SBA Increases Funding Prospects for New Entrepreneurs

 

Early stage companies might have critical new funding prospects thanks to a program run by the U.S. Small Business Administration (SBA).

To create jobs and to help new entrepreneurs get capital, the SBA launched the initiative – via a new Small Business Investment Company (SBIC) capital investment program in May 2012.

That’s why the SBA has recruited experienced investment fund managers. If licensed for the program, investment funds can multiply their collective assets for lending up to an aggregate $1 billion to new entrepreneurs.

“Early stage small businesses face difficult challenges accessing capital. At the same time, in this financial climate, venture capital funds are finding it difficult to raise money from institutional investors,” said SBA Administrator Karen Mills.

“By licensing and providing SBA financial backing to Early Stage Innovation Funds, we hope to expand entrepreneurs’ access to capital and encourage innovation as part of President Obama’s Start-Up America Initiative launched last year,” she explained.

Such funds can get matching SBA-backed funds up to $50 million.

The proviso for funds – they must target at least half their funds for young businesses.

The SBA will earmark the funds for a 60-month period.

In announcing the early-stage program, an SBA press release cited the difficulties for young companies that need between $1 million and $4 million.

“Since January 2006, less than 10 percent of all U.S. venture capital dollars went to seed funds investing at those levels, and 69 percent of those dollars went to just three states:  California, Massachusetts, and New York,” explained the press release.

“The Early Stage Innovation Fund initiative will target this gap by licensing and guaranteeing leverage to funds focused on early/seed stage investments,” promised the SBA release.

Since 1959, the SBA has worked with SBICs to provide capital. In 2012, there are nearly 300 SBICs with at least $17 billion in capital.

From the Coach’s Corner, here are three resource links:

  • Here’s the SBA early stage Web page
  • For all SBA investment programs, see this page

“The harder you work, the harder it is to surrender.”

-Vincent Lombardi

 

__________

Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.

 

Bookmark and Share

Will State Lawmakers Heed New SBA Data, Small Business Concerns?

 

Jan. 26, 2012

There’s more evidence that small business plays a pivotal role in creating jobs in Washington and other states, according to the Office of Advocacy in the Small Business Administration (SBA). The Office of Advocacy released small business data for each of the 50 states.

SBA believes the new data is “an invaluable resource for small businesses, legislators, academics, government officials, and policymakers in each state.”

Why?

“Small businesses are the foundation of economic growth in Washington and in our nation” said Dr. Winslow Sargeant, Chief Counsel for Advocacy. “By supporting policies that promote innovation and entrepreneurship, we help small businesses tackle these challenging economic times. These statistics are a resource for a path to economic growth.”

As for Washington state, the report explains “small business employment; business starts and closings; bank lending; business ownership by minorities, women, and veterans; and firm and employment change by major industry and firm size.”

Salient data about small business:

  • There were 532,162 small businesses in Washington in 2009. Of these, 142,854 were employers and they accounted for 53.3 percent of private sector jobs in the state. Small firms made up 98.1 percent of the state’s employers.
  • Throughout 2010, the number of opening establishments was lower than closing establishments and the net employment change from this turnover was negative.
  • Washington’s real gross state product increased 0.7 percent and private-sector employment decreased 1.8 percent in 2010. By comparison, real GDP in the United States decreased 1.3 percent and private sector employment declined by 0.8 percent.
  • Self-employment in Washington surged over the last decade. Female self-employment fared the best compared with other demographic groups during the decade.

To promote entrepreneurship, this week the Washington Policy Center sent state lawmakers in the 2012 legislative session these recommendations:

  1. Revisit the voluntary settlement agreement as passed by the state Senate in 2011 – $1.2 billion
  2. Reform the displaced worker retraining program
  3. Simplify sales taxes by using an ‘origin based’ tax (as opposed to a ‘destination based’ tax) and creating a flat rate for out-of-state businesses
  4. Review regulations to ensure that Washington rules don’t exceed federal regulations
  5. Enact Tort Reform
  6. Do no harm in transportation policy – do not reduce road lane capacity
  7. Do not follow Seattle in enacting statewide paid sick leave

In addition, Gov. Gregoire suggested her strategies to aid small business — business and occupation tax relief.

