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Small Business Success Index 5

Index Score*   Grade
SBSI INDEX 73 C- marginal
Capital Access 67 D+
Marketing & Innovation 65 D
Workforce 76 C
Customer Service 88 B+
Computer Technology 75 C
Compliance 92 A-
*Index score is calculated on a 1-100 scale.
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Where Are VCs Investing Now?

February 14th, 2012 ::

By Karen Axelton

Facebook’s recent IPO may be getting all the attention, but social media isn’t the only area where investors are putting their money. When it comes to venture capitalists, Information Week reports, VCs’ favorite place to invest in 2011 was the health IT sector. Specifically, medical software and information services attracted $633 million in VC investment in 2011–the most this sector has attracted since 2001, according to data from Dow Jones VentureSource.

DowJones data shows VC investment in health IT rose from $394 million in 2009 to $520 million in 2010. 2011 saw a 22 percent increase in dollars invested, along with a 26 percent increase in the total number of deals–from 68 in 2010 to 86 in 2011.

What’s behind the surge of interest in healthcare IT? The last three years have seen wider adoption of electronic health records, accelerated by President Obama’s federan incentives. And consumers’ and healthcare practitioners’ growing comfort with using the Internet, software and mobile devices to store, access and manage health-related data has attracted VCs’ attention.

And their interest in the health IT sector shows no sign of slowing, according to the most recent Venture View survey by Dow Jones VentureSource and the National Venture Capital Association. The poll of more than 500 venture capitalists in late 2011 found 61 percent predict investment in healthcare IT will rise in 2012.

While health IT is a rising star of healthcare VC investments, biopharmaceuticals was still the healthcare industry that got the most VC investment in 2011, with 302 deals at a total of $3.9 billion. However, compared to 2010, that figure represents a 6 percent decline in deals and flat dollar investment.

Medical devices came in second, with 290 deals in 2011 for a total of $3.3 billion. Although the number of deals declined slightly, investment dollars rose by more than 25 percent.

Where are VCs not investing? Perhaps due to uncertainty as to how healthcare reform will actually shake out, investment in healthcare services plummeted from $1.2 billion in 2010 to $541 million in 2011.

Overall, the Dow Jones VentureSource quarterly survey of VC investments in energy, consumer Web and IT, health, and electronics and computer hardware companies showed that total VC investments slowed in the last quarter of 2011, the year overall saw 3,209 deals for a total of $32.6 billion. That’s a 10 percent increase in capital raised and a 6 percent increase in the number of deals compared to 2010.

Image by Flickr user takomabibelot (Creative Commons)

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Posted in Capital Access, Raising Capital, Small Business, small business, Venture Capital | No Comments »

Small Businesses Still Struggle to Obtain Access to Credit

February 7th, 2012 ::

By Karen Axelton

Nearly four years after the nation’s financial meltdown, small business owners seeking financing find themselves between a rock and a hard place. Some 90 percent of small business owners say availability of credit is still a problem for small business, reports a new poll by the American Sustainable Business Council, Main Street Alliance and Small Business Majority. The survey of more than 500 small business owners found that 60 percent of small employers have personally faced difficulties trying to obtain loans to grow their businesses.

Getting capital wasn’t always such an issue for entrepreneurs. A 61 percent majority of respondents say it’s harder for them get loans now than it was four years ago, with 29 percent saying it’s much harder. Only 9 percent of respondents say it’s gotten easier to get a loan.

What do small business owners think would help ease the credit crunch? Some 90 percent of business owners support regulatory changes that would make it simpler for community banks and credit unions to lend to small businesses. Another 77 percent support providing incentives for community banks to lend more to entrepreneurs. Specifically, by more than a 2:1 ratio, small business owners support encouraging credit unions to lend more to entrepreneurs by increasing their member lending cap from 12.25 percent of their assets to 27.5 percent of their assets.

A large majority—82 percent of respondents—also supports tighter credit card regulations, such as clearer disclosure of terms and caps on interest rates. In addition, nearly half, or 47 percent, strongly support these kinds of regulations. The survey also found that 52 percent of small business owners have used credit cards to finance their own business.

Another way small business owners think loans could be made more accessible is by reducing collateral requirements. One-fourth of those surveyed have used their homes as a source of capital for their business through a home equity line of credit. With home equity values dropping in many parts of the country, this type of collateral is no longer available to many entrepreneurs.

Finally, the majority of small business owners, or 57 percent, think that reducing the principal on underwater mortgages to the homes’ current market value would boost consumer spending, which would help small businesses regain market share. Nearly three-fourths (73 percent) said the fallout from the mortgage crisis has hurt their businesses by reducing consumer spending and demand.

