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Posts Tagged ‘small business financing’

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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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Need Just a Little Business Financing? Here’s Where to Look

February 23rd, 2012 ::

By Maria Valdez Haubrich

It seems like the economy might finally be on a permanent upswing. But even though economic indicators are looking more positive, that doesn’t mean your chances of finding business financing are improving.

Ironically, getting smaller amounts of financing for expansion can be a particular challenge. If you need some quick capital right now, you’re going to have to think creatively about ways to get it. Consider the following ideas.

Credit card financing: While experts used to warn against this method, it’s become more acceptable, simply because fewer financing options exist today. Used wisely, credit cards can be a great cash flow management tool. Just be sure you keep the amounts borrowed manageable so that you can make timely payments.

Home equity: In some regions of the country, falling home values have rendered this financing method nearly obsolete. But if you’re fortunate enough to have equity in your home, tapping it can be an option. Be sure to carefully weigh the risks against the potential benefits and make sure you can pay the money back so your home isn’t in jeopardy.

Retirement plans: Tapping your retirement plan such as a 401(k) is another possibility, but whether this is right for you will depend on how much money is in your plan, your risk tolerance, and how close you are to retirement age. Be sure you understand how (or if) you will be required to pay the money back, as well as any fines or penalties involved.

Factoring: Factoring companies buy your business’s receivables and collect the funds for you, then take a percentage of the amount as payment. You won’t get the full amount of your receivables, but you will get quick access to cash. Make sure this tradeoff is worth it to you. Also be sure you are dealing with a reputable factor and that you understand the interest rates and any fees involved.

Microloans: Community organizations are one source of microloans, which, as the name implies, are for smaller amounts of funding (usually under $50,000). The loans are often aimed at certain entrepreneurial categories. For instance, you might find microloans intended to encourage women business owners, military veterans or people whose companies are located in poor areas. The SBA has a microloan program; your local economic development department can help you explore microloan options in your community.

SBA loans: The Small Business Administration (SBA)’s SBA Advantage program offers a simplified loan application process for 7(a) loans of up to $250,000. Small Loan Advantage loans are made by SBA-guaranteed banks; Community Advantage loans are made by nontraditional financial institutions to help underserved communities.

Image by Flickr user photosteve101 (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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Small Biz Resource Tip: Capital One Small Business

December 2nd, 2011 ::

Capital One Small Business

Capital One has announced a new line of credit cards for small businesses. For every dollar spent, the Spark Cash card rewards businesses with up to 2 percent cash back, and the Spark Miles card rewards you with two airline reward miles. What differentiates the cards is the lack of limitations on the rewards. There are no limits on the amount of cash back, and the miles earned never expire. Checks are automatically mailed to the user at the end of a year, but the rewards are available anytime. There are no enrollment fees, but check for annual fees to kick in after the first year.

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Small Biz Resource Tip: ChubbyBrain

November 24th, 2011 ::

ChubbyBrain

If you’re looking for funding for your business, you want to find a good fit with a lender. ChubbyBrain can help. ChubbyBrain is a funding recommendation engine that analyzes the funding history of venture capitalists, angel investors, financial institutions and grant providers to find those that best fit your business’s needs. It only takes about 5 minutes to input your business’s data; then the search engine uses your data to find your match. Best of all, it’s free. In addition to the search engine, ChubbyBrain offers guides to help small business owners navigate the world of getting financing.

 

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

Small Biz Resource Tip: Kickstarter

November 10th, 2011 ::

Kickstarter

Since crowdfunding is all the rage these days, why not try it as a way raise money for your business idea? If you think you’ve got a winning idea, people around the world might think so too and want to see you succeed. Kickstarter is a funding platform for creative projects, and every week thousands of people pledge millions of dollars to help creative entrepreneurs get their projects off the ground. From music and art to technology, food and design, if your idea fits in the creative category, you have a chance to make your pitch and receive financing. Project owners keep 100 percent of the donations and retain control over their work.

 

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

Need Business Financing? Ask Your Customers to Lend a Hand

September 22nd, 2011 ::

By Karen Axelton

Are you looking for new sources of capital for your business? If you’ve had trouble getting financing from banks, there is one other source you may want to tap into: your own customers.

With banks implementing stricter loan requirements in the wake of the economic meltdown, it’s gotten harder for small companies to obtain loans—even if they have steady business and a large and happy customer base. The good news, though, is that those same customers can potentially be a source of financing for your small business.

Customer financing has been around for a long time, but the trend has grown as other sources of funding have dried up and as consumers have become more passionate about the idea of supporting local businesses. Consumers are also more understanding about the need for businesses to seek alternative financing, meaning that business owners are less leery of admitting to their customers that they need financial help to grow.

Customer financing works best if you can offer your customers something tangible in return for their investment. For example, a restaurant could sell a $100 credit that’s good for $125 of food. It’s also important to communicate honestly and openly with customers who invest in your business. Emphasize that the money will be used for growth and expansion to make your business even better (you shouldn’t use customer financing to keep a flagging business going). This will give customers confidence that you’re not going to take their money and run.

One option for simplifying your search for customer funding is using “crowdfunding” websites like Prosper.com, PeerFunder.com or IndieGoGo.com. These sites, which connect small business owners and others with potential investors, can be a good way to expand your financing search beyond customers to your customers’ network of friends. Of course, be sure to do your homework about what each site offers and your responsibilities and risks.

Before approaching customers about financing, be sure to talk to your accountant and attorney about how to structure financing options to be sure you’re following legal regulations and requirements.

Image by Flickr user Hamed Saber (Creative Commons)

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Posted in Accounting and Taxes, Capital Access, Compliance, Raising Capital, Small Business, small business | 2 Comments »

New Financing Option for Small Businesses: SBIC Impact Investment Initiative Launches

August 18th, 2011 ::

By Karen Axelton

Small businesses seeking capital in Michigan have a new source of options thanks to the Small Business Administration. The SBA last month announced that InvestMichigan! Mezzanine Fund will be the first licensed Impact Investment Fund in the SBA’s new Impact Investment Initiative. The $130 million venture capital fund will provide capital to businesses that are headquartered in Michigan, have a significant presence in Michigan or are in the process of expanding their operations in Michigan so they can grow and create jobs.

The InvestMichigan! fund is the first stage in a $1 billion commitment over five years through the SBA’s Impact Investment funds, part of the Obama administration’s Startup America initiative announced in January. Karen Mills, SBA Administrator, said Michigan was chosen as the launch state because of its economic struggles as well as opportunities.

Startup America is a White House initiative to bring together public and private organizations to help entrepreneurs. It will use the infrastructure of the SBA’s Small Business Investment Company Program (SBIC), which supplements private equity capital and long-term loan funds to help small businesses expand. In FY 2010, according to SBA data, the SBIC program provided $1.59 billion of financing to nearly 900 U.S. small businesses.

The Impact Investment Initiative is expected to put up to $1.5 billion into the hands of small businesses over the next five years. It will combine public and private funding for high-growth companies that generate not only a financial but also a “social” return. The program will focus on businesses in underserved markets or in sectors that have been defined as national priorities. Impact investments can be:

  • Place-based, targeting small businesses located in or employing residents of low or moderate income areas or economically distressed areas; or
  • Sector-based, targeting industry sectors that the Administration has identified as national priorities. (Currently only clean energy and education have been identified as priority sectors.)

The SBA will collaborate with private, institutional investors to identify impact investments and provide licensing and capital to fund managers who qualify to organize and operate an Impact Investment SBIC.

For more information on the Impact Investment Initiative, visit the SBA website.

Image by Flickr user TexasGOPVote (Creative Commons)

 

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