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Posts Tagged ‘small business administration’

Startup Fever with Six Million New Startups in the US in 2009

June 22nd, 2010 :: Steven Fisher

Six million. Wow. I heard this on a Marketplace podcast (you should subscribe to it if you don’t) that talked about this report out today from the Kauffman Foundation. It it they stated that start-ups hit a 14-year high in the middle of last year.

That is a big number and they got their core data from self-employment stats the Census Bureau and the Labor Department publishes, and sure enough, 2009 was a stellar year. It revealed that more than half-a-million people started their own businesses each month. And that is up nearly 5 percent from the previous year.

This is one of those numbers that confirms two things – people start businesses in recessions and that the United States is a startup nation. Granted, this number was up due to higher unemployment but it shows us that when we are faced with a new challenging situation we won’t sit still. In fact, many new entrepreneurs I have talked to looked at their layoff with a severance package as the final kick in the pants they needed to start their business and achieve a life long dream.

One of the big trends in this report is that many of these people are part of the emerging Homepreneur trend which Emergent Research covered in a recent report. Even though they might be small, these small business are the engine of job growth in the United States.

Here are some highlights from the findings:

Groups ramping up startups include African Americans and folks 55-64.
Advantages include: cheap talent, cheap rent, reduced competition.
Failure rate stable as in other years: 50% in the first 5 years.
Small business credit cards cost more than before – a 14% increase vs. the consumer increase of 2.5%
Small business credit cards not protected by new consumer protection laws passed by Congress

I am excited to see more startups that have launched with no equity out the door, or by early revenue from solid deal flow that helps them grow organically. Since they have built their business in a tight credit market not getting capital has forced them to work with what they have instilling a discipline that will serve them well.

Thinking About Becoming an Entrepreneur or Taking Your Business to the Next Level?

We have two great resources you should check out – the Small Business Success Index and “The Rise of the Homepreneur“.

“The Rise of the Homepreneur” which discusses the findings of the report “Homepreneurs: A Vital Economic Force” which is a new report published by Emergent Research, a small research and consulting shop in Lafayette, Calif. “We’re seeing more and more home-based businesses that are real businesses,” says Steve King, who coauthored the new report with Carolyn Ockels. To prepare the report, they analyzed U.S. Census data and Small Business Administration research, along with data from our very own Small Business Success Index, a survey of 1,500 companies sponsored by Network Solutions and the University of Maryland’s Robert H. Smith School of Business.

The Small Business Success Index™ (SBSI) is in its third wave of the report, sponsored by Network Solutions® and the Center for Excellence in Service at the University of Maryland’s Smith School of Business. To download a copy of the Small Business Success Index and also find out how your business scores on the six key dimensions of small business success, visit www.growsmartbusiness.com.

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Tags: African American, Business, Kauffman Foundation, small business, small business administration, United States, United States Census Bureau, University of Maryland College Park
Posted in Business Development, Capital Access, Entrepreneurs, Raising Capital, Resources, small business, Workforce | 8 Comments »

Will An ARC Loan Help Your Business?

January 11th, 2010 :: Gary Honig

The stimulus plan created for small businesses the America’s Recovery Capital or ARC loan program. With $255 million of funds, it is geared to help businesses who have an existing loan with their loan payments.

1. The business seeking an ARC loan must have outstanding business debt.

The ARC loan program was designed to help “viable” as defined, small businesses who are suffering “immediate financial hardship” also defined. In order to be considered viable, the business must show that at least one of the last two years the company was profitable. It further requires that the outstanding loan(s) from a credit institution may not have any payments more than 60 days past due.

2. The ARC loan is not for start ups or change of ownership scenarios

The requirement of immediate financial hardship would need to be fully documented for these kinds of financial conditions; trouble making personnel payroll, slowdown of sales, bank refuses additional credit on loans, trouble paying debts etc. Evidence of these conditions must be shown in excruciating detail. So it is necessary that the borrower has very good accounting in place in order to run the necessary financial reports.

3. An ARC loan can be made up to $35,000

The Small Business Administration (SBA) is running the ARC program and an SBA preferred Lender, a bank, will be making the actual loan. A borrower needs to find a bank that is offering the ARC loan program. The bank will be looking for the SBA (US Government) to guarantee 100% of the loan. Proceeds of the loan can only be used to make payments on existing loans, like; secured or unsecured lines of credit, business related credit card debt, capital leases, and term debt.