The poll also asked respondents about some specific proposals put forth in President Obama’s American Jobs Act. The vast majority (69 percent) supports committing $50 billion to new and existing infrastructure projects—such as making improvements to road, bridge and water systems—that would generate new jobs and help increase consumer spending. Another 59 percent favor creating a nationwide wireless network and improving the accessibility of high-speed wireless services, which would benefit both businesses and consumers.

Read the full report here.

Image by Flickr user Rojer (Creative Commons)


 

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Posted in Capital Access, Raising Capital, Small Business, small business | 2 Comments »

2011: A Good—and Bad—Year for Venture Capital

January 24th, 2012 ::

By Maria Valdez Haubrich

The fourth quarter 2011 data from the National Venture Capital Association is in and there is good news and bad news about the venture capital industry.

The good news is that the amount of money venture capital firms are investing is on the rise; the bad news is that the number of venture capital funds out there is declining. In the U.S., 38 venture capital funds raised a total of $5.6 billion in the fourth quarter of 2011, representing a dollar increase of 162 percent but a 41 percent drop in the number of funds compared to the third quarter of 2011. (In that quarter, 64 funds raised $2.1 billion.) This quarter marked the lowest number of funds raising money since the third quarter of 2009.

In all of 2011, U.S. venture capital fundraising totaled $18.17 billion from 169 funds. That’s a 32 percent increase by dollars compared to 2010, but the same number of funds.

“This past year we saw more venture capital money raised by essentially the same number of firms, a sign that consolidation within the industry is continuing,” said Mark Heesen, president of NVCA, in announcing the data. “We also continued to invest more money in companies than we raised from our investors. Both of these trends – if they continue — suggest that the level and breadth of venture investment is starting to recalibrate to reflect a concentration of capital in the hands of fewer investors. Our cottage industry is indeed getting smaller still and that will impact the startup ecosystem over time.”

How will this shakeout affect small businesses? Consolidation in financial industries generally makes it harder for smaller companies to get backing, as bigger funds with more dollars to invest are more likely to look for high returns and less likely to take risks on smaller firms without a high potential for ROI.

At the same time, a shakeout is also occurring in the IPO market. The NVCA recently reported that in 2011, 52 venture-backed companies went public, representing a value of $9.9 billion. That’s a 31 percent decrease in volume, but a 41 percent increase in dollar value compared to the previous year.

In other words, with both venture capital investment and venture-backed IPOs, the trend is toward fewer and bigger players, meaning bigger—but fewer—deals.

Image by Flickr user photosteve101 (Creative Commons)

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Posted in Capital Access, Small Business, small business, Venture Capital | No Comments »

Small Biz Resource Tip: Multifunding.com

January 19th, 2012 ::

Multifunding.com

Is your bank small business friendly? Do you want to find out all your options for a small business loan? Multifunding.com was founded by Ami Kassar, a leader in financing for small businesses, and was created to help entrepreneurs find the best financing options available on an individual basis. Applicants simply call to describe their financing story; Multifunding will create a proposal with the best possible options for you. If you decide to move forward, Multifunding will help you create the best possible application and walk you through the loan process. You don’t pay unless you get the loan. Plus, a new tool on Multifunding.com grades 6,800 banks across the U.S. using data from the FDIC.

 

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Posted in Capital Access, Raising Capital, Resources, Small Business, small business | 1 Comment »

Two Small Business Technology Programs Get Extended

January 10th, 2012 ::

By Karen Axelton

The National Defense Authorization Act recently signed into law by President Obama has gained notoriety for expanding the scope of the federal government’s authority against terror suspects. Drawing less attention, but perhaps more interesting to small business owners, is that it also reauthorized the Small Business Innovation Research and Small Business Technology Transfer programs for six years, Policy Forum Blog reports.

The Small Business Innovation Research (SBIR) Program and the Small Business Technology Transfer (STTR) Program, administered by the SBA’s Office of Technology,  aim to ensure that small, innovative high-tech businesses are involved in the federal government’s research and development efforts. Eleven federal departments participate in the SBIR program and five departments participate in the STTR program.

