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Web.com Small Business Toolkit: Build Your Business Plan (Business Plan Tool)

January 9th, 2013 ::

SBA’s Build Your Business Plan

If you never got around to writing that business plan, the Small Business Administration now has a tool to make the process a lot easier. Your business plan should outline the route a company intends to take for the next three to five years and includes revenue projections, marketing strategies and more. The SBA’s Business Plan Tool provides the business owner with a step-by-step guide to get started. You can save your plan as a PDF and update it at any time. Then take your plan to a free mentor at one of the SBA’s partners (SCORE or a Small Business Development Center) to get one-on-one advice.

 

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

Small Businesses’ Credit Profiles Are Improving. Is Yours?

November 20th, 2012 ::

By Karen Axelton

Ask any small business owner who’s been trying to borrow expansion capital, obtain working capital or simply get a line of credit from a lender, and they’ll tell you it’s become far more difficult since the recession hit. However, a new study by Direct Capital Corporation suggests that the tough times may have actually had a beneficial effect on small business owners in one way: Since the recession hit in 2008 and during the past few years of recovery, small business owners’ average credit profile actually improved in 45 out of 50 U.S. states.

Direct Capital Corporation, a nationwide lender to small businesses, reviewed credit data for over 23,000 small businesses nationwide during the past 12 years. Where do small business owners have the strongest average credit profile? Nebraska topped the list, followed by Alaska, South Dakota, Indiana and Oklahoma.

The states where small businesses’ average credit profiles have declined in the past four years are Washington, DC (which had the lowest average credit profile), followed by Rhode Island, New Mexico, Montana and Texas.

Direct Capital Vice President of Marketing Stephen Lankler says one reason for the surprising change is that business owners have a heightened awareness of how important it is to keep their credit score high. “Business owners today are much more aware of how important it is to maintain a strong credit profile,” he said. “That was not the case five to seven years ago when it was much easier for a business to access credit.”

Lankler says growth in the number of products that give businesses on-demand access to their credit profiles has also contributed to the higher credit scores. “As a result of the financial crisis, major lenders – including banks – have become much more restrictive in extending credit to business owners,” Lankler said. “In response, business owners have become more vigilant in maintaining strong credit profiles and a flood of products have been introduced to help them do so.”

What are some ways you can keep your business’s credit score high?

  • Pay your bills on time and if you cannot, talk to the vendor to work out a payment plan.
  • Monitor your business’s credit report to note any errors and take steps to correct them.
  • Don’t mix personal and business funds. Use business, not personal, accounts for business purchases.
  • Use business credit cards carefully, being sure not to overutilize credit. Ideally, pay off your balance in full each month, but if you can’t, keep your balance under 30 percent of your available credit.
  • Even if you never plan to use it, make sure you keep enough available credit (through business credit cards and other options) to get you through an emergency if need be.

Image by Flickr user ThirdLegReviews (Creative Commons)

 

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Posted in Capital Access, Raising Capital, Small Business, small business | 3 Comments »

Bad News for Small Business: VC Investments Decline

November 15th, 2012 ::

By Maria Valdez Haubrich

Recently, we posted here about the growth in angel capital investments. Now, there’s some not-so-good news for small businesses about venture capital. The most recent MoneyTree survey from PricewaterhouseCoopers and the National Venture Capital Association reports that in the third quarter of 2012, VC investments shrunk both in terms of overall dollars (down by 11 percent from the second quarter of 2012) and in terms of deal volume (down by 5 percent from the second quarter of 2012).

VC dollars and deals also declined year over year. What’s behind the shrinkage? PWC and the NCVA say that venture capitalists are exhibiting extreme caution with the capital they have available. Instead of making new investments, they’re focusing on the companies that are already in their portfolios. Compounding the problem, there are fewer new venture funds, which is cutting into the amount of capital that can be invested.

