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Why it’s Bad News That Small Business is Bigger Now 0

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By Tom Gazaway

Sometimes it’s the little things government does that make a big difference. An example is the changes the Small Business Administration recently made to its definitions of what qualifies as a small business, which will likely have a negative impact on many startup business owners.

In a nutshell, small businesses just got bigger, at least in the SBA’s view. Here’s why that’s not good news:

More loan competition. The SBA uses its small-business definitions to decide which companies can qualify for SBA-guaranteed small business loans. For many startup businesses, the SBA’s guarantee often makes the difference in a bank’s willingness to take a chance on an unproven borrower that doesn’t yet have revenue or assets that might serve as collateral.

More bidders for government contracts. The definitions also matter when it comes to winning a government contract. The federal government tries to make sure a certain portion of its contracts go to small businesses. Now, some 18,000 bigger businesses will count in that small-business category, denying more contracts to actual small businesses.

More confusion. In case you’re not aware, the SBA’s rules on business size are a confusing mess. Each industry has its own definition of a small business. In its rules review, SBA could have chosen to standardize its definitions — say, declare that a small business is any enterprise with annual revenue under $7 million. That used to be the cutoff for most industries.

But instead, the current system of hundreds of different definitions was continued, and now some industries can be considered a small business even though they have revenue of $35 million! In some industries, the situation is utterly ridiculous. New-car dealerships, for instance, nearly all qualify as small businesses under the new rules.

Small businesses have been heavily challenged to survive in the past few years as the economy crashed. Throwing more, bigger businesses into the small-biz pool isn’t going to help truly small businesses to grow. The argument was made that some small businesses have grown in part thanks to SBA’s help, and so shouldn’t be penalized by exclusion from SBA programs. Maybe they could have come up with some kind of grandfather clause, where if you were a small business within the last year or two you could still access the programs.

Instead, the SBA simply grew its audience. That may be good for SBA’s budget, as the agency can claim it’s serving more customers, but it doesn’t bode well for new and truly small businesses.

If you’re doing the math on this, it basically means the SBA can now lend to mid-sized businesses that are not really small businesses and call it “small business lending.”  But get this…they might even say they’re increasing small business lending, when in fact they are lending less to small business. Instead, they could give a disproportionate amount of funding to companies in the $10 million — $30 million revenue range.

Companies generating revenues like this have never been considered small businesses before, but now they are — at least to the SBA, which will spin this for its own political and PR gain.

If you’re a small business owner trying to get a small business loan today, we can help. The business-finance experts at Hawkeye Management know how to help you find a small business loan, even with the SBA’s changes. Contact us today for a free consultation.

Posted on: 01-26-2011
Posted in: Miscelaneous

Why Venture-Capital Funding for Small Business Shrank in ’10 0

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By Tom Gazaway

If you’re a startup business owner who’s been hoping to land some venture-capital investors to fund your growth, think again. The figures are starting to come in for venture investing in the final quarter of 2010, and the picture isn’t pretty.

Venture funding has been spotty since the beginning of the year, when some industries saw venture investors’ interest wane. In the fourth quarter, many industries saw less venture capital flow their way.

The reason is revealed in a new report by VentureDeal on venture-backed mergers and acquisitions. With the IPO market still sluggish, selling a venture-funded company off is currently the most popular way for venture investors to reap a profit and get their money back in circulation — so they can invest it in new companies like yours.

Unfortunately, M&A activity slowed around the end of the year, the VentureDeal report shows. When that happens, it’s simple mathematics: Less money coming back to venture-capital firms in profits from previous deals means less money for new investments in startups.

In biotech, for instance, the value of merger deals sank 38 percent to $2.38 billion, with the biggest dip in pharmaceutical-company deals. The software industry saw deal volume sink 22 percent to under $2 billion. Even the hot telecom/mobile/wireless space saw less action, with deals down 17 percent to $87 million. That may sound like a lot of money circulating, but in the VC world, it’s not.

What’s more, many experts believe the VC industry has permanently shrunk in this downturn — that it’s not a temporary dip, but a “new normal” going forward in which traditional VC will play less of a role in business finance. The numbers coming in seem to bear this out. Dow Jones reports that in 2010, venture firms raised 14 percent less than they did in 2009, when the economy was worse off. Looking at just the fourth quarter, VC fundraising was down nearly by half compared with fourth-quarter 2009.

While getting a big, splashy VC firm to fund your company sounds exciting, the reality is that very few companies, mostly in high-tech, get the bulk of the venture-capital money. Think about Groupon, the mega-successful online daily-deal site, which raised a record-breaking $950 million in venture capital in mid-January, and is now headed toward an initial public offering. A typical small business has only a very slight chance of getting in on this kind of funding.

Even if you could score some VC money, you might not want to take on private investors. In that case, you no longer own your business outright — you now have other owners on board with their own ideas of how the business should be run. A lot of small-business owners don’t want to give up that ownership stake, anyway.

If you’d like to talk about realistic options for securing the capital your business needs to grow, contact the small business financing experts at Hawkeye Management. We’ll be happy to help you with finance vehicles with a proven track record, such as unsecured small business lines of credit and small business loans.

Photo via stock.xchng user ericortner

Posted on: 01-19-2011
Posted in: Miscelaneous

20 Must-Know Business and Finance Gurus 14

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by Tom Gazaway

Ask any small business owner why they’re successful, and most will credit the people who helped and inspired them along the way. I’m no different — I wouldn’t be here today as the owner of a thriving small business credit business without learning from many who went before me.

