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Archive for the ‘Finding Money to Start a Business’ Category

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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Small Businesses Still Prefer Bank Capital Over Alternatives

Posted on May 23rd, 2011 by The BizFilings Team
Category: Finding Money to Start a Business, Small Business News, Small Business Trends, Start A Business

Last Friday marked the conclusion of National Small Business Week, wherein business leaders and government figures took efforts to champion the role of small companies in promoting job growth, entrepreneurship, innovation and general economic prosperity.

A favorite figure thrown around by the U.S. Small Business Administration, which sponsored last week’s activities, is that small firms contributed nearly two-thirds of all jobs created within the past 15 years. The sector also currently employs nearly half of all private workers.

“From the family businesses that anchor Main Street to the high-tech startups that keep America on the cutting edge, small businesses are the backbone of our economy and the cornerstones of America’s promise,” said President Barack Obama at a commencement ceremony in Washington, D.C.

“Throughout our economic recovery, persevering small businesses have helped put our country back on track,” he added.

However, the celebration of small firms belies a number of deep-rooted challenges – namely that of access to financing opportunities.

The Capital Access Network released its latest Small Business Barometer this week, shedding light on how small businesses are obtaining working capital and their preferred methods of doing so.

Banks remain the most sought after source of financing, with 43 percent of small businesses claiming banks to be most desirable. But interestingly enough, only 34 percent of respondents reported turning to them as their first choice. Alternative providers and credit were cited as first choices nearly as much as banks.

“Small businesses must be vigilant in exploring alternative finance options,” said Glenn Goldman, CEO of CAN. “While traditional bank loans may be preferred, they may not be the most available or best option for Main Street businesses. New products and features are making their way into the marketplace and are often a better fit and easier to access.”

However, the study does little to settle the question of how much small businesses are affected by the credit crunch. Nearly a quarter of respondents reported that they have been rejected by banks for loan or credit card applications, but with other groups such as the National Federation of Independent Business stubbornly maintaining that over 90 percent of small businesses are meeting their credit needs, those figures do little to suggest otherwise.

At the end of the day, entrepreneurs forming a company are likely to face varying credit conditions that depend on location, industry and outlook.

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The Role of Passion in Growing and Financing a Business

Posted on May 10th, 2011 by The BizFilings Team
Category: Finding Money to Start a Business, Grow a Business

Entrepreneurs, almost by definition, have a dedication to their businesses – they see them as extensions of themselves and, thus, have a relentless zeal to pursue them until success is achieved.

However, this same degree of passion that allows entrepreneurs to devote so much of their time and effort can be something of a double-edged sword, as passion gives way to bias or poor judgment.

“There are two sneaky things about the passion trap, it tends to operate at a subconscious or unconscious level, so we’re often not aware that these cognitive biases or these filters are at work, and we actually believe that the world or the marketplace is confirming our thesis about the business,” author and investor John Bradberry told Inc. magazine.

With startup activity at a 15-year high, according to the Kauffman Foundation, the need to have a balance between passion and objective judgment is essential, especially with financing strategies difficult to grasp.

A recent study by Hiscox USA found the underestimation of monthly expenses to be the primary mistake made by entrepreneurs forming a company. While financing seems to be a fundamentally mathematical aspect of launching a company, the mishandling of it can be routed in passionate assertions that a business will sell itself or survive on its own merit.

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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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Amex: Small Businesses Ready to Come Out of their Shells

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

More than half of U.S. small businesses are willing to take a financial risk in order to grab more market share – a possible sign that the U.S. economy is recovering further from the recent recession, American Express’ OPEN Small Business Forum reports.

However, the survey, which measured small business owners’ views on economic conditions for the coming year, did notice significant differences in outlook between those who reported doing well and those who said they were struggling. For instance, successful business were more likely to be marketing themselves on social networks and providing benefits to their employees than businesses trying to keep the lights on.

Roughly 37 percent of business owners surveyed expected their companies to grow in 2011, and nearly two-thirds of those reported that they believed the pace of said growth would be slow and steady.

This gradual economic recovery may mean it’s time for small businesses to take the next step and form an LLC in order to set the stage for expansion, experts say.

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Fed Governor Aims to Settle Small Business Credit Dispute

Posted on April 15th, 2011 by The BizFilings Team
Category: Finding Money to Start a Business, Grow a Business, Small Business News, Start A Business

Progressing a number of recent comments and studies from public officials, Federal Reserve Governor Elizabeth Duke asserted that financing conditions for the U.S. small business sector are likely to continue to improve in coming months.

Duke referenced a number of recent surveys that seem to contradict each other, with some arguing that small businesses’ biggest problem has been a lack of available credit while others blame weak sales for the problem.

The real issue, she asserted, is more complex than either, in that lending to the sector has been troubled, but perceptions of the credit market among small business owners has discouraged them from even applying.

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

However, she added, conditions are expected to improve as banks and other private lenders become willing to embrace greater levels of risk. Additionally, consumer spending and overall confidence – both of which have shown recent improvements – will also help stimulate the sector.

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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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Report Lists Small Businesses’ Greatest Mistakes

Posted on February 25th, 2011 by The BizFilings Team
Category: Finding Money to Start a Business, Launch My Business, Small Business News, Small Business Trends

Treasury Secretary Timothy Geithner stated this week that the U.S. financial system is currently the strongest its been since before the recession, adding that improvements in banks’ available assets should boost lending to small firms and hasten the economic recovery.

As conditions begin to improve, many entrepreneurs and small business owners are taking time to reflect on what has and has not worked, and a new study released this week by the insurance firm Hiscox USA addresses these concerns.

According to the Hiscox USA Small Business Survey, the top four mistakes small business owners cited they made when setting up a business are:

  1. Underestimating monthly expenses (32 percent of respondents)
  2. Hiring the wrong people (20 percent of respondents)
  3. Uncertainty over how to market and sell a product (18 percent of respondents)
  4. Not securing enough financing (18 percent of respondents).

“Cash flow, human resources, marketing and insurance issues can seem boring, but are hugely important,” said Kevin Kerridge, an insurance expert at Hiscox USA. “Any professional starting their own business … has a very clear vision of the service and value they will bring to their client base.”

“But, if you don’t plan for the basic essentials of running a business … you could be very quickly going back to being an employee,” Kerridge added.

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Financing Options for Independence-Minded Entrepreneurs

Posted on February 18th, 2011 by The BizFilings Team
Category: Finding Money to Start a Business, Small Business Trends, Start A Business

Small business confidence has been growing steadily in recent months, reaching levels unseen since before the recession, while borrowing throughout the sector has also grown. A recent report from Thomson Reuters and PayNet found lending grew by 20 percent from November to December of last year.

As these trends are only expected to accelerate in coming months, startups and entrepreneurs forming an LLC will need to adopt financing strategies that place them above their competitors.

Once such method, so-called “royalty financing,” has been a particularly popular method in recent months, as it allows borrowers to pay off credit according to the business’ revenue streams, so when there’s a slow month, the borrower is not forced to pay the same flat fee.

Entrepreneurs may also want to consider bootstrap financing, which, like royalty credit, allows entrepreneurs to retain full ownership and equity over their company.

“Since bootstrapping requires plowing business profits back into the company rather than taking them home, you’ll be amazed at the degree of focus you’ll exude,” writes Brad Sugars in Entrepreneur magazine. “Building your business this way necessarily requires keeping expenses low and establishing optimal target markets.”

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