Of course, the bad news may not affect you if your small business is in an industry that finds it easier than average to attract venture capital. Here’s a closer look:

  • As of Q3 2012, software companies were still the most popular type of VC investment, accounting for $2.1 billion invested in 304 deals. (That’s still a 12 percent drop from Q2 2012, however).
  • Life sciences (which includes biotechnology and medical devices) investing increased in terms of dollars but declined in deal volume compared to Q2 2012.
  • Internet-specific investing (companies whose business model depends on the Internet, regardless of industry) declined by 12 percent in dollars and 8 percent in deal volume compared to Q2 2012.
  • The clean technology sector (alternative energy, pollution and recycling, power supplies and conservation) had a 20 percent decrease in dollars but a 2 percent increase in deal volume.
  • Financial services, healthcare services, business products and services, and retailing businesses saw increasing dollar amounts invested in Q3 compared to Q2.
  • In contrast, companies in the media and entertainment, semiconductors, telecommunications and IT services sectors all saw a decline.
  • Companies in the software, media and entertainment, and IT services industries received the most first-time rounds in Q3 2012.

Your industry isn’t the only thing that matters when you’re looking for VC investments. Where your business is located matters more than you might want to think. Over half (58 percent) of VC funding in Q3 2012 went to businesses in California, Massachusetts and New York.

Image by Flickr user Horia Varlan (Creative Commons)

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Is Angel Funding Taking Wing Again?

November 6th, 2012 ::

By Karen Axelton

Small business owners seeking financing from private investors can take heart from the latest data from the Center for Venture Research at the University of New Hampshire. The quarterly study of angel investors found that, as of the second half of 2012, the angel investor market seems to be on the rebound. The total dollar amount invested, total number of investments, and total number of investors all grew compared to the same period in 2011.

For the first two quarters of 2012, total dollars invested reached $9.2 billion, up by 3.1 percent compared to the same period in 2011. Investments were made in a total of 27,280 entrepreneurial businesses–a 3.7 percent increase from the same period in 2011. And the number of active investors hit 131,145 individuals, up 5 percent from the same period in 2011. In the first half of 2012, the average deal size hit $336,390, holding fairly steady with 2011’s average deal of $338,400.

Jeffrey Sohl, director of the UNH Center for Venture Research at the Whittemore School of Business and Economics, says that while many of the figures are holding steady, the survey shows a “steady recovery” of the angel market since 2008.

While the percentage of investments focused on seed and start-up stage investing held steady at 40 percent (compared to 39 percent last year), there’s good news for existing business owners: Expansion stage financing grew to 22 percent of investments in the first half of 2012, up from 13 percent in the same period of 2011.

What industries are most likely to find angel funding? Healthcare services/medical devices and equipment accounted for 24 percent of investments, followed by software (14 percent), biotech (12 percent), retail (10 percent), IT services (7 percent) and media (6 percent). Interest in the industrial/energy sector, which had been one of the top six sectors since 2009 due to an interest in clean tech, dropped in the first half of 2012. Meanwhile, retail and media have “solidified” their place in the top six sectors, driven primarily by investments in social networking-related businesses.

One interesting trend: The percentage of women angel investors nearly doubled in 2012 from the same period last year (from 11.7 percent of angels to 21.8 percent). Meanwhile, 18.4 percent of companies seeking angel investment were women-owned.

Minority angels are less represented, accounting for just 4 percent of the angel population. Similarly, minority-owned firms accounted for only 7.1 percent of the companies that sought angel capital.  Although minority-owned businesses got angel financing at a similar rate to all businesses, the study says the fact that so few are seeking angel capital is cause for concern.

Image by Flickr user GeishaBoy500 (Creative Commons)

 

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Web.com Small Business Toolkit: EarlyShares Small Business Challenge (Contest)

October 9th, 2012 ::

EarlyShares Small Business Challenge

EarlyShares, an equity-based crowdfunding platform, has launched a contest asking small business owners to pitch ideas on how their business model can help create new jobs and stimulate the U.S. economy. Entrants compete for a $25,000 grand prize; second- and third-place winners receive $15,000 and $10,000, respectively. In the spirit of crowdsourcing, the public will vote on the top pitches (although a panel of judges also contributes to the selection process). The contest runs through October 31st, with crowd voting taking place November 2-7. Winners will be announced on November 9th.

