6 Tips to Get the Lowest-Cost Small Business Loan

Small business owners are facing unnecessary financial risks because they increasingly seek debt consolidation and loan refinancing as the result of high interest rates and onerous fees, according to a small-business lender.

Lender Quarterspot reported, for example, that nearly 25 percent of the $10 million in aggregate loan requests it received from July 7 to August 7 in 2013 were for loan consolidation and refinancing.

But in refinancing their old loans, those businesses face “effective interest rates well above triple digit percentages” said the company.

ID-100144053 stuart miles“There is obviously pent-up demand for business loan refinancing, but this also shows that many small business owners are entering into their original loan agreements without fully understanding the terms and implications,” said Adam Cohen, CEO and co-founder of QuarterSpot (http://www.quarterspot.com).

“We want to educate all owners so that they understand the difference between good and bad loans, and are able to secure the best possible loan for their business,” he asserted.

Due diligence

He warns borrowers to ignore advertised rates and to calculate the true cost of loans.

In a press statement, he claims small business owners are “blindly entering into loan agreements with fixed interest payments and poor terms…since most merchant cash advances and small business loans charge a fixed amount of interest and can include prepay penalties, many of these businesses will be faced with effective interest rates well above triple digit percentages if they refinance.”

Instead, he said business owners should continue to pay on the original until paid off, and get another loan if more funding is needed.

Many press releases and studies published by organizations are self-serving, so it’s important to have a healthy skepticism. That’s my first thought about small-business lender Quarterspot.

Great Recession’s residual effects

The Great Recession was caused in part by the predatory behavior of small-business lenders. In How to Ease Debt-Collection Headaches, I explained how tight credit traumatized 360,000 businesses thanks to unscrupulous practices of lenders like the nation’s 15th largest credit card company, Advanta, headed by CEO Dennis Alter:

Advanta has been repeatedly accused of bilking countless customers with predatory interest rates at higher than 30 percent for dubious reasons, and abruptly cutting credit lines without warning to unsuspecting businesses long before the recession was acknowledged by economists. Little wonder about Advanta’s downfall. Its business customers couldn’t pay their credit card bills. Here’s a representative sample of complaints.

Advanta and others also wrecked the personal credit of entrepreneurs by requiring personal loan guarantees and Social Security numbers.

So Mr. Cohen’s representations hit a nerve with me.

“There is obviously pent-up demand for business loan refinancing, but this also shows that many small business owners are entering into their original loan agreements without fully understanding the terms and implications.”

–Adam Cohen

Quarterspot recommendations

He provides six tips:

1. Make sure your business credit profile is accurate by requesting a copy from Experian, Equifax or Dunn & Bradstreet

2. Maximize your good credit accounts by working with businesses that report trade information

3. Positive payment history is a major component of a strong credit profile so be sure to pay creditors on time

4. Maintain sufficient cash reserves in your business checking account to increase your credit limit

5. Choose a business loan without prepayment penalties or fixed interest repayments

6. Compare loans and other financing options calculating the total borrowing costs (interest paid + fees + loan amount) in dollars and cents

“Business owners should ignore advertised rates and instead compare borrowing costs in dollars and cents,” continued Mr. Cohen. “Many online lenders and merchant cash advance companies calculate interest and fees using methods that cost small businesses double or more.”

Quarterspot representations

He claims QuarterSpot can reduce borrowing costs by as much as 85 percent when compared to traditional lenders. He says QuarterSpot does not require small business owners to provide personal loan guarantees or to undergo personal credit checks. Borrowers can apply for a loan in five minutes or less and receive funding in as little as 24 hours for loans ranging from $5,000 to more than $1 million.

“Small businesses employ nearly half of America and account for half of GDP, yet most small businesses cannot get a bank loan.”said Mr. Cohen in an earlier release. “They are often forced to accept extremely high rates and fees from alternative sources, and worse yet – owners risk losing their personal belongings and damaging their personal credit if things don’t work out.”

If you apply to Quarterspot, please let us know about your experience. We’re publishing this article as a public service in the wake of predatory behavior by many lenders before the Great Recession. (We don’t have any connection with Quarterspot.)