Both programs had been through temporary extensions for the past several years. In addition to a six-year reauthorization, the agreement, which was put forth by Rep. Sam Graves (R-MO), chair of the House Committee on Small Business, and Rep. Ralph Hall (R-TX), chair of the House Committee on Science, Space and Technology, also includes these key changes:

  • Greater participation by small businesses that have significant private capital support, increasing venture capital participation to 25 percent for the National Institute of Health, the Department of Energy and the National Science Foundation, and 15 percent for other participating federal agencies;
  • Increased award levels for both Phase I and Phase II. The award guidelines for SBIR and STTR will go from $100,000 to $150,000 for Phase I and from $750,000 to $1 million for Phase II; these are the first increases since 1982.
  • Increasing the SBIR program allocation from 2.5 to 3.2 percent and the STTR allocation from .3 percent to .45 percent. This will enable more small businesses to compete for R&D funds.
  • Standardizing parts of the application process across federal agencies to simplify the process for small businesses;
  • Demanding better coordination between the SBA and participating agencies to guard against waste, fraud and abuse in both the SBIR and STTR programs;
  • Requiring most agencies to review applications within 90 days, so that small businesses have a better idea of when they can expect a decision to be made;
  • Setting forth performance-based standards that will encourage businesses to focus on commercialization.

“Because of this deal, businesses will have peace of mind for the next six years,” said Senator Mary Landrieu (D-LA), chair of the Senate Small Business and Entrepreneurship Committee. “The nation’s innovators will have more access to federal research dollars, and the process by which they get the funding will be more efficient because we cut down the time for final decisions and disbursements.”

Image by Flickr user Francisco Diez (Creative Commons)

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Posted in Capital Access, Raising Capital, Small Business, small business, Technology | 1 Comment »

Financial Execs Have Bleak Outlook for 2012

January 3rd, 2012 ::

By Karen Axelton

How’s the economic outlook for 2012? According to U.S. financial executives polled in the the latest Bank of America Merrill Lynch CFO Outlook survey, not too good.

Just 38 percent of those surveyed in the annual poll said they expect the U.S. economy to expand in 2012, down from 56 percent in last year’s survey and 66 percent in 2009. The CFOs now give the economy a score of 44 out of 100, down from last year’s score of 47 and equal to the lowest score in the survey’s 14-year history.

What specific expectations do CFOs have?

  • Some 56 percent expect revenues to grow in 2012, a decline from 64 percent last year.
  • Forty-one percent anticipate growth in profit margins, down from 55 percent last year.
  • Just 18 percent of CFOs expect to participate in a merger or acquisition in 2012, down from 26 percent a year ago.

What are their big concerns for 2012? Topping the list was the effectiveness of U.S. government leaders, cited as a concern by 70 percent of executives in the survey. Other major worries:

  • The U.S. budget deficit: 63 percent
  • Healthcare costs: 60 percent
  • Unemployment: 58 percent
  • Consumer confidence: 55 percent

When it comes to their own companies, the financial concern was healthcare costs, chosen by 56 percent of CFOs. Other top worries were energy costs and consumer confidence, both at 43 percent; cash flow at 42 percent; and revenue growth at 40 percent.

There is some good news in the survey. First, in spite of their pessimistic outlook, just 7 percent of respondents said they expect layoffs at their companies; 48 percent plan to maintain the same number of employees, and 46 percent said they expect to hire.

Another good sign: CFOs were more likely than last year to say lenders have expanded the amount of capital available to them. In addition, just 21 percent expect their cost of capital to increase, down from 27 percent last year.

How do these responses jibe with what you’re experiencing in your business?

Image by Flickr user Mykl Roventine (Creative Commons)

 

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How Easy Is It for Small Businesses to Find Capital?

December 21st, 2011 ::

By Rieva Lesonsky

How is the economy impacting small businesses—in particular, their access to capital? The Small Business Success Study recently released by The Hartford found that some entrepreneurs face greater challenges than others in managing cash flow and getting the capital they need to operate or grow.

When asked “How easy is it for your business to generate positive cash flow in a typical month?” 39 percent of respondents said it was “moderately easy.” Just 19 percent described it as “very” or “extremely” easy. On the other end of the scale, 21 percent said it was “slightly” easy and one in five said it was “not easy at all.”

The study asked business owners whether their overall goal was to grow their business or simply to maintain its current size. Surprisingly, the entrepreneurs who were focused on growth were more likely to have challenges generating positive cash flow. Nearly one-fourth of them (23 percent) said it was not easy to generate positive cash flow, and just 6 percent said it was extremely easy. In comparison, only 16 percent of “maintenance”-oriented entrepreneurs had trouble generating cash flow, and 9 percent said it was extremely easy to do so.

What about getting the capital they need? Again, growth-oriented business owners faced more difficulty. Just 23 percent said it was “not difficult at all” to get a loan or other capital, compared to 41 percent of maintenance-oriented business owners. And nearly half (43 percent) of growth-oriented entrepreneurs said it was “extremely” or “very” difficult to get capital, compared to just 23 percent of maintenance-oriented business owners who said so.

