Entrepreneurial

Small Business Week heads to D.C.

John Peabody

May 22, 2012 13:08 EDT

It’s Small Business Week, and here are a few links to help you know what’s going on.

Inc. has a list of ten impressive attendees in D.C., and the New York Times has a post packed with useful Small Business Week links. At Entrpereneur.com, Victoria Tifft, the Small Business Administration 2012 National Small Business Person of the Year and founder of ClinicalRM, a medical device and vaccine research company, discusses the growth of her business.

And at Reuters, John Stoehr is asking, in light of a challenge to the health care law: Who truly speaks for Small Businesses?

Not in D.C. but want to get involved? The White House is holding a Google hangout with SBA Administrator Karen Mills at 3:00pm ET on Wednesday, May 23, 2012. Log on and hang out.

Image: U.S. President Barack Obama holds up a hoagie sandwich after he meets with small business owners to discuss income tax credits during a roundtable discussion in Taylor Gourmet restaurant in Washington, May 16, 2012. Second from left is Small Business Administration Administrator Karen Mills. REUTERS/Larry Downing

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.

7 tips for landing an SBA loan

– Rachel Zippwald is the vice president of California Bank & Trust, a major SBA lender. The views expressed are her own. –

Small businesses seeking financing are in for a bit of good luck these days.

Special Small Business Administration incentives, such as the waiver of certain fees, are still available until the end of the year, so now is the time to apply for financing. There are, however, a few caveats.

While SBA loans are available, it may take a bit more work to obtain one and banks are requiring more information than they have in the past. The following are a few tips to facilitate getting your SBA loan approved.

1. Provide details on exactly how much financing you need and how you will use it. Banks like specifics, so be prepared to provide a precise dollar amount and give details of how you will use the funds. For example, if you’re seeking $125,000 to expand your business, explain to your lender how you will use the funds, such as you need $75,000 for working capital to support three months of expenses, and another $50,000 for seven networked computers and a server. Banks are impressed with research, so provide a written quote for the equipment. If you’re planning to consolidate debts and refinance for a longer term, provide copies of your promissory notes and state how much you think you can save with the refinance. Detailed loan amounts with copies of bids, promissory notes or proposals can help strengthen your loan package because your lender can understand the facts backing up the request.

2. Provide information about company management. When banks lend money, they like to understand who runs the company and to be familiar with their backgrounds. This is a key factor in presenting your loan for approval. Help your lender by providing a resume for each owner or key employee and describe their functions and responsibilities. If certain key positions have not yet been filled, include a thorough job description of the type of person you are seeking. This will confirm for the lender that you have analyzed your needs and have determined the requirements of the position.

3. Be prepared to offer collateral. The SBA requires collateral to fully secure your loan, to the extent that it is available. If you own a home, you will likely be asked to pledge it. The SBA may also request a lien on your business assets and may require life insurance on sole owners of a business. Most loans made by banks are secured loans, and therefore approval may be contingent on a guarantor who is willing to offer collateral.

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 Talk: Parsing Geithner’s speech to small business

Jon Cook

Nov 19, 2009 14:09 EST

It appears the magic number for American small businesses is 10, as in the sudden urgency to help smaller companies after the U.S. unemployment rate jumped over 10 percent last month for the first time in a quarter century. After a year with Wall Street at the top of everyone’s agenda, Main Street is now taking center stage.

Suddenly new lending programs are being announced, town halls are hastily being arranged and political heavyweights from across the financial and ideological spectrums are falling over themselves to propose their plans for how to get small businesses back on track and hiring.

Over the past month, everyone from President Obama, to House Speaker Nancy Pelosi, to Federal Reserve Chairman Ben Bernanke and to billionaire investor Warren Buffett have addressed the issue. Yesterday was Treasury Secretary Tim Geithner’s kick at the can (watch the video of his speech here), when he chaired a forum on small business financing with FDIC head Sheila Bair and SBA chief Karen Mills.

Geithner said the first part of the recovery was to stabilize Wall Street in order to prop up sagging earnings so investment portfolios stop taking such a beating and hard-hit firms stop laying off employees. “That rise in earnings is not simply because banks are particularly smart or clever,” insisted Geithner in front of an audience of small business owners and lenders.

Geithner added that now that the banking sector has been stabilized, the next step is to get banks lending again to small businesses, which he called “the engines of job growth” and which have historically led the country out of recessions. “It’s because the taxpayers of the United States and their elected representatives decided that to save the economy we had to act to stabilize the financial system. All banks – strong and weak – benefited from those actions and banks bear some responsibility for the extent of the damage caused by this crisis and they carry a substantial obligation to help our communities get back on their feet.”

CRISIS MANAGEMENT 101

Geithner went on to give a brief, but informative, lesson on credit crisis management, stating:

from The Great Debate:

Obama fails small businesses

George A. Cloutier

Nov 12, 2009 12:19 EST

-- 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-size companies. The opinions of George Cloutier are his own and do not represent those of the United States Conference of Mayors or Partner America. --

President Obama gets an “F” for his small business program. The SBA has guaranteed a paltry 50,000 loans  to the nation’s 29 million small businesses – that’s .0017. Loan volume is down 36 percent from 2008 and 50 percent from 2007. Obama and his advisers have actually done the unimaginable; they have reduced the flow of aid to small businesses in the face of a deep recession. The program’s bank lenders have left $15 billion on the table due to “regulatory problems.” Even an administration plan to provide lending to 70,000 vehicle dealers has no takers and failed.

