Entrepreneurial

Small business owners turn to pawn shops

– Cynthia Hsu is a contributor to FindLaw’s Free Enterprise blog. FindLaw is a Thomson Reuters publication. –

Small business owners that are struggling to make ends meet sometimes need business loans – or a pawn shop. Pawn shop loans are now something that some business owners are turning to as a result of the tight economy and lack of lending.

Pawning is probably easier than getting a bank loan, though the interest rates may be significantly higher.

Pawn shops, including online pawn shop Pawngo.com, will evaluate your item, and e-mail you an offer about how much they are willing to loan you. If you are able to repay the loan, you will get your item back. If not, the pawn shop will keep it. Pawngo itself has loaned about $1.35 million in about 46 states, according to the company website.

Pawn shop owners say that the number one reason why small business owners tend to go into their office is because they want to have enough cash flow to pay their employees, reports CNN Money.

Maybe pawn shop loans could be a viable last resort for some companies. After all, if you need cash in a hurry, pawn shops can help you pay your employees and the bills so that the lights stay on in the office.

The problem is pawn shop loans are probably only a temporary fix. Business owners only have a certain number of assets, and unless the business turns around there will be no way to repay the loans or keep the business afloat. Especially because of the higher interest rates associated with pawn shops.

Small business at a crossroads

– Jeff Stibel is the chairman and CEO of small business credit rating agency Dun & Bradstreet Credibility Corp. The views expressed are his own. –

What is a small business owner to make of the headlines?

Right now, leading indicators – like lending, hiring and optimism – paint a conflicting picture of the direction of the country’s small business sector. It’s no wonder we’d be confused. It seems one index rises, while another falls.

Take, for example, small business optimism.  There’s no doubt we’ve come a long way from where we were at the bottom of the recession. But, the leading optimism index, calculated by the National Federation of Independent Business (NFIB), still looks like a seismometer in the days following an earthquake.

For the first two months of 2011, the numbers looked promising; optimism didn’t just rise slightly – it lunged forward. On a scale with 100 being the best and 0 being the worst, the index jumped from 92.6 in December 2010 to 94.5 by February this year. It’s a substantial gain from where we were at the bottom of the recession, when the NFIB reported numbers in the low 80s – 81.0 being the lowest.

But just when things looked up, numbers from March, April and May showed a drop – back more than 3 points – all but erasing recent gains and dropping to a level not seen since late last summer.

At the same time, lending statistics led us to believe something otherwise – and more encouraging – that small business health is rebounding. In fact, the Wall Street Journal recently reported that a Capital One survey showed 85 percent of small business owners felt they could access the loans they need – an increase of 15 percent from the year prior.

Big banks see slow recovery for small business

Jon Cook

May 27, 2011 17:11 EDT

Marc Bernstein’s response to reports of loan facilitators advising small business clients to avoid big banks: “It’s simply bad information.”

The head of Wells Fargo’s small business lending initiatives then pointed to the $3.7 billion the country’s fourth-largest bank (by total assets) lent to small firms over the first three months of the year – an increase of 27 percent over the first quarter of 2010.

“That’s not small change,” said Bernstein, who added Wells Fargo is the largest national lender of loans under $100,000 and was recently honored as the Small Business Administration’s (SBA) 2011 Large 7(a) Lender of the Year. “We are trying to do everything we can to get people who apply for a loan approved, but the fact of the matter is that there are a lot of small businesses that unfortunately have been hit very badly by the downturn and are struggling and it’s hard to see how they’re going to handle more debt.”

This appears to be the view of most big banks, who insist they are ready to lend, so long as the business owner can show they are capable of repaying the loan.

But what if your primary source of collateral – your house – has plummeted in value due to the housing slump that still has a grip on the country?

“We love collateral, but we are first and foremost cash-flow lenders,” said Bank of America small business executive Robb Hilson, adding a company’s current and future sales are a better indicator of its ability to handle more debt. “We could have bullet-proof collateral, but if the business owner has a hard time demonstrating that they can repay the loan vis-a-vis cash flow then we’re not as excited about doing it.”

Bank of America, the biggest U.S. bank, made more than $92 billion in loans to small and medium-sized business in 2010 and is the top lender of SBA 504 loans, which are used to purchase commercial real estate, upgrade existing facilities or buy new equipment.

“Loan doctor” to small business: Avoid big banks

Deborah L. Cohen

May 11, 2011 13:36 EDT

Large banks are making noise about lending more to small companies this year, but financing expert Ami Kassar is still advising his clients to steer clear.

The founder of Philadelphia-based MultiFunding LLC, which brokers loans for small businesses, said his customers stand a better shot at success with regional and community banks.

“As a general rule we don’t get near big banks,” said Kassar, whose firm has arranged 28 deals since launching 15 months ago and has more than 60 others in the pipeline. “The big banks are, in my opinion, full of big talk in terms of their commitment to small business.”