From the Coach’s Corner, here are tips on obtaining a bank loan:

Applying for Bank Loan? Here’s How to Shorten the Process — Business owners generally have two concerns when trying to get a bank loan or line of credit. Either they can’t qualify or they face scrutiny beyond belief. Wouldn’t it be great to save time and shorten the process?

Financial tips:

Primer for Best Practices in Preparing Financial Statements – A good financial system is vital for your business. Not only will a properly prepared financial statement tell you what’s transpired in your business, it will give you a snapshot regarding your future. 

Budgeting Basics for a Micro Business – For entrepreneurs, often the most difficult part of launching a business is preparing financial projections. It may not be the most enjoyable task, but budgeting is imperative for maximizing performance.

Accounting / Finance – Why and How to Determine Your Break-Even Point – Uncertainty can kill hope in business. Best practices in management mean having the right information to alleviate uncertainty in business. For that you need the right tools. 

“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.

Photo courtesy of Stuart Miles at www.freedigitalphotos.net

Best Business Strategies to Get Tech Funding

If you have a tech startup looking for funds, you already know the competition is intense. But there are strategies that will help you to get funded. Investors revealed their preferences for funding technology firms at the 2012 Consumer Electronics Show (CES) in Las Vegas.

On her blog, the chair of the CES venture capital panel, Joey Tamer, writes “each early stage fund planned to invest in a Series A for four or five new early stage companies during this year.”

Ms. Tamer is a strategic consultant to entrepreneurs in technology and digital media, and to experienced consultants in all fields to maximize their practices (www.joeytamer.com).

Joey Tamer

        Joey Tamer

“In the case of Jerusalem Venture Partners, Yoav Tzruya reported that this number represents no more than 1 percent of the 600 companies JVP reviews each year for its early stage fund,” says Ms. Tamer.

“Kevin Spain of Emergence Capital which has a focus on B2B applications, and Chris Petrovic of GameStop Digital which is a strategic investor/acquirer of game companies, as well as Habib Kairouz of Rho Capital agreed with the plan for four to five new deals this year,” she adds.

Improved environment

“We are in a boom period again, this time for the number of early stage companies in play in the market,” Ms. Tamer explains. “The continuing trend that allows for new technologies and applications to be built with many off-the-shelf tools, using world-wide technical expertise, for much less capital, has created many new companies competing for the funding resources available.

“The new trend of incubating companies in accelerators has added some seed capital to these concept-companies to get them through their initial product development,” she says. “But then these companies need to get some traction in the market, hopefully to significant revenue, before they can hope to move from seed capital to Series A.”

Optional strategies

Ms. Tamer indicates you have options to consider if you can’t get from seed to Series A or from Series A to Series B.

“Early stage companies not attracting that critical Series A or Series B funding should consider connecting strategically or through acquisition or merger with other similar-stage companies to create a stronger offering for funding,” she advises. “Aligning with other early companies that would enhance your market position or extend your product offerings or brand, you might attract that essential next stage of funding.”

She explains a developing trend.

“Kevin Spain added a new point, that he sees a strong emerging trend in B2B and enterprise applications using the new technologies that are mostly focused on the consumer market now,” she writes. “He advised companies to look for those B2B market opportunities for their current B2C products and applications. A doubling of your target markets, which rise and fall under different economic conditions, may present a strong offering to investors.”

She explains the motivation of two investors.

“Scott English from Hearst and Chris Petrovic of GameStop approach their investments as strategic additions to their portfolios, rather than as pure venture investments –even though each has a different priority for these investments,” she explains.

“The first point made was to conduct your due diligence about how strategic investors value their target companies,” Ms. Tamer says. “Hearst, for example, is a later stage investor focused on financial ROI to Hearst first, and strategic value to the portfolio second. GameStop, focused on early stage game companies, values its acquisition targets first as an operational addition to its portfolio plan (does the company add to GameStop’s infrastructure, product mix, learning about new markets, or strategy) before financial and ROI considerations.”

