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Archive for the ‘Lines of Credit’ Category

Small Business Owners Receive Funding Aide From Obama Administration

Posted on June 28th, 2011 by The BizFilings Team
Category: Cash Flow, Equity Loans, Financial Services, Form My Business, Home Business, Internet Business, Lines of Credit, Small Business, Small Business News

Any small business owner who’s gone through the pains of forming a company, and now requires a loan to keep matters progressing, is having a harder time securing a bank loan. But a new website is helping small business owners in need connect with alternative funding sources.

SBAdirectloans.com works in conjunction with the Small Business Administration, which is a federal government agency. This agency provides loans that come with preferable terms and guidelines — without the consequence of defaulting.

“Small business owners right now are sick with worry over their business,” said Mike Robbins, SBA lending expert. “They simply don’t realize that a private lending professional can get them SBA-guaranteed funds in as little as a month. Even if every bank in their town says no, it’s still possible to get an SBA loan.”

According to an article published on Bankrate.com, the nation is still going through the financial crisis and banks are still refusing small business owners bank loans at a higher rate than usual.

Robbins said the Obama administration can be thanked for setting aside billions in entrepreneur aide.

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Small Business Credit Demand Expected to Rise in Coming Months

Posted on May 31st, 2011 by The BizFilings Team
Category: Finding Money to Start a Business, Lines of Credit, Small Business Trends, Start A Business

Many analysts have pointed to community banks’ lack of interest in tapping the national Small Business Lending Fund as indicative of the overall state of the credit market, with lending stalled due more so to weak demand than tighter policies.

But as companies emerge from the recession and seek to expand their operations through hiring, marketing and equipment investment, the demand for credit is expected to grow as well.

As Maria Coyne, executive vice president of business banking for the Cleveland-based KeyBank, recently explained to Entrepreneur magazine, small firms are actually borrowing to afford additions to their payroll.

“[Small businesses are] also taking advantage of existing opportunities,” Coyne told Entrepreneur. “Perhaps they’ve explored other ways to sell their products or services or expand into new markets and now they need to borrow to bolster their inventories. Maybe they’re taking advantage of existing tax credits to purchase heavy equipment that can help a company be more efficient.”

But underlying these market trends is consumer activity, which is often seen as the principle driver of sales, hiring and investment. With the most recent Thomson Reuters/University of Michigan Consumer Sentiment Index showing a three-month high in May, analysts may anticipate credit market growth in coming months.

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JPMorgan to Hike Small Business Lending as Credit Market Remains Debatable

Posted on April 28th, 2011 by The BizFilings Team
Category: Finding Money to Start a Business, Grow a Business, Lines of Credit, Small Business News, Start A Business

JPMorgan Chase, the nation’s second-largest bank, announced Tuesday it will boost its lending to U.S. small businesses by 20 percent this year, marking a volume of $12 billion in credit to the sector.

“Small business owners are not only our neighbors but also the entrepreneurs that hire half of the employees in the United States,” said Michael Cleary, CEO of business banking in retail financial services. “It’s critical that we support small businesses as they continue to fuel the economic recovery across the country.”

Chase, the banking sector of the financial service giant, increased its first quarter lending to firms with less than $20 million in annual sales by 64 percent. Last year, the bank became the No. 1 distributor of Small Business Administration-backed loans.

There has been debate in recent months over the state of the credit market and its impact on small businesses, with some groups, such as the National Federation of Independent Business, asserting small firms consistently achieve all of their credit needs. In fact, the NFIB reported that 93 percent of small businesses met their lending requirements in March.

Others, such as Federal Reserve Governor Elizabeth Duke, have argued that the issue is actually much more complex. In a speech earlier this month, Duke reasoned that perceptions of poor credit have actually discouraged firms from even applying for loans, thereby improving the acceptance rate but limiting distribution.

“Many small business owners were so convinced that their requests would be denied that they did not even apply for credit,” Duke said. “Despite this restricted credit availability, small business owners, by a large margin, still considered their most significant problem to be weak sales.”

However, Duke maintained that conditions are expected to improve in coming months, as private lenders and banks like JPMorgan Chase embrace greater levels of risk. Consumer spending and overall confidence will also help to stimulate the sector.

Still, other analysts, like Wall Street Journal contributor Angus Loten, have argued that banks are only lending to top-tier small companies and startups, while average-income firms have been struggling to access credit.

“Recent surveys of small-business owners suggest that lenders are targeting only the most credit-worthy businesses,” Loten wrote in a February article. “Such firms tend to be at the upper end of Bank of America’s $20-million threshold for small business, if not well beyond.”

