired similar bootstrapping networks in many other cities, and even some in other countries.
Sometimes, midst the glamour of venture capital and angel investors, we forget that well over 90% of the new businesses got their start by bootstrapping. And it is organizations like the Bootstrap Group that make it possible for many of them to become truly successful.
With the advent of easy international access for all, starting a strong bootstrap group for your niche really wouldn't be that tough. Start out by learning about an online business, then take that knowledge and create a membership site that works. Seek like-minded people as members, and you are on your way! In fact, whether or not you are actively pursuing business, you could actively pursue membership in your bootstrapping membership site and make a tidy income.
In an age of information overload, a new style of networking is getting entrepreneurs' attention. Unlike most business groups, the Bootstrap Network emerged organically, starting with a few friends of an entrepreneur named Bijoy Goswami. Each of these entrepreneurs was running business on his own dime, bootstrapping it -- a tactic far more common that most of us admit. In under three years the Bootstrap Network grew to more than 500 members in Austin, Texas, and inspired similar bootstrapping networks in many other cities, and even some in other countries.
Sometimes, midst the glamour of venture capital and angel investors, we forget that well over 90% of the new businesses got their start by bootstrapping. And it is organizations like the Bootstrap Group that make it possible for many of them to become truly successful.
With the advent of easy international access for all, starting a strong bootstrap group for your niche really wouldn't be that tough. Start out by learning about an online business, then take that knowledge and create a membership site that works. Seek like-minded people as members, and you are on your way! In fact, whether or not you are actively pursuing business, you could actively pursue membership in your bootstrapping membership site and make a tidy income.
Thursday, July 01, 2010
Hire Staff and Save On Loans From Chase
Last year, JP Morgan Chase said it planned to increase its lending to small businesses by $4 billion in 2010 to a total of $10 billion through access to working capital, term loans for expansion, commercial mortgages, lines of credit and business credit cards. It also pledged to hire 325 additional business bankers.
Those plans are being to bear fruit.
Chase has just introduced a new incentive that rewards small businesses for each new employee they hire this year.
Chase will lower its interest rate on a new Chase Business Line of Credit by 0.5 percentage point for each new hire, up to three for the life of the loan. Counting the discount for a new business checking account, a small business owner could save about $4,000 over three years on an outstanding balance of about $65,000, Chase estimates.
"We encourage businesses to take advantage of the lowest interest rates in years and to create more jobs for the economy," said Jamie Dimon, Chairman and Chief Executive Officer of JPMorgan Chase. "We know how important it is to help small businesses because they are core to the U.S. economy."
The offer is available to business owners who are approved for a new Chase Business Line of Credit up to $250,000 or existing business customers who increase their line of credit by $10,000 or more. Chase business checking customers will receive an additional half percent discount on their loan rate.
This isn't a panacea for all ills, but it is certainly another tool in small business' arsenal.
Those plans are being to bear fruit.
Chase has just introduced a new incentive that rewards small businesses for each new employee they hire this year.
Chase will lower its interest rate on a new Chase Business Line of Credit by 0.5 percentage point for each new hire, up to three for the life of the loan. Counting the discount for a new business checking account, a small business owner could save about $4,000 over three years on an outstanding balance of about $65,000, Chase estimates.
"We encourage businesses to take advantage of the lowest interest rates in years and to create more jobs for the economy," said Jamie Dimon, Chairman and Chief Executive Officer of JPMorgan Chase. "We know how important it is to help small businesses because they are core to the U.S. economy."
The offer is available to business owners who are approved for a new Chase Business Line of Credit up to $250,000 or existing business customers who increase their line of credit by $10,000 or more. Chase business checking customers will receive an additional half percent discount on their loan rate.
This isn't a panacea for all ills, but it is certainly another tool in small business' arsenal.
Subscribe to:
Posts (Atom)