Why the differences? The study didn’t draw conclusions, but perhaps it’s because growth-oriented business owners have higher expectations for cash flow or are more aggressively seeking capital. As such, they may find it harder to generate the larger amounts they need, compared to “maintenance”-oriented entrepreneurs who are satisfied with the status quo.

The Hartford did suggest an overall environment that’s more hospitable to small businesses would be helpful in meeting capital needs. “A more favorable lending environment [would help] small businesses that often rely on personal savings, credit cards and collateral (like their homes) to apply for a loan,” the report’s authors note, adding that “regulatory hurdles and compliance burdens persist for banks that want to make loans to small businesses.”

Image by Flickr user Benjamin Sperandio (Creative Commons)

 

 

 

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SBA 504 Loan Refinancing Program Offers Small Businesses Working Capital

December 20th, 2011 ::

By Karen Axelton

Do you have an existing business loan you’d like to refinance? Changes to the SBA’s 504 loan program can help. As part of the Small Business Jobs Act of 2010, the 504 Loan Refinancing Program was put in place to let small businesses refinance loans and use equity to get working capital loans.

Here’s how it works: Borrowers can finance up to 90 percent of the appraised value of available collateral, which can include fixed assets such as commercial or residential property. This allows borrowers that have more than 10 percent equity to get additional working capital to pay for eligible business expenses.

The program is structured like SBA’s traditional 504 loan program, which means borrowers work with third-party lending institutions and SBA-approved Certified Development Companies (CDCs) to get financing, in a traditional 10 percent/50 percent/40 percent split.  However, instead of requiring the third party lender to contribute 50 percent of the project, now the third party lender simply has to contribute an amount equal to or greater than the SBA amount.

This is a temporary program intended to benefit small businesses that have loans maturing—in particular, commercial mortgage loans for properties whose value may have declined due to the recession. The goal is to help small companies lessen the amount of money they have to commit to paying mortgages and make more money available for ongoing business expenses, helping to keep businesses afloat and preserving jobs.

In order for your business to be eligible for the program, the debt must have been incurred at least two years prior to the date of your refinancing application. The program will end September 27, 2012 but loans do not have to mature before that date; in fact, the SBA has expanded the program to include loans maturing after December 31, 2012.

The SBA estimates that as many as 8,000 small businesses will take advantage of the refinancing program in the current fiscal year. For more details on the program, visit the SBA website and read FAQs here.

Image by Flicker user Woodley Wonderworks (Creative Commons)

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Posted in Capital Access, Raising Capital, Small Business, small business, Uncategorized | No Comments »

Small Biz Resource Tip: The Collateral You Need to Close on Your Business Loan

December 13th, 2011 ::

The Collateral You Need to Close on Your Business Loan

SCORE, the nonprofit small business mentoring organization, and insurance provider MassMutual have pooled their resources to offer small businesses an e-guide to help entrepreneurs learn more about their business financing options. The e-guide is available for free download on the SCORE.org website and offers an overview of financing options, including how life insurance can meet lenders’ borrowing terms quickly and with no limitations on running the business. While you’re on the SCORE website, check out the other helpful tools in the “Templates” section.

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SBA Opens Up Access to Credit for Small Business

December 8th, 2011 ::

By Karen Axelton

Is your small business stymied in its attempts to access capital? The SBA is hoping to help, reports The Huffington Post Small Business, by expanding its CAPLine program, which offers SBA-guaranteed lines of credit to small businesses.

Lines of credit offer small businesses the working capital they need to finance inventory purchases or keep going through slow seasons. For example, many small retailers rely on lines of credit to get through the holiday shopping season. But lines of credit offer some special challenges, The Huffington Post notes. For one thing, while small businesses are currently finding it easier to get financing from smaller or community banks, these banks often don’t like to provide lines of credit, which require more staff and special expertise to service. Big banks have the staff and expertise to provide lines of credit, but have more stringent requirements that often put small businesses out of the running.

The revisions to the CAPLine program may help…or they may not. The SBA’s goal is to expand availability of CAPLine lines of credit by reducing the paperwork and servicing required in an effort to encourage more lenders to offer them. Paperwork and red tape have been sticking points with CAPLine and keep many banks from participating in the program, so hopefully the changes will help.

The maximum loan amount for CAPLine lines of credit is $5 million and the term can be up to 10 years. Banks also typically set their own minimums for these loans. You can find out more about the CAPLine program at the SBA website. If you are seeking a lender in your area that participates in the program, the best place to start is with your local SBA District Office. District Offices are informing lenders in their area about the revised program in an effort to bring them on board, so your District Office will have the most up-to-date information about which lenders are involved. Find yours at the SBA website.

Image by Flickr user emdot (Creative Commons)

 

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