How has the Legislature responded? Lawmakers have ignored their $1.5 budget-deficit crisis.

Instead, lawmakers are considering other matters – mandating paid sick leave and safe leave, banning plastic bags, abolishing the death penalty and gay marriage.

When will Washington’s Legislature demonstrate wisdom?

From the Coach’s Corner, also read:

WPC Hits Target, but Will Washington State Legislature?

Washington: A Balanced Budget Is No Longer Enough

Does the Federal Reserve Understand Small Business?

Knowledge is knowing a tomato is a fruit.  Wisdom is not putting it in a fruit salad. 

_______

Columnist Terry Corbell is also a business-performance consultant and profit professional. Click here to see his management services (many are available online). For a complimentary chat about your business situation or to schedule Terry Corbell as a speaker, why don’t you contact him today?

Bookmark and Share

Does the Federal Reserve Understand Small Business?

 

To answer the question, I have a simple one-word answer: No. It appears at least one of the Federal Reserve’s 12 districts does not have a practitioner’s understanding of small business. 

Small business is really the straw that stirs the drink in the nation’s ability to increase the number of jobs in this country. 

According to Small Business Administration (SBA) figures, small businesses make up more than 99 percent of all employers and employ more than half of all workers. Another SBA stat stands out: Small businesses have created 64 percent of all jobs in the last couple of decades. 

But small businesses have really suffered during and after the Great Recession. 

So why is it that a 2011 study by the Federal Reserve Bank of New York draws the wrong conclusions as to why small business employee rolls dropped a lot more than big-business employment in the recent recession? 

The Fed’s study concludes that a drop in consumer demand triggered the cutbacks. Huh?

Fortunately, a blog by Dr. Scott Shane nailed the reason.

“I think two factors – reduced access to credit and the concentration of small businesses in the worst hit sectors of the economy – play a bigger role than the Fed researchers acknowledge,” he wrote.

I like his work, and have quoted him previously (Is the U.S. in Danger of Becoming Second-Rate in High Tech?). Dr. Shane is an entrepreneurial scholar – the A. Malachi Mixon III Professor of Entrepreneurial Studies at Case Western Reserve University.

The Fed was right about the loss of small-business employment rolls — 10.4 percent among companies with fewer than 50 employees. And Dr. Shane agreed. As Biz Coach, a business-performance consultant, I see it every day. Small businesses did lose more jobs than their bigger counterparts during the Great Recession. So, we’re in agreement on the job losses.

“Businesses with fewer than 50 employees accounted for 28 percent of the 121 million Americans employed in the private sector in 2008, the latest Small Business Administration figures show,” wrote Dr. Shane. “That’s too much employment in small businesses for policymakers to find a way to fix the job problem without getting the smallest companies to boost hiring.”

He’s right again.

“Small businesses are underrepresented in two sectors that have weathered the downturn relatively well: exporters and those in research-and-development-intensive industries,” he wrote. “And small businesses account for much more of the employment in the sectors hardest hit by the downturn.”

As an example, he cites construction.

“While total employment fell only 4.4 percent from 2007 to 2009, employment in construction dropped a 19.4 percent. With so many small businesses in construction, this has meant heavy job loss,” he explained.

“The Fed researchers also play down the importance of tightened credit markets in accounting for the losses, arguing that most of the decline in borrowing by small businesses during the recession came from a decrease in demand for loans – not a reduction in supply,” he asserted.

He cites figures from the National Federation of Independent Business: “In March 2009, at the depth of the recession, only 29 percent of small business owners reported that their borrowing needs were being met, down from 40 percent back in February 2007.”

Dr. Shane points out home-price declines adversely impacted small business credit.

