“No Bailout for Small Business” – Senate Republicans

Filed in archive Business Loans and Financing on July 28, 2010

Small Businesses Earn More By Using Credit Cards?

The following is a headline on Inc.com dated July 16,2010:
Small Business Credit Card Use Creates Jobs

This conclusion comes from a report that they quote at length. This report was conducted for the American Bankers Association by Keybridge Research, an international economics and public policy consulting firm.

The report claims that small business use of credit cards is directly or indirectly responsible for the creation of 1.6 million jobs.
"The increase in small-business credit card use from 2003 to 2008 "contributed directly to the creation of 592,000 small business jobs and an additional one million direct or induced jobs throughout the US economy."

Now, most anyone whose been around the block a time or two knows that research can prove anything, if:

1) you use the right data to prove your point; 2) you ignore any data that doesn't prove your point: and 3) you get paid enough to get the right results.

The other thing that needs to be done when you read such a report is say, "Who benefits from this?" Could a report done for the American bankers somehow be good for the American bankers who issue the credit cards and earn usury interest rates on them? Could the results be backing up a desired conclusion?

Who's Zoomin' Who?

So, who's zoomin' who here, to borrow a line from Aretha Franklin. Should small business owners take on exorbitant amounts of short term debt in order to hire people who are long term obligations? Should they be using expensive money to hire employees that will become very expensive assets if the health care bill goes though as it is?

Who will benefit from using credit cards to run their businesses? That's up to you to decide. And who will benefit the most if you do? You can answer that question too, but it certainly won't be the small business owner.

Maybe the truth of the matter is that when small businesses go looking for credit, they are running into an ever increasing amount of resistance by the banks to make loans that they consider to be risky. After losing billions in worthless credit default swaps and CDOs backed by worthless mortgages, you wonder how can a small business be any more risky than that.

But having been burned by their own stupidity and greed, they have now suddenly found religion and don't want to take any risks anymore. So the business owner is forced to use what ever credit they can find to keep operations running and credit cards, even at their unregulated, criminally high interest rates are a better alternative than closing shop.

Small Businesses Hurting Financially

Filed in archive Economic Outlook on July 12, 2010

Small businesses are still hurting. As if we didn't know. Many are having to use personal credit cards or using their private retirement funds to keep afloat. But maybe something is happening at the lofty levels of finance in the US, the Federal Reserve bank.

The Federal Reserve Bank is a bank just like all the banks that make up the Fed (it is not a government agency - it is a private bank owned by private banks). However, they say they are the ultimate protector of our nation's monetary and fiscal policy, a job that used to belong to the US Congress until they decided to outsource that responsibility to the Fed back in the 30's.

As the big gorilla in the room when it comes to the nations' economic health, the Fed has a reputation, albeit a very tarnished one, to uphold.

So it was not surprising to hear the Fed Chairman say (again) that he wants the banks he helped give trillions of dollars to over the last 2 years to start lending some of it to small businesses.

The Sacramento Bee newspaper online reported on July 12th that Bernacke has "stepped up pressure Monday on banks to break the logjam and lend more to smaller firms, which employ at least half of American workers."
(http://www.sacbee.com/2010/07/12/2885503/business-highlights.html)

The paper goes on to say that the AP recently reported that, "Big companies are building up cash and are expected to report strong earnings starting this week. Not so for small businesses that can't get loans - or hire freely until they do."

The US job engine is still running on empty and you as a small business owner are that engine. There a number of ways for you to get your engine running again. You can get a free analysis of your website as a starting point.

No More Line of Credit? Factoring Can Be The Answer

Filed in archive Business Banking on July 5, 2010

Last time, I introduced the concept of accounts receivable factoring and today I wanted to give you a bit of history and then some more details on how it works.

History records that the concept of factoring goes back at least 4,000 years, so this is not a nw, unproved, questionable means of financing. Factors played a big role in the cotton business in the US back in the early days of this country. The cotton farmers needed to get their crop to the mills in England, but couldn't usually afford to pay for shipping up front. So a factor would step in and arrange shipping, customs clearance in England and delivery to the mill. He would then collect payment from the mill and get those funds back to the farmers.