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Small Banks in Delaware Less Likely to Fund Small Businesses

Posted on April 19th, 2011 by The BizFilings Team
Category: Finding Money to Start a Business, Lines of Credit, Small Business News, Start A Business

The rate at which small banks in Delaware hand out initial financing for small businesses in the state has decreased sharply in recent times, the News Journal says.

This means that new players have stepped into the void left by those smaller local institutions, the newspaper reports, naming Bank of America and Wells Fargo as two of the biggest players in the market, and adding that the the presence of non-bank lenders and community development funds has also increased.

The state’s WSFS Bank underwrote $3.9 million in small business loans in 2008, according to the News Journal, but that figure fell all the way to $782,00 just two years later. Small Business Administration loans have also begun to dry up for those in the process of starting a business.

Fortunately, the SBA avoided the budget ax that many had feared in the run-up to the last-minute compromise measure earlier this month that averted a government shutdown. The administration even received $25 million back that had been removed by congress in February.

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Treasury Secretary: SMBs Need Credit to Spur Jobs Creation and Innovation

Posted on March 23rd, 2011 by The BizFilings Team
Category: Finding Money to Start a Business, Grow a Business, Lines of Credit, Small Business News, Start A Business

At a conference Tuesday, Treasury Secretary Timothy Geithner maintained his assertion that the U.S. small business sector needs greater access to credit in order to stimulate job growth and innovation.

The secretary’s position reflects that of the Obama administration, which has been busy trying to improve its standing with the business community in recent months, touting small businesses as critical to economic recovery.

“The financial crisis caused a great deal of damage to the capacity of innovators to access capital, and we can’t promote innovation and investment in the United States unless we help innovative companies get the funding they need to succeed,” the Wall Street Journal quotes Geithner as saying.

Geithner pointed out that the recession caused private banks, venture capitalists and other lenders to cut back on the distribution of credit – an argument that the National Federation of Independent Business has contradicted, asserting in its most recent report that 92 percent of small businesses met their credit needs in February.

However, most economists agree that such surveys only reflect the conditions of the most well-off small firms and that the vast majority of entrepreneurs forming a corporation are facing much more difficult circumstances.

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What Lenders Consider in Making an Investment

Posted on February 10th, 2011 by The BizFilings Team
Category: Angel Investors, Cash Flow, Finding Money to Start a Business, Lines of Credit, Start A Business, Venture Capital, Women-Owned Businesses, Work For Myself

While conditions are already difficult for small business owners in regards to achieving their credit needs, it is likely even more difficult for women-owned businesses.

“Traditional lenders are requiring you to jump through more hoops, and they are applying less attractive terms after all the jumping is over,” writes Entrepreneur magazine contributor Kim Kiyosaki. “Private lenders and investors are more cautious and have upped their standards, as well. What’s a businesswoman to do?”

When seeking credit opportunities, Kiyosaki advises women business owners to consider four basic factors that lenders – banks, microlenders, angel investors or venture capitalists – consider when deciding whether or not to approve a loan.

  1. The project. This refers to the startup, organization or business venture that is seeking funding. What is it? What will it do? Why is it unique, and why does it deserve funding over others like it?
  2. The partners. These are the main principals – initial investors, founders, managers, participatory advisers – involved in the creation of the venture.
  3. The financing. Investors, perhaps more than anything else, want to see the numbers. Such figures include growth and revenue projections, prior investments, current sales and past deals.
  4. The management. “Money follows management,” Kiyosaki points out. Make sure that lenders are confident in the competence and devotion of those who will determine how their money is spent.

Loan options for woman-owned businesses

There are loan options available for woman-owned businesses. The Prequalification Pilot Loan Program uses intermediaries to assist prospective borrowers in developing loan applications and securing loans. A Women’s Business Development Center or a Small Business Development Company are examples of intermediaries. Here’s how the loan process works:

  • The loan package is submitted to the SBA and a decision is generally rendered in three days.
  • If approved, the SBA issues a letter of prequalification stating the SBA’s intent to guarantee the loan.
  • The maximum loan under this program is $250,000 with a guarantee of 85 percent up to $150,000 and 75 percent for loans over $150,000.
  • The intermediary can usually help the applicant find a competitive lender.

Additional resources

Business Resources for Women Entrepreneurs
A Guide to Starting and Running a Woman-Owned Business

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A Few Thoughts on Startup Credit Card Financing

Posted on January 31st, 2011 by The BizFilings Team
Category: Finding Money to Start a Business, Lines of Credit, Small Business

Recent surveys have shown that the majority of entrepreneurs finance their startups primarily through credit cards. The Pioneer Institute recently reported that the two most common financing methods among businesses with fewer than five employees were loans from relatives and credit cards.