The vast majority of companies MultiFunding works with seek loans of $1 million or less, making them less attractive for larger banks to commit resources to, Kassar said. And when it comes to applying for government-back SBA loans – not typically among Kassar’s top options – he prefers to work with virtual lenders who facilitate the process online.

Kassar, who arranges deals on behalf of customers nationwide, only takes on customers he believes stand a good shot at getting funding. Some 30 percent of his candidates have collateral, making them more attractive to lenders.

A surprising number of small businesses don’t understand their finances or have a good handle on their accounting procedures, he said.

“I joke that we’re the loan doctors,” said Kassar, noting that about 15 percent of applicants have to be turned away because of lack of credit. “Most people have no idea what they’re qualified for.”

Why America isn’t lending to small businesses

– Jeff Stibel is the chairman and CEO of small business credit rating agency Dun & Bradstreet Credibility Corp. The views expressed are his own. –

The “Great Recession” – the longest since World War Two – will have an even more prolonged effect on the economy if one trend continues: small businesses are unable to secure capital.

Despite significant government stimulus to banks and lending institutions, small business lending is actually down over the past few years. So why isn’t the banking industry lending to small businesses during a period in our history when it’s absolutely essential? The answer has a lot to do with credit-worthiness.

Banks claim it’s hard to find qualified applicants and, for the most part, they believe the majority of small businesses simply aren’t credit-worthy. And in this economy, banks are not willing to take a risk. As a result, business lending suffers.

The latest statistics from the Federal Reserve Bank of New York show more than 75 percent of small businesses that applied for a loan during the first half of 2010 did not receive the credit they needed. During hard times such as these, businesses need capital more than ever; it spurs growth, innovation, and job creation. Businesses are in a Catch-22.

Compounding the problem is that businesses applying for lending don’t fully understand the importance of business credit. It’s easy to blame the banks or the economy, but that won’t solve the problem. There is one thing businesses can do: improve their credit ratings.

Below are my top three steps any small business can take to improve their credit:

Small business bill passes, now what?

Jon Cook

Sep 27, 2010 13:19 EDT

As President Obama gets set to sign off on the $30-billion small business lending bill, people want to know one thing: how will it help me?

That’s what small business owners like Bruce Freeman want to know. Freeman, who runs Proline Communications, a marketing and consulting business in New Jersey and writes a syndicated column “Ask The Small Business Professor”, said the the $12 billion in tax breaks included in the bill will help, but the larger $30-billion portion earmarked for small community banks should instead be given directly to small businesses.

“Give it to me. Don’t give it to somebody else to then hopefully, maybe, get it to me,” said Freeman, who would prefer to get the money in the form of tax credits, or some other more direct assistance. “Give it to me in the form of beer bottles with the name of my business on it, but give it to me. This loan stuff is ridiculous, because I don’t know if I could ever get one.”

Brian Miller, the president and COO of The Entrepreneur’s Source – a Southbury, Connecticut-based facilitator of startup financing – said the new legislation will only work if the government is able to get it into the hands of small business owners quickly.

“If it does not and we’re faced with the same kind of situation that we were with TARP, where the banks just sit on the money and they don’t get it in the hands of people that need it, then it’s going to be a colossal failure,” said Miller, who added his company is currently hearing from 10,000 people a month inquiring about financing, about a 25-percent increase from pre-recessionary levels.

Rohit Arora, who co-founded the New York-based website Biz2Credit to help small businesses get financing, said credit is virtually frozen right now and the government’s main lending arm – the Small Business Administration – has virtually stopped since the end of May, when TARP-assisted programs elapsed.

“Most of the mainstream banks are not lending money to small businesses in spite of all the announcements they (government) keep making,” insisted Arora, adding 85 percent of small businesses are making getting a loan a priority right now before interest rates start climbing again. “Community banks and smaller banks have started coming back, but there’s a lot of pressure from regulators that if they’re lending money they need to be more conservative.”

Save the pelicans and small businesses

George A. Cloutier

Jun 29, 2010 10:33 EDT

– George A. Cloutier is the founder and CEO of American Management Services and the author of the bestselling book “Profits Aren’t Everything, They’re the Only Thing”. The opinions expressed are his own. –

For the last two months we have been inundated with photos of oil-covered pelicans and other marine animals victimized by the oil spewing forth from the ruptured BP well in the Gulf of Mexico. The spill in the Gulf is obviously disastrous, but it pales to the economic “oil spill” that has destroyed small businesses over the last two years.

Pelicans and small business owners are faced with surprisingly similar situations: they are victims of disastrous events beyond their control. They are faced with a life-threatening struggle for survival, in which many have already passed due to lack of assistance, or are facing an uncertain future with promises of government intervention.

Both groups are facing tough odds, but right now I’d rather be a pelican.