By "investing" in the process, the factor guaranteed that both parties concerned got what they wanted. This type of financing was also important in the garment industry in the early part of the 20th century when clothing retailers would order collections well in advance of the time they would sell them, but the clothing manufacturers couldn't pre-finance the inventory. Factors filled the gap.

So how does it work? Pretty simple and from the time you begin the conversation until you have approval can be as little as a week.

Besides speed, here is the BIG advantage of factoring over bank credit. Your company is not being credit checked! Your customers are, because they are the ones who are going to be paying the factor. As long as you, or your business, don't have things like federal tax liens or blanket bank liens in the way, you're OK. And even if your bank has a lien on your assets, the factor will usually be able to convince the bank to release the accounts receivables since this will increase your financial strength which is alos to the bank's advantage.

Once the factor and you agree on the terms, you will cut your invoices as you always do, but will include instructions to make payment to a special bank account set up to handle these transactions. Once you cut the invoices, the factor will pay you 75-80% of the face value of the invoices within about 48 hours. Now you have cash to work with and you can do all the things you need to do, plus perhaps do other things like take advantage of supplier discounts on larger orders or take advantage of their quick payment discounts.

This new "funding source" also allows you to pursue new strategies like offering better payment terms to certain customers to encourage them to place larger orders. You may now also be able to go after bigger accounts that demand longer payment terms (60-90 days is not uncommon for big retailers). You now have the flexibility to take your business to another level.

In the next post I'll talk about what Accounts Receivable Factoring costs costs and why it makes sense.

No more Line of Credit? Here’s What You can Do

Filed in archive Business Banking on July 5, 2010

A lot of the readers of this blog are small business owners who face many of the same problems all small businesses face. One of the biggest, I'm sure you'll agree, is financing.

There are some 25 million small businesses in the US alone and although they are the job engine of the economy, they "don't get no respect" when it comes to getting money to operate their businesses.

When bank credit isn't possible or lines of credit are already max-ed out, many owners turn to friends or relatives or to their own personal lines of credit. But, there is obviously a limit to that. That also means a limit to the ability to expand and grow the business; to take it to the next level.

So when the banks say, "NO!" and all your other sources are dried up, what can you do? No, quit is not the answer. It is easier and better than that. It is something called accounts receivable factoring, a financing method that is over 4,000 years old.

Your accounts receivables are primarily your invoices: money owed to you by other companies who are your customers. You may be offering 30 day terms to most of your customers, or you may have to offer that, or better, to larger customers or government agencies. You know they are good for the money, but you can't make payroll or pay your lease on the promise to pay.

However, if your customer is credit worthy and has a good payment track record with you and other suppliers, a factor will offer to take over collection of your invoices for you and pay you an advance. Presto - you have positive cash flow again!

I'll go into more detail in another post and give you a place to go to get some really good, detailed information on
Accounts Receivable Factoring and how it can help you.

Should You Use Facebook to Market Your Business?

Filed in archive Internet Marketing on June 27, 2010

The answer to the question is a resounding "Yes"!

Why? Let Facebook's official statistics give you some food for thought:
• More than 400 million active users
• 50% of our active users log on to Facebook in any given day
• Average user has 130 friends

• People spend over 500 billion minutes per month on Facebook
• There are more than 100 million users currently accessing Facebook through their mobile devices
• There are over 160 million objects that people interact with (pages, groups and events)
• Average user is connected to 60 pages, groups and events
• Average user creates 70 pieces of content each month
• More than 25 billion pieces of content (web links, news stories, blog posts, notes, photo albums, etc.) shared each month.

So, how do you take advantage of this enormous marketplace? Here's a link to a blog post that talks about how to set up what is called a "Fan" page on Facebook so that you can get started.

The author goes through the steps on how to set up the page, how to make it attractive to visitors, how to find fans and how to advertise. This is a great resource to get started.

http://smallbiztrends.com/2009/07/facebook-fan-pages.html

I'll be posting more about Facebook and how to market with it in the coming days. In the meantime, I hope your business is growing!