4. This is an interest free loan, guaranteed by the SBA

The loan may be dispersed in up to 6 payments that go directly to paying off loans. After the last disbursement, there are no payments by the borrower due on this loan for 12 months. After the 12 months, the balance of the loan is amortized over 5 years (60 months) for full repayment of the principal. Again, there is no interest due on this loan, but any older existing loans must still have regular payments.

5. Will the bank require additional collateral for the loan?

This requirement is based on the individual SBA 7a Lender. Some will only require a signature from the business owner who is personally guarantying the loan. But in this case the personal credit of the owner will be scrutinized. Because the size of the loan is small enough and the SBA is guarantying 100% of the risk, if the business owner still has fair credit there is a chance no additional collateral will be required.

6. How do I apply?

Find a local bank who is participating in the ARC loan program. There will be a multipage comprehensive loan application. With the application a loan package including 2 years of tax returns, both personal and for the business, historical financial accounting, documentation for the existing loans, 2 years of Performa financial projections to show the business can make the necessary loan payments. The entire loan application will be packaged by the Lender and submitted to the SBA for approval. Once approved, a loan closing will occur and the disbursements commence. Many businesses are finding the application process so onerous they are turning to business consultants and SCORE volunteers for assistance, which is highly recommended. Do not be taken in by individuals who claim to guarantee approval if you pay them an up front fee.

Bottom Line

So in the end, if you have a business that has been around for a few years, and you have meticulous accounting records, and you have a loan with a bank in which you are struggling to make loan payments – the ARC loan is designed to provide interest free funds where for the first year you do not have to make any payments in order to help stimulate your business. For additional details contact the SBA.

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Tags: ARC Loans, business loans, SBA loans, small business administration
Posted in Capital Access, Raising Capital | 15 Comments »

Large or Small the Credit Crunch Hits Us All: Guest Post by Tom Quaadman, U.S. Chamber of Commerce

April 22nd, 2009 :: Steven Fisher

USC1007993 We asked Thomas Quaadman, executive director for Reporting Policy and Investor Opportunity at the U.S. Chamber Center for Capital Markets Competitiveness, to sound off on the small business financial crisis for GrowSmartBusiness.com. This guest post is part of a series of interviews with small business owners, entrepreneurs and small business experts providing their insights about the Small Business Success Index.

The fact of the matter is that the freeze-up of the credit markets also impacts small businesses in a hard way. Small businesses very often are start-ups, or are uniquely affected by the business cycles of a locality. As such, lines of credit and loans are necessary for small businesses to expand, or be able to survive the tough times. This is important, because small businesses are the engine that drives the economy and creates jobs.

While the financial crisis may have hit some large businesses early in the cycle, some small businesses will be impacted later as the effects work their way through the system. Also, the freeze-up of the credit markets that began in September, cut off the lifeline that some businesses needed to survive. This combination has led to a growing number of business closings and ever increasing job losses.

We have seen many efforts to restart the credit markets—TARP I, TARP II, TALF, the PPIP, the acronyms keep growing and growing. But often, in reporting these developments, the media misses the point and reports about the companies that are too big to fail.

The fact of the matter is that these efforts to shock the credit markets back to life are as much to restart lending for small businesses as for the large ones. In fact, the Chamber supported the efforts of the Obama Administration to increase lending to small businesses through the Small Business Administration. These efforts are vital for economic recovery to take hold.

The genius of the American economy has been the freedom of a person to start a business and give them the opportunity to grow it into a larger one. Sure there is too big to fail, but we have to remember that you need to think big and start small. With the right idea, work ethic, and sufficient capital, a small business can thrive and we can all benefit.

Just ask Bill Gates.

Thomas Quaadman is the Executive Director for Financial Reporting & Investor Opportunity at the U.S. Chamber’s Center for Capital Markets Competitivenes. He also writes on for The Chamber Post, where the U.S. Chamber of Commerce discusses “business and the challenges faced by business leaders around the globe.”

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Tags: Chamber of Commerce, credit crunch, financial crisis, small business administration, TARP, Tom Quaadman
Posted in small business | 3 Comments »