For small businesses, the Administration and Congress (both parties) have done little to mitigate the disaster; talking a lot about how much they care, but implementing only half measures and largely ineffective programs that only helped a few. Lending levels from commercial banks have seriously declined and have created a lending squeeze for small businesses at a time when they desperately need more credit.

Washington politicians passed a healthcare bill with provisions to aid small businesses in the payment of premiums, but forgot to mention, according to the Congressional Budget office, that only 11 percent of businesses with 25 or fewer employees would get some help. The eligible businesses will receive approximately a third of the total annual premiums back in the form of future tax credits. Why, as a business owner, would I add healthcare benefits for my employees when I will receive only 1/3rd of the additional costs?

The recent jobs bill allows for businesses to receive a $5,000 tax credit next year if they create a $40,000 annual job. This makes no sense. Why would a small business spend $40,000 this year to receive a possible $5,000 tax credit next year?

National Small Business Week: Who cares?

George A. Cloutier

May 25, 2010 09:14 EDT

– George A. Cloutier, a graduate of Harvard Business School, is the founder and CEO of American Management Services, one of the nation’s largest turnaround and management services firms specializing in small and mid-sized companies. He is also the author of the bestselling book “Profits Aren’t Everything, They’re the Only Thing”. The opinions expressed are his own. –

Certainly not the Obama Administration and Congress (both Democrats and Republicans) who have repeatedly failed small business at every opportunity with soaring rhetoric, empty promises, and adopting Lilliputian aid programs.

Most of the twenty-nine million small businesses and their fifty million employees’ won’t be celebrating National Small Business Week because they’re fighting the worst economic crisis in recent history. The twenty-five thousand plus small businesses failing every week, and the owners who have lost their life savings and depleted their 401k’s, will not be celebrating either.

There will be no joy in Mudville for 90 percent of the nation’s small businesses who have received no economic stimulus funding or have been denied credit, additional or otherwise, as well as those who have received no benefit from the stimulus or bailout programs. To be fair, some 60,000 small businesses (that’s .0002 of the total) received loans from the SBA last year, leaving only 28,940,000 who have received nothing but platitudes.

The Administration’s record of failure speaks for itself:

• Small businesses received only one percent of the bailout. ($800 million. Wow, when by recent accounts the automotive industry received $100 billion and only employs two million people.)
• Guaranteed loans from the SBA have only reached the levels of 2006 in the face of the worst economic crisis for small business since the Depression.
• The SBA runs out of loan guarantee authority periodically because of the Administration and Congress’s outright stinginess, while authorizing billions for their big donors on Wall Street and Big Business.
• The recent job bill is a joke, as to assisting small businesses. Small business can receive up to $5,000 over a year for hiring an un-necessary new worker at $40,000 annually. Spending $40,000 to receive a meager $5,000 won’t motivate most owners to hire a useless non-productive employee.
• The recently passed healthcare bill is loaded with provisions that will cost small businesses tens of thousands of dollars depending on their size. If a small business under twenty-five employees pays for insurance, it will receive back as tax credits one third of the actual cost. Unfortunately, according to the highly-touted Congressional Budget office only 11 percent of all small businesses will qualify for the program. An additional problem is small businesses which do qualify will not actually receive the tax credit until next year, while the remaining 89 percent of this category can go pound sand.

Once again the logic fails us. Why would a cash-strapped employee spend $10,000 to receive only $3,000 next year as a reimbursement a year later?

Small business confidence taking a beating

Jon Cook

Dec 9, 2009 14:48 EST

All those pundits who declared the current recession dead and buried, obviously haven’t been talking to small business owners.

Chapman University economists are the latest to announce the official end of the recession – with the codicil that the recovery will be more tortoise than hare.

In stark contrast to that report is the latest National Federation of Independent Business survey that shows small business confidence is locked in a downward spiral, that is worse than at any time during the last big recession in 1981-82.

The NFIB index showed a drop of 0.8 points in November – to 88.3 – from where it was in October and it represented the sixth time the index was below 90 since the current recession officially began 24 months ago. According to the NFIB, the index never fell below 90 at any point during the 1981-82 downturn and experienced a sharp rise at the beginning of 1983.

NFIB chief economist William Dunkelberg said the index’s current level was directly related to a lack of consumer spending. It seems not even a modest increase in Black Friday sales volume was enough to boost morale among small business owners.

“The biggest problem continues to be a shortage of customers,” Dunkelberg said in a statement. Among the 825 respondents to the NFIB survey, just 16 percent said they planned to make any capital expenditures over the next few months – the lowest total in 35 years. “Consumer spending is very weak, and there is nothing on the table in Washington to make owners more optimistic about the future.”

Dunkelberg said a continued lack of access to credit was further handcuffing small businesses and slowing job growth. In November small businesses reported a decline in average employment per firm of 0.58 workers during the prior three months, according to the NFIB. That represented a vast improvement over May’s record loss of 1.26 workers per firm, but not something that could lead someone to confidently proclaim the recession dead.