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Archive for the ‘Lines of Credit’ Category

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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Chase Surpasses Small Business Lending Goals for 2010

Posted on December 28th, 2010 by The BizFilings Team
Category: Cash Flow, Financial Services, Finding Money to Start a Business, Grow a Business, Lines of Credit, Small Business, Venture Capital

Chase Bank announced Tuesday that the Chicago-based bank has exceeded its lending goals for 2010, providing more than $10 billion in credit to U.S. small businesses.

The volume makes Chase the No. 1 small business lender in the country, according to the Small Business Administration. It also represents a 40 percent jump over the bank’s lending volume from last year.

The loans were spread among more than 250,000 small businesses with annual revenues of less than $20 million.

“Small businesses are putting these loans to use every day in cities and towns all across the country, creating jobs and helping our economy get back on its feet,” said Michael Cleary, CEO of business banking in retail financial services for Chase.

However, as the economy only gradually improves, credit remains a crucial problem, preventing owners from hiring in significant numbers. An October report by the New York Federal Reserve declared that more than three-quarters of small businesses met little or none of their credit needs for the first half of 2010.

Still, entrepreneurs forming a company may at least take comfort in Chase’s jump in credit availability, as well as other recent reports finding heightened confidence among small business owners.

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Small Business Lending Fund Passes Through Congress

Posted on December 23rd, 2010 by The BizFilings Team
Category: Cash Flow, Financial Services, Grow a Business, Lines of Credit, Small Business, Venture Capital

Entrepreneurs forming a company may take comfort in a recently passed piece of Congressional legislation that will provide greater small business lending incentives to community banks.

The newly formed Small Business Lending Fund will provide $30 billion in small business lending funds to community banks with less than $10 billion in assets.

“Increasing access to capital is the key ingredient our small businesses need to start investing, growing and hiring again,” Washington Senator and Democrat Maria Cantwell said. “I commend the Treasury Department for moving quickly to set up the Lending Fund to get job-producing lending capital flowing to the local banks and businesses who know how to put America back to work.”

The SBLF, which is part of the Small Business Jobs and Credit Act passed in September, is largely in response to the lack of available credit that has stricken many small businesses since the recession began.

As small businesses employ nearly 50 percent of the U.S. private workforce, the sector is seen as vital in job creation and, ultimately, a full-scale economic recovery.

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Many Small Businesses Asserting Problem is Not Tax Credits But Low Demand

Posted on December 21st, 2010 by The BizFilings Team
Category: Business Inspiration, Form My Business, Grow a Business, Lines of Credit, Small Business, Start A Business, Taxes, Work For Myself

In light of Thursday night’s Congressional passage of the $801 billion tax credit package, many small business owners are pointing out that it is not tax credits that businesses are in need of – it is greater demand.

“I don’t think (the tax cuts) will matter much at all. I have such confidence in my business that even without the tax cuts I would have taken the money off my home line,” small-business owner Susan Povich, referring to a credit line on her home mortgage, told Reuters.

President Barack Obama’s tax plan, which passed through the House of Representatives at midnight Thursday night, will extend Bush-era tax cuts that would have expired at the end of this year until 2012 – a measure Republicans have touted as crucial in promoting business growth and job creation.

However, the private sector is currently sitting on a massive trove of liquid assets which, in light of economic conditions, they are merely hesitant to spend. According to Federal Reserve data, as of September, $1.9 trillion in cash is currently held by private business, accounting for 7.4 percent of total company assets – the highest rate in more than 50 years.

With such a bounty of funds waiting to be unleashed, economists and lawmakers have been trying to determine measures to provoke spending and hiring on a massive scale – a surefire kick-start to entrepreneurs forming a company and widespread economic recovery.

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SBA Launches Micro Loan Program Aimed at Quickly Getting Credit to Small Businesses

Posted on December 20th, 2010 by The BizFilings Team
Category: Cash Flow, Financial Services, Finding Money to Start a Business, Grow a Business, Lines of Credit, Small Business, Start A Business, Venture Capital, Work For Myself

The U.S. Small Business Administration has announced plans for a new lending initiative aimed at quickly providing small businesses with micro loans in response to recent reports that small firms are not receiving adequate credit.

According to the SBA, the loans range up to $250,000 and can be approved in a matter of minutes or up to 10 days through an application that is only two pages long. Analysts hope the program will aid cash-strapped entrepreneurs in forming a company.

“Many entrepreneurs and small business owners across the country have enormous potential to drive economic growth and create good-paying jobs in their local communities, but too often they face barriers in fulfilling that potential,” said Catherine Hughes, chairperson of the SBA’s Advisory Council on Underserved Communities.

The lending initiative is largely in response to an October report by the New York Federal Reserve, which found that three-quarters of small businesses that applied for loans in the first half of 2010 received little or none of the credit they requested.

However, a report released this week by the National Federation of Independent Business declared that 91 percent of surveyed small businesses’ credit needs were currently met, suggesting to many that the actual state of small business credit is difficult to determine.

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The Five C’s of Good Credit for Financing a Startup

Posted on December 17th, 2010 by The BizFilings Team
Category: Business Inspiration, Financial Services, Grow a Business, Lines of Credit, Small Business, Start A Business, Work For Myself

Financing is the single most important aspect to starting a company and maintaining it through the early stages of development is equally paramount. No matter how brilliant an idea, product or business model is, no one will know this if its provider is not able to acquire substantial credit for hiring, marketing and growing the company.