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Web.com Small Business Toolkit: Biz2Credit Women in Business (Financing for Women Entrepreneurs)

September 11th, 2012 ::

Biz2Credit Women in Business

Biz2Credit, which has been connecting small and midsized businesses with lenders and other business tools since 2007, has recently launched their Women in Business site. The site targets women business owners whose companies have been in operation for less than three years and have under $1 million in sales and fewer than 50 employees. Owners can take advantage of the small business financing package, which includes a business plan prepared by Biz2Credit’s small business experts; one month of financial consultation by a Biz2Credit case manager; access to a financial snapshot of your company; and recommendations for increasing credit scores, lowering interest rates and more.

 

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Posted in Accounting and Taxes, Capital Access, Compliance, Raising Capital, Resources, Small Business, small business | No Comments »

Will the Community Bank Crunch Squeeze Small Business? How to Find Out

September 6th, 2012 ::

By Maria Valdez Haubrich

If your small business has received loans or lines of credit from a community bank—or was hoping to do so—you might find it becoming more difficult. Inc. recently reported on a coming crunch that is hitting community banks, with possible ill effects for small business owners who depend on those banks for capital.

The problems stem from the Troubled Asset Relief Program (TARP) which gave banks nationwide funds from the U.S. Department of the Treasury that had to be paid back with interest. While Inc. reports that the nation’s larger banks have already paid back their TARP debt, about 300 community banks across the country haven’t yet done so.

The Treasury Department is winding down the TARP program, raising interest rates for banks that still have outstanding debt to pay back. These banks are being hit with a perfect storm: In addition to the need to pay back principal and higher interest, new federal regulations as a result of the Dodd-Frank Act require community banks to have more available cash for emergencies.

The result? Many community banks are being forced to cut back on lending to small business in order to handle their TARP responsibilities and have enough cash. That’s bad news for small businesses, which rely greatly on community banks for their capital needs.

Inc. cites FDIC data that smaller banks (those with $5 billion or less in assets) made $336 billion in small business loans in the first quarter of this year. By comparison, banks with $5 billion or more in assets made loans of $311 billion to small businesses. Small business loans account for nearly one-fourth of all loans by community banks, compared to just 5 percent of bigger banks’ lending.

How can you know if your bank will be affected by this issue? The best way is to talk honestly with your banker. Ask whether the bank accepted TARP funds and, if so, whether they have paid the money back. If not, try to get the banker’s take on how this responsibility will affect future loans to small business.

Even if your bank is not affected by TARP, be aware that small business owners whose own banks are cutting back on lending may start approaching your bank for loans. In other words, if you were considering applying for a loan or line of credit, the time to act is now.

Image by Flickr user Alan Cleaver (Creative Commons)

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Small Business Owners’ Economic Outlook: Holding Steady

September 3rd, 2012 ::

By Karen Axelton

As election season begins in earnest, how are small businesses feeling about their own—and the nation’s–economic outlook? Capital One’s second quarter 2012 Small Business Barometer, a quarterly survey of U.S. small businesses, asked entrepreneurs about their current financial conditions and what they expect for the next six months, and found steady, but modest growth.

Gains that began in 2011 are continuing in 2012, the survey found. Some 45 percent of small businesses say their companies are facing the same economic conditions as last quarter, and 38 percent say their economic conditions have improved. Just 17 percent felt economic conditions were getting worse. Asked about their own businesses’ financial situation, 44 percent say it’s better than it was a year ago, 40 percent say it’s the same, and just 15 percent say it’s worsening.

What’s more, 37 percent of small businesses plan to add jobs in the next six months—a two-year high. Sixteen percent say they have job openings they can’t find qualified people to fill, a slight increase from the previous quarter.

As for the coming six months, small business owners are cautiously optimistic, rating the national business outlook at 6.0 out of a possible 10 points—mostly due to concerns about sales and profit margins. Reflecting this cautious attitude, most of the small businesses surveyed say they plan to keep spending, business development and investment consistent with current levels. Seven in ten will keep spending at the same levels—a two-year high, 9 points higher than last quarter and 5 points higher than last year. Just 15 percent of companies expect to increase business development and investment spending.

One positive sign is that one-fourth of small businesses have tried to obtain financing in the last 12 months—the highest percentage in the past nine quarters of survey data.  While 42 percent of small businesses say getting financing is harder than it was six months ago, that’s down 10 points from the percentage who reported difficulty the previous quarter.