“A 2007 survey by Barlow Research Associates shows that one-quarter of small business owners use the equity in their homes to fund their businesses,” he wrote. “And research by Kean University professor Samuel Bornstein shows that many of the loans used to tap that equity were the Alt-A, adjustable-rate and interest-only mortgages at the toxic heart of the crisis…”The decline in housing prices sucked a large amount of small business credit out of the system.”

Dr. Shane indicated home equity loans for small businesses decreased $25 billion.

“If policymakers want to counteract the job losses in small business, they need to do more than say that the cause is decreased demand,” he concluded. “Rather, they need to stimulate the small business heavy industries that were badly damaged by the recession and keep credit flowing.”

Amen. Naturally, it follows that new strategies for small business credit are needed. However, now there’s a bigger problem.

My sense is that the small business credit situation – in the aggregate – won’t qualify such firms for loans. The chicanery by big banks led to reduced credit limits and they got away with charging 38 percent interest on business credit cards for dubious reasons.

From the Coach’s Corner, here’s a resource link: 11 Strategies to Keep your Small Business Floating above Water

“Dreams come true if you survive the hard times!”
-George William Curtis

 

__________

Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.

 

Bookmark and Share

Small Business Owners Get Commercial-Mortgage Refinance Help

The application deadline is scheduled to expire September 27, 2012

 

Real estate capital is available for small business owners via the Small Business Administration (SBA), but the application deadline is Sept. 27, 2012. Congress approved a two-year, $15-billion budget aimed at benefiting as many as 20,000 small business owners.

So if you’re a small business-owner needing to refinance your commercial mortgage, you might consider this SBA program. The SBA has changed its temporary 504 refinancing program for mortgages that mature after Dec. 2012. Depending on their eligibility, small business owners can get long-term financing.

SBA.GOV site - U.S Small Business Administration“With the collapse of the real estate bubble, many small business owners have found themselves unable to refinance as a result of inflated real estate values at the time they took out their mortgage,” SBA Administrator Karen Mills said in a statement.

“SBA’s temporary 504 refinancing program was first made available to those small businesses with the most immediate need,” she explained.

“Today’s step opens this critical assistance to more small businesses, giving them the opportunity to restructure their debt and free up capital that will be essential to keeping their doors open and also their future ability to grow and create jobs,” she added.

Eligibility provisos:

  • Your business must be at least two years old
  • This is only for owner-occupied real estate
  • The original loan must be at least 24 months old
  • Loan proceeds are solely for 504-eligible business expenses
  • You must be current on your loan payments

SBA’s 504 loan program mandates three elements:

  • A lien for 50 percent of the cost of the project
  • A second mortgage held by an ”SBA certified development company,” which carries a 100 percent SBA guarantee for as much as 40 percent to the total value of the property
  • The small business owner must have at least 10 percent equity

What all this means is that qualified small business owners can refinance as much as 90 percent of the appraised property or 100 percent of the outstanding mortgage – whichever is lower. Of course, there are financing charges. Excluded from eligibility are government-guaranteed loans and existing 504 loans.

From the Coach’s Corner, not to be a curmudgeon, the truth is that many small business owners won’t qualify for these SBA-backed programs. In many cases, it’s because of damaged credit from dealing with predatory lenders and credit card companies, and other factors from the economic downturn.

For such business owners, here’s a column: Step-by-Step Solutions for a Company Turnaround.

“It’s easy to get a loan unless you need it.”
-Norman Ralph Augustine

__________

Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.

 

Bookmark and Share

SBA Web Chat: Tips on Healthcare Tax Credits

 

Aug. 4, 2010

If you need up-to-date information on healthcare for your small business, the Small Business Administration is holding a Web Chat. The SBA’s Web Chat will highlight small business health care, with a focus on how the Affordable Care Act will benefit small business owners through available tax-saving incentives.  

Participants can learn about the newest tax credits they can take advantage of, and additional tax provisions to be implemented during the next several years.  