She explains some lessons:

  1. Do your homework about your company’s “fit” with what an investment group might be seeking.
  2. Talk with other companies in the investor’s portfolio.
  3. Narrow down your list and your efforts to those investors that prefer your company’s stage, market sector, and your possible enhancement of their portfolio’s current companies.
  4. Some strategic and corporate investors function very much like venture capitalists, and others have different priorities. So, after your due diligence, and as you enter discussions, read the deal’s restrictions and the detailed legal conditions before negotiating or accepting any investment.

Critical factors to help you win

“Norm Fogelsong of Institutional Venture Partners, a later-stage venture fund, insisted that your company’s vision must be big, very big, to attract the rounds of capital needed to become a major player,” she points out.

“The panelists agreed that they are very focused on execution, in particular execution on market penetration,” Ms. Tamer advises. “After you have been funded on your product’s unique value, it is time to turn your attention to your market, especially your customer acquisition and retention strategies, tactics and results.”

She provides another insight: “Yoav related that he looked for CEOs with deep market savvy, a founder who knows his or her product and its market realities, and has a strong go-to-market strategy.”

Ms. Tamer shares the insights of Sharon Wienbar of Scale Venture Partners, a later stage investor, who wants to minimize risk three ways:

  • Proof of market responsiveness: Does your customer commit to your vision of your product’s value, price and use?
  • A business model that prioritizes customer acquisition and retention: Do you have a plan that acquires each new customer quickly and for less and less cost of acquisition?
  • Compelling metrics: are your projections for market penetration, growth and profitability backed up by proven metrics?

“So, amid the growing competition for capital we are seeing this year, particularly in the consumer market, investors’ focus seems to move quickly from unique technologies and applications to strong execution,” concludes Ms. Tamer. “Early stage companies need strategies to present compelling offerings to investors, and an increasing focus on market execution that leads to growing a big company and taking significant market share.”

Hope you enjoyed these insights. As usual, Ms. Tamer speaks and writes with authority.

(Note: I’m very familiar with Ms. Tamer’s expertise. She is a fellow member of Consultants West, www.consultantswest.com, a roundtable of veteran consultants in the Los Angeles area.)

From the Coach’s Corner, here are more of Ms. Tamer’s valuable insights:

“If you can dream it, you can do it.”

-Walt Disney


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.

How Seattle Attorneys Helped Startups Get a Reprieve from Financial ‘Reform’

After Congress passed the financial regulatory reform bill in 2010, the angel investment community and entrepreneurs began celebrating – thanks, in part, to two Seattle attorneys.

They had worked practically nonstop to aid the startup-financing cause.

At first in the lawmakers’ debate, it appeared no one was listening.  The financial regulatory reform bill was advancing through the U.S. Senate.

But Sen. Chris Dodd’s bill was flawed. It threatened job creation by restricting startups and angel investors. Thankfully, the provision hurting startups was deleted by amendment just before passing the Senate.

ID-100100177 stockimages“It would have hurt angel investing and would have wiped us out,” says attorney Joe Wallin, principal at Carney Badley Spellman, P.S. (formerly a partner in the Seattle office of Davis Wright Tremaine).

He and another Seattle attorney, Bill Carleton, a member of McNaul Ebel Nawrot & Helgren, labored with others to kill the provision.

It resulted in an amendment SA 4056 co-sponsored by Senators Maria Cantwell and Patty Murray (D-WA).

“Congratulations to Marianne Hudson of the Angel CapitalAssociation, and Dan Rosen of the Seattle Alliance of Angels!” exclaimed the attorneys in a statement. “Thank you Senators Murray and Cantwell!”

Dodging a bullet

The bill would have resulted in unemployment continuing to be a bigger economic threat than it needed to be.

“Over the next three years, the economy must create nearly 13 million jobs to bring unemployment down to 5 percent – still higher than pre-recession levels,” wrote economist Peter Morici, Ph.D., in an Op Ed column on this portal. “That requires 360,000 jobs every month and economic growth at 5 percent a year.”

“It would have hurt angel investing and would have wiped us out.” 

And credit lines for small businesses as catalysts for new jobs are still not widely available via the normal pipelines.