While credit cards may be a valuable financing option – especially with fewer lending opportunities as a result of the recession – small businesses and startups should heed a few pieces of advice.

First, the majority of U.S. small businesses are sole proprietorships, meaning that any debt or financial obligations that startups incur will be delivered upon the owner.

“Unless your business is incorporated, you’re the de facto guarantor of all business debts,” writes Asheesh Advani for Entrepreneur magazine. “So if your business has a slow sales quarter and you fall behind on your credit card payments, your personal credit rating and your personal ability to borrow are at risk.”

Credit cards are a valuable financing option, so they should not be discouraged altogether. But small firms – particularly those with high growth aspirations – may want to get incorporated or form an LLC to protect principals’ personal assets from the business’ credit card debts.

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Treasury Department Announces First Round of State Small Business Credit Initiative Funding

Posted on January 21st, 2011 by The BizFilings Team
Category: Finding Money to Start a Business, Form My Business, Lines of Credit, Small Business

The U.S. Department of Treasury announced Friday that North Carolina and Michigan will be the first states to receive funding from the State Small Business Credit Initiative – a $1.5 billion initiative aimed at helping small businesses achieve lending through the backing of private loans and state programs.

The program is part of the Small Business Jobs and Credit Act passed last fall and is intended to stimulate small business growth and job creation.

“Small businesses depend on access to credit in order to hire and expand, and this funding will better position main street entrepreneurs to create new jobs and invest in their local communities,” said Treasury Secretary Timothy Geithner.

“Innovative public-private lending partnerships like the State Small Business Credit Initiative have a proven track record,” the secretary added.

While the initial round of funding is reserved for North Carolina and Michigan, the SSBCI follows that all 50 states and the District of Columbia, as well as U.S. territories are eligible for the program’s funding.

Last week, the Small Business Administration announced it has supported more than $12 billion in small business loans since the passage of the Jobs Act, further suggesting that the availability of credit may continue to improve for entrepreneurs forming a company.

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Venture Capital Expected to Surge in 2011 as Startup Scene Expands

Posted on December 29th, 2010 by The BizFilings Team
Category: Angel Investors, Cash Flow, Financial Services, Finding Money to Start a Business, Form My Business, Grow a Business, Lines of Credit, Start A Business, Venture Capital, Work For Myself

Venture capital is often considered a funding option only at a significantly developed stage – above angel investment and beyond initial bank loans or personal financing. Since the recession began, VC funding has declined substantially, despite a boom in a number of highly regarded tech and web startups.

In fact, the total amount of money raised by U.S. VC firms dropped year-over-year for 2008 and 2009, according to a statement by Mark Heesen, president of the National Venture Capital Association, to Reuters. And that number is expected to drop for 2010 as well.

However, improving market conditions, as well as a surge in the startup scenes of California and New York City, may contribute to an upswing in VC funding over the next few years. There is also the much-anticipated initial public offerings of companies such as Facebook and Groupon that is expected to occur sometime in the next two years.

Other major venture capitalists such as Merus Capital of Palo Alto, California, are upping their investment funds to meet the anticipated demand. Merus, founded by a former Google mergers and acquisitions executive, is now preparing to raise a new $100 million fund for tech startups and later-stage development companies starting next year.

For entrepreneurs forming a company in one of these startups hubs, it may be a good time to begin floating around ideas for your next round of investing.

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Funding Options for Startups

Posted on December 28th, 2010 by The BizFilings Team
Category: Angel Investors, Cash Flow, Equity Loans, Financial Services, Finding Money to Start a Business, Grow a Business, Lines of Credit, Small Business, Start A Business, Venture Capital, Work For Myself

Starting a company from home is a very common option for startups with limited funding. Apple, Google, eBay, Amazon and Facebook were all launched in dorm rooms, garages or homes using little more than a few computers.

Still, this does not mean that a fledgling enterprise will not need some sort of financing to help it reach the next stage of development.

Until the company can catch the attention of venture capitalists or angel investors, entrepreneurs can look to a number of other options for their financing needs.

Commercial bank loans can provide essentially all the funding a startup needs without the threat of managerial involvement. However, paying off the debt is easier said than done, especially as it takes a good amount of time for a startup to become profitable. The process of loan approval is also a more stringent process.

“Banks want to see two sources of repayment: cash flow from your business and a secondary source – typically collateral,” writes AllBusiness.com. “Lenders will look at your past financial statements, including those of any business partners.”

Home equity loans offer low interest rates and are easier to acquire. However, the risk of losing a home is often too great for the entrepreneur to take.

Startups can also consider credit cards, U.S. Small Business Administration-backed loans and equipment leasing. Although there is always almost a downside to a lending option, they should be considered on a case-by-case basis.

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