John Tuzynski, chief of Employment Tax and Specialty Programs for the Small Business Self-Employed (SB/SE) Division at the Internal Revenue Service, will host the August web chat on “Healthcare and Small Business.” 

SBA’s Web chat series provides small business owners with an opportunity to discuss relevant business issues online with experts, industry leaders and successful entrepreneurs.  Chat participants will have direct, real-time access to the Web chats via questions they submit online in advance and during the live session, with instant answers. 

WHEN: August 12, 2010, 2010, 1 p.m. ET. Mr. Tuzynski will answer questions for one hour.      

HOW: Participants can join the live Web chat by going online to www.sba.gov, and clicking “Online Business Chat.”  Web chat participants may post questions before the August 12th chat by visiting http://web.sba.gov/livemeeting/Aug10/ and posting their questions online. 

To review archives of past Web chats, visit online at http://www.sba.gov/tools/monthlywebchat/index.html.

From the Coach’s Corner, however, please note these columns:

Healthcare Reform Increases Costs to Workers, Study

How Healthcare Law Would Affect Small Business

Oxymorons: ‘Healthcare Reform’ and ‘Public Servants’

Bookmark and Share

Agency Provides Help for Small Business to Cope with Federal Government

 

If you’re a small business owner, most likely you’re feeling the pain of overzealous regulation by government.

Small business owners feel the pain – losses in time and money – more readily that management in large companies. They’re closer to the cash register and have fewer resources – especially, micro businesses.

That means, in general, they’re more fiscally conservative and more likely to implement change to improve their cash flow.

In my experience, depending on the locale, the majority of small businesspeople complain of bureaucrats that make profits hard to achieve.

 

free stock photo Suit, Male, Ties, Work

 

Even a federal agency agrees, according to published reports. The Office of Advocacy at the Small Business Administration (SBA) states that federal rules cost business $1.1 trillion. And it costs small businesses 45 percent more than big businesses to comply.

That costs jobs.

So the SBA’s office says it’s been doing something about it with its regulatory review and reform initiative; what it calls “r3” to target regulations that are “ineffective, duplicative, or out of date.”

In 2008, it received 82 nominations for onerous rules that need reform. After two years of study, it whittled down the list. In 2010, it decided to focus on 10 federal rules that need revision.

“Only 10?” you’re thinking. Well, just as it took the SBA two years to decide on 10 finalist rules, getting government to reform anything takes years. So let’s congratulate the agency for its efforts.

In difficult situations, a positive attitude works wonders. The place to start is to chart progress. It’s a healthy exercise to focus on what’s right than on what’s wrong. Relish your progress. So regarding the 10 rules, let’s try to appreciate how far the agency has come.

Here’s a tip of the Biz Coach cap for the 10 federal rules:

  1. Update Air Monitoring Rules for Dry Cleaners to Reflect Current Technology
  2. Flexibility for Community Drinking Water Systems
  3. Simplify the Rules for Recycling Solid Waste
  4. EPA Should Clearly Define “Oil” in its Oil Spill Rules
  5. Update Flight Rules for the Washington, DC, Metropolitan Area
  6. Eliminate Duplicative Financial Requirements for Architect-Engineering Services Firms in Government Contracting
  7. Simplify the Home Office Business Deduction
  8. Update MSHA Rules on the Use of Explosives in Mines to Reflect Modern Industry Standards
  9. Update OSHA’s Medical / Laboratory Worker Rule
  10. Update Reverse Auction Techniques for Online Procurement of Commercial Items

Do you have questions, concerns or comments? Here’s an e-mail address: advocacy@sba.gov.

I say keep it going. If state and local governments would only see the light.

From the Coach’s Corner, does your small business need economic data or research? Try this article: Strategic Planning: List of Informative Web Sites

“Government is not a solution to our problem, government is the problem.”

-Ronald Reagan

__________

Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.

 

Bookmark and Share

Biz Coach Terry Corbell – the business-performance consultant – provides Proven Solutions for Maximum Profits.

Switch to our mobile site