“Obama spent the TARP to bail out Wall Street banks, GM and his pals at the United Autoworkers but left the 8,000 regional banks to sink or swim,” Dr. Morici added. “Cash strapped, those banks can’t lend enough to small and medium-sized businesses, which create most new jobs.”

That’s another reason why a heavy economic burden falls on startups and others in the angel ecosystem. SA 4056 was imperative for the financial regulatory reform bill.

The law’s potential impact

“It could have reduced funding for small companies by probably $10 billion per year,” adds Mr. Wallin. “Small companies are the source for new jobs.”

In another article “How Sen. Dodd’s Financial Reform Almost Killed Financing of Startups,” I quoted Ms. Hudson of the Angel Capital Association, who forecast the bill would prevent up to “77 percent of accredited investors” from investing in new firms. In that column, Mr. Wallin explained why the financial regulatory reform bill contained flaws.

“Before companies could accept money from investors they would have to file paperwork with the SEC and wait 120 days,” Mr. Wallin told me in that interview.

“If the SEC didn’t review the filing and conclude that the filing qualified for the federal securities law exemption, companies would have to file paperwork with the states in which the investors lived and wait for the states to determine that the sale of the securities qualified for the securities law exemption,” he explained.

Funding data

To confirm what’s been at stake, the attorney cited data from the University of New Hampshire Center for Venture Research.  The report was entitled, “The Angel Investor Market in 2009: Holding Steady but Changes in Seed and Startup Investments.”

Even in a tepid economy, of course, we’re talking big numbers.

“Total investments in 2009 were $17.6 billion, a decrease of 8.3 percent over 2008 when investments totaled $19.2 billion,” wrote Jeffrey Sohl, director of the school’s venture research center.

“However, a total of 57,225 entrepreneurial ventures received angel funding in 2009, a reserved 3.1 percent increase from 2008 when 55,480 entrepreneurial ventures received angel funding. The number of active investors in 2009 was 259,480 individuals, virtually unchanged from 2008’s 260,500 individuals,” he added.

Smaller deals

He said the average deal size was reduced by 11.1 percent in 2009.

“Software accounted for the largest share of investments, with 19 percent of total angel investments in 2009, followed by healthcare services/medical devices and equipment (17 percent), industrial/energy (17 percent), retail (9 percent) and biotech (8 percent).  “Industrial and energy investing is a significant increase from 2008, reflecting a growing appetite for green technologies,” Mr. Sohl stated.

He indicated 54 percent of the exits stemmed from mergers and acquisitions. Forty percent involved bankruptcies.

So, all is well as normalcy returned to the startup-funding process. But one has to wonder why all this political maneuvering was necessary.

From the Coach’s Corner, here are related links:

Are Startups Facing a Series A Funding Crunch? – The headlines about Series A funding for startups can be confusing. Do startups have a funding crisis or not? While a law firm’s report shows a Series-A funding cataclysm mostly in the Silicon Valley, headlines emanating in southern California tell a different story.

To Finance Your Startup, How Bloggers Can Impact Your Quest for Venture Capital – Multi-million dollar venture-capital financing decisions are affected by bloggers and social media. That’s the conclusion from a 2012 academic study, “Putting Money Where The Mouths Are: The Relation Between Venture Financing and Electronic Word-of-Mouth.”

“The best startups generally come from somebody needing to scratch an itch.”

– Michael Arrington


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.

Photo courtesy of stockimages at www.freedigitalphotos.net

Breakthrough Strategies to Land Venture Capital in 2010

Dec. 18, 2009

If you follow eight tactics suggested by premier financial strategist Joey Tamer, my sense is that you will greatly enhance your odds for landing venture capital.

She shares her expertise in a Wall Street Journal blog, Strategies for Finding Venture Capital in 2010.

Ms. Tamer is an expert consultant for early-stage technology and media companies whom I rely upon as an authoritative source on finance-related matters in my Biz Coach columns.

Whatever Ms. Tamer says, you can take it to the bank with confidence. 


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.

Seattle business consultant Terry Corbell provides high-performance management services and strategies.