Administration “experts” allocated less than 1 percent of the stimulus bill to small business. It’s mind-boggling that Washington ignores the biggest economic sector in the country employing 60 million people, producing 50 percent of GDP, and creating 70 percent of new jobs.

In the past several weeks, I have had the honor to lead events for small businesses in 15 cities (including Philadelphia,  Kansas City, Missouri and Baton Rouge, Louisiana) directly engaging with 2500 small business owners (employers only). Ninety-five percent of these business owners feel the administration's stimulus plan and program has badly mistreated small businesses compared to Wall Street and Detroit.

On October 21st, President Obama announced a second stimulus for small business. His new plan must have been a political speech since it lacked specifics as to how many businesses would be helped, how much money would be allocated and distributed, and when the money would actually start flowing.

Recently, the House passed a bill that purports to offer $40 billion to small businesses. The banks, having left billions of dollars on the table, astoundingly were selected again as the prime source of lending.

The bill mentions authorizing the SBA as a lender of “last resort” if certain loans are not funded by the banks, with a complicated process yet to be determined. No amount of authorization is mentioned and the process to achieve “last resort” status has no definition or timeframe. Much of the lending purported in the $40 billion will be achieved by raising the limit on certain types of loans; this way more money can be loaned to fewer businesses providing political cover for Congress and the president.

Small Talk: Jobs data contradictory

Jon Cook

Nov 10, 2009 11:22 EST

Over the last week there have been some wins and losses for small businesses in terms of new job data.

On the win side of the ledger, a new Intuit survey shows 44 percent of small businesses say they plan to hire in the next 12 months. The data is included in a San Francisco Chronicle story profiling a local Web startup – Airbnb.com – that is doing its part, having hired seven people since April, at a time when national unemployment has reached a 26-year high of 10.2 percent.

But that optimism is tempered by a USA Today story that said the main reason the unemployment rate jumped in October was due primarily to small businesses cutting staff. It seems that while some small companies are starting to hire again, they are still outnumbered by the ones laying off their workers. The story quotes Moody’s economist Mark Zandi, who explained there is a bias towards big companies in how the Labor Department compiles its payroll survey, which showed October job losses were down nearly 50 percent (190,000) from the average of 357,000 in May, June and July.

BANKRUPTCIES HURTING OBAMA EFFORTS

Small businesses are trimming staff, because many of them can’t get the loans they need to stay afloat until the economy picks up again. The Obama administration is ramping up efforts to get more money into the hands of small business owners, but the President’s efforts have been hamstrung by the bankruptcies of two of the country’s biggest small-businesses lenders: CIT and Advanta.

CIT lends to more than a million U.S. small businesses, while Advanta – a small business credit card lender – is trying to collect close to $3 billion in outstanding loans to 360,000 clients. The idea of both CIT and Advanta calling in markers has sent small businesses into a panic. The filings, which came just a week apart, may well be why Obama has chosen next week to stage a small business forum in Washington, in which U.S. Treasury Secretary Tim Geithner and Small Business Administration head Karen Mills will engage small business owners on the best way to get them more financing.

Sensing an opportunity, JPMorgan Chase & Co. announced yesterday it is stepping up lending to small businesses by $4 billion. A Reuters’ story suggested JPMorgan, which received $25 billion in public TARP money, could also be responding to government pressure to do its part to help get the small business economy back on its feet.

CIT = more bad news for small business

Jon Cook

Nov 2, 2009 16:27 EST

Just when it looked like President Obama was making some headway with small business, along comes the CIT bankruptcy train to derail everything.

Last Thursday, on Obama’s urging, the House of Representatives overwhelmingly passed new legislation that authorized more than $40 billion for loans backed by the Small Business Administration. It was the relief U.S. small businesses had been hoping for. But just 72 hours later the good news was tempered when CIT Group Inc. – the SBA’s top lender – filed for bankruptcy protection. Now all that new federal money may be loaded onto a train missing its locomotive.

CIT’s failing could leave as many as a million small and medium-sized businesses looking elsewhere for credit in a marketplace where few banks are lending. According to the National Small Business Association, CIT lent $65 million in SBA-backed loans for the first six months of 2009; just 1 percent of all SBA loans issued. That figure was down dramatically over 2008, when CIT comprised 6 percent of the SBA total.

At a time when loan defaults by SMEs are rising and Equifax is reporting that small business bankruptcies are up 44 percent over last year, the CIT news is akin to a perfect storm for small business.

“It’s great that the stock market is coming back, but if you’re unemployed or you’re running a small business, the turnaround has not happened,” said Drew White, CFO for Sageworks Inc., which monitors the financial data of privately-held companies across 1,600 industries. Sageworks’s latest study found that since 2003 the debt-to-equity ratio decreased in the private sector, which might normally be a good thing, but according to White is likely the result of companies paying down debt and shrinking inventories due to slower sales and tightened credit in the recession. “It looks like there’s sort of a benchmark or a normal way that these businesses operate and they need a fair amount of borrowing capacity to do that and that has been restricted and constrained.”

Unlike Equifax, Sageworks only crunches the numbers for companies currently being audited, so White conceded the numbers are likely worse than their latest report shows. He also doesn’t anticipate a turnaround over the next couple quarters, unless the jobless rate improves and consumer confidence rebounds.

“Even if they (retailers) had a lot of access to credit, I don’t know if they’d be making a lot of big bets and say let’s go stock up with a bunch of inventory, because there’s certainly no evidence people are flocking back to buy things,” said White, who added the efforts by the government to stimulate lending are great, but it’s not a panacea. “In the long run the fundamentals of the economy have to come back: people have to be employed, people have to feel better and people have to start investing and buying. We don’t see much evidence of that.”