Before heading to a bank or private lender, small business owners should consider the “Five C’s” of good credit.

“The five C’s are very important,” John Seelinger, a volunteer for small business advocacy group SCORE, told Inc. magazine. “You can’t afford to be sloppy or haphazard with them. The underwriting process may be different, but the fundamental five C’s are always there.”

“Capacity” refers to a business’ or investor’s ability to repay a lending debt.

“Character” reminds borrowers that investors need to be certain that they are lending to reputable and trustworthy borrowers.

“Capital” refers to the level of investment an owner has made in his or her own business. A lack of personal financing will likely discourage creditors from offering their own funding.

“Collateral” is perhaps the most important consideration, however. Lenders are far more likely to offer credit to businesses and investors that have offered a line of insurance in case of bankruptcy or poor ROI.

“Conditions” refers to a lender’s desire to know how and toward what their financing will be spent.

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Transitioning a Small Business into 2011

Posted on December 1st, 2010 by The BizFilings Team
Category: Business Inspiration, Finding Money to Start a Business, Lines of Credit, Small Business, Work For Myself

Although the economic recession is beginning to improve, albeit slightly, banks are operating with tighter lending policies and credit from alternative sources is equally difficult to come by. The worst recession since World War II is understandably reluctant to be dismissed.

“However optimistic you may be about your business, you need to let the overall economy temper your expectations,” Scott Shane, an economics professor at Case Western Reserve University, told Entrepreneur magazine. “You need to assume that the recovery is going to be tepid and plan accordingly.”

Meanwhile, a recent survey by the National Association for Business Economics projected that the economy, although growing, will not exceed a rate of 2.6 percent through 2011.

In looking forward to next year, small businesses should take a look back at their 2010 data and operational processes. Chances are, whatever worked this year will likely work next year as well.

Given that employee departures are expected as the job market improves, holding on to workers that have held back the company may not be worth it, especially in a tight financial situation.

“High-maintenance, low-margin customers are an impediment to deploying time and resources more profitably,” says small business consultant Joseph Fulvio. “Get rid of them.”

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New Tech-Based Financial Services Begin to Offer an Alternative to Big Banking Practices

Posted on November 30th, 2010 by The BizFilings Team
Category: Equity Loans, Financial Services, Finding Money to Start a Business, Franchise, Lines of Credit, Small Business

Banks have drastically tightened their lending policies and the wake of the recession has brought with it a degree of public mistrust toward large banks, which hold more than 40 percent of the nation’s deposits.

But the arrival of new technologies such as smartphones, tablet computers and mobile payment systems are beginning to deliver financial services that return trust and comfort to consumers – many of whom are small business owners and entrepreneurs in need of financial breaks.

One such service, Venmo, allows friends, relatives or business partners to transfer funds between their phones without bank authorization. The service is ideal for quick business transactions such as retail purchases or paying for business lunches.

But for more bank-related stand-in services, BankSimple runs on the motto: “We’re not a bank. We’re better.” They offer customers simple interfaces and banking opportunities while leaving compliance and treasury issues to company affiliates.

“What I find fascinating is that these organizations are attacking the established system of financial transactions and creating new trust networks that have the potential to revolutionize our markets and our commerce,” writes John Gerzema for Inc. magazine. “They could dis-aggregate the financial system.”

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Small Business Jobs and Credit Act Offers Tax Break

Posted on September 28th, 2010 by BizFilings Team
Category: Lines of Credit, Small Business, Taxes, Work For Myself

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Psst! Did you know that the recently passed Small Business Jobs and Credit Act includes a new tax break for self-employed individuals who pay their own health insurance premiums?

Current law dictates the self-employed are allowed to deduct premiums they pay for themselves and their immediate families from their income prior to computing income tax – but not before they configure their Social Security and Medicare tax (aka self-employment tax).

Under the Small Business Jobs and Credit Act signed into law by President Obama yesterday afternoon, self-employed individuals are allowed to deduct premiums from their income BEFORE calculating self-employment tax, but ONLY for 2010. According to Kathleen Pender, business journalist and writer of the Net Worth column published in the San Francisco Chronicle, “the bill will give the self-employed the same tax break that employers get on health insurance premiums they pay for their employees.”

According to her column, most self-employed individuals will save 15.3 percent of whatever they pay in premiums. “A person who pays $12,000 a year in premiums would generally save $1,836.”

There is a catch. The tax break is much less for higher-income individuals “because they don’t owe Social Security tax on income above $106,800 in 2010.”

“Remember that there are two parts to the self-employment tax: The Social Security portion is 12.4 percent on the first $106,800 in annual income, but nothing on income that exceeds that amount. (Income means self-employment income plus wages from a job, if any.) The Medicare tax is 2.9 percent on every dollar of income. Suppose you have $150,000 in income this year and pay $12,000 in insurance premiums, which reduces your income to $138,000. This new deduction saves you nothing on Social Security taxes because you don’t owe Social Security tax on income above $106,800. However, the deduction will reduce your Medicare tax because you owe Medicare tax on all of your income. The deduction will save you 2.9 percent of $12,000 or $348,” writes Pender.

According to MarketWatch.com, “the one-year tax deduction for sole proprietors on health care costs for payroll tax purposes on their 2010 tax returns is expected to save self-employed business owners approximately $456 to $968 in taxes next year.”

For more information, visit The National Association for the Self-Employed (NASE).

How will the Small Business Jobs and Credit Act help your plight as a small business owner?

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