“We’re seeing some hesitancy and concern about prospects for the remainder of the year, as well as a limited line of sight to growth,” said Jon Witter, President, Retail and Direct Banking at Capital One. “Small business owners are moving forward with continued caution and pragmatism as they consider their plans and projections for the coming months.”

How does this outlook compare with your own? Are you feeling optimistic about the months ahead?

Image by Flickr user carlos.a.martinez (Creative Commons)

 

 

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Temporary SBA 504 Loan Program Provides Working Capital for Small Businesses

July 19th, 2012 ::

By Maria Valdez Haubrich

Are you looking for cash or working capital to grow your small business? Then you should know about a temporary Small Business Administration (SBA) program that could help. As part of the Small Business Jobs Act passed in 2010, the SBA started a temporary program enabling small businesses to refinance eligible fixed assets through its 504 loan program without having to expand their businesses. This temporary refinancing program will expire on September 27, 2012, so now is the time to see if it can help your business.

Here are some of the benefits of the temporary 504 program:

  • Eligible small businesses can get below-market pricing and long term, fully amortizing fixed rate loans.
  • You can finance up to 90 percent of the property’s current appraised value.
  • In some cases, you can “cash out” proceeds from the refinancing to pay eligible business expenses, including payroll, inventory and accounts payable.

Eligible applicants for the 504 refinancing program must:

  • Show that their loans are current
  • Have made all required payments in the last year with no payments more than 30 days past due.
  • Debt to be refinanced must have been incurred at least two years before the date of the loan application

The temporary program is structured like SBA’s traditional 504 loan program (although it’s separate from that program). Small business borrowers work with third-party lending institutions and SBA-approved Certified Development Companies (CDCs) to get financing. The loan is typically made up of three parts:

  • A loan (or first mortgage) secured with a senior lien from a private-sector lender covering up to 50 percent of the project cost,
  • A second mortgage secured with a junior lien from an SBA-approved CDC covering up to 40 percent of the cost, and
  • A contribution of at least 10 percent equity from the small business owner.

For more details about the temporary 504 loan program, visit the SBA website and the 504 FAQs page.

Image by Flickr user vxla (Creative Commons)

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

Bills Would Make It Easier for Credit Unions to Lend to Small Businesses

July 17th, 2012 ::

By Karen Axelton

Small business financing could get easier to find if two pieces of pending legislation pass. Recently introduced by Kurt Schrader (D-Ore.) and Steve Chabot (R-Ohio), the Credit Union Small Business Lending Act (H.R. 4191) would make it easier for credit unions to participate in Small Business Administration (SBA) loan programs.

Another pending bill, H.R. 1418, would raise the cap on how much credit unions can lend to businesses. Currently, credit unions can lend a maximum of 12.5 percent of their assets to member businesses. The bill would raise that percentage to 27.5 percent, significantly expanding credit unions’ ability to make small business loans.

More and more small businesses have been turning to credit unions in the aftermath of the recession, Small Business Trends reports. It’s easy to see why: Over the past year, credit unions have steadily increased the percentage of small business loans they approve, from 51.2 percent in May 2011 to 57.6 percent in May 2012, according to the Biz2Credit Small Business Lending Index. In contrast, the majority of small business loan applications to banks are rejected.

“Allowing credit unions to do more to help small businesses is an important step toward helping our nation recover from the current economic downturn,” says Robert Marquette, at-large director for the National Association of Federal Credit Unions (NAFCU), a national organization that focuses on federal issues affecting credit unions.

The average credit union small business loan is for $185,000—a small enough amount that loans of this size are often difficult to obtain from banks. Testifying before Congress about the need to pass both bills, Marquette told legislators that since the end of 2007, applications to credit unions for small business loans have grown from $87 million to $259 million in 2011.

According to Rohit Arora, CEO of Biz2Credit, there are several key reasons credit unions are increasingly becoming a funding source for entrepreneurs. Credit unions are typically more involved in the local business community than bigger banks, generally have more flexible lending requirements, can make lending decisions more quickly and are less reliant on automated scoring. What’s more, many credit unions even offer better financing rates than bigger banks.

Have you used credit unions to finance your small business?

Image by Flickr user cometstarmoon (Creative Commons)

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Posted in Capital Access, Raising Capital, Small Business, small business, Uncategorized | 3 Comments »

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