Here’s a look at 20 of the thought leaders whose insights have helped me build Hawkeye Management into the valuable resource for business owners it is today. They’re listed alphabetically — I wouldn’t want to try to rank them, as they’re all great!

  1. Brock Blake, founder of Funding Universe – The builder of a mighty useful portal for entrepreneurs seeking funding. I admire anybody who’s created an Inc. 500 Fastest Growing company.
  2. Ali Brown - Millionaire entrepreneur Brown is focused on helping women business owners succeed…but no reason the guys can’t listen in.
  3. Anita Campbell, owner of SmallBizTrends – It’s less well-known than Entrepreneur or Inc.’s site, but Campbell’s site has tons of practical advice for business owners on her site.
  4. Amy Cosper, editor-in-chief of Entrepreneur magazine – Her tweets give you a quick glimpse at many of the magazine’s most interesting stories.
  5. Erica Douglass – Made her first million at 26. Now she helps others with business, money, and investing advice. An inspiring young leader.
  6. Melinda Emerson, “The SmallBizLady,” of SucceedAsYourOwnBoss.com - Her site is a great place to learn about entrepreneurial business ownership.
  7. Greg Fisher of CreditScoring.com – This guy is obscure and has an edge, but he knows his stuff. It’s a great website for credit-related research and understanding, especially on controversial credit topics.
  8. David Garland of The Rise To the Top – As his Twitter bio puts it, “The #1 non-boring resource for building your business smarter, faster, and cheaper.” I have to agree. His new book is Smarter, Faster, Cheaper: Non-Boring, Fluff-free Strategies for Marketing and Promoting Your Business.
  9. Maren Kate of Escaping the 9to5 – A great, energetic, inspiring young entrepreneur to follow for those aiming to quit their day job and become entrepreneurs.
  10. Steve Kelly – A pastor who continues to teach me that how we choose to think in life, and in business, is everything.  This is the guy who said, when asked about the recession, “I just know I’m not joining it.  Do you think God’s economy is in recession?”  Of course it’s not.
  11. Mark Kohler – This CPA and attorney is also a national speaker, author of Lawyers are Liars, and radio host. Kind of the complete package there, with solid advice on how to keep your business on track legally, and how to build your personal brand.  He has quality content plus an entertaining and fun delivery and style.
  12. Aaron Patzer, founder/CEO of Mint.com – Builder of one of the preeiminent personal-finance sites. Intuit bought it last fall for a reported $170 million — need I say more?
  13. Michael Port – Author, professional speaker and entrepreneur Port’s “Book Yourself Solid” program is pure marketing genius.
  14. Kevin Rose, tech investor and Digg founder - One of the superstars for understanding emerging technology and new media.  If you don’t know this guy already, then where have you been?
  15. Chris Sacca, Twitter investor – Former Google Guy, he not only shows canny investing skill, but he recently biked across the USA. Guess it’s a combination of admiration and jealousy here.
  16. Dan Schwabel of Millennial Branding — The brand genius and author of Me 2.0 always seems ahead of the curve in knowing what’s next in the world of marketing yourself.
  17. The Shark Tank team: Robert Herjavec, Kevin O’Leary, Barbara Corcoran, Daymond John and Kevin Harrington – What can I say? I find this show compulsive viewing, and the experts are top-notch.
  18. Carol Tice of MakeaLivingWriting.com - I feel lucky to have longtime reporter and copywriter Tice’s help as I work on improving this blog. Her own blog was recently named one of the Top 10 Blogs for Writers.
  19. John Ulzheimer, formerly of Credit.com, now with Smartcredit.com – The absolute king of credit, and there’s not a close second.  He’s the only former industry insider (formerly with FICO and Equifax) who’s now on the outside doing consumer education.
  20. Carrie Wilkerson of Barefoot Executive TV – If you prefer to learn via video, Wilkerson offers great tips on marketing and business leadership.

Who’s inspired you and helped you build your business? Leave a comment and let us know who you’d like to thank.

Please take a minute to take the short poll below for Hawkeye Management research. Thank you!

 

 

Posted on: 01-11-2011
Posted in: Miscelaneous

Key Ingredients for Business Loan Approvals 0

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By Tom Gazaway

Here’s a good story about how some borrowing needs require the right person, and not just the right bank:

I got a call recently from a business owner who started his company about four years ago.  The first year, they did a little over $300,000 in revenue.  In year two, they jumped up just over $1 million, and last year they did approximately $1.6 million. They should have a big year in 2011.

They have carved out a nice niche, and there’s room for much more growth — if they can get access to credit. They don’t have collateral to offer a lender, but they approached their bank and asked for $200,000 in a business line of credit.

The problem: Many banks are simply not approving large, unsecured lines of credit like this nowadays for small business owners.

This isn’t a deal that is likely going to be done, even by a lender who offers unsecured business lines of credit (UBLs).  The second problem is that if the bank will lend without collateral, they will likely only lend up to 10 percent of the business’s annual revenue.

This business owner’s best-case scenario was probably to get around $120,000, since his 2010 financials aren’t filed yet.  Also, many lenders cap their unsecured credit lines at a certain point, so even if 10 percent of annual revenue supported a higher approval, they only allow up to $50,000 or $100,000 for a UBL without collateral.

This brings me to my third point: He went to the wrong bank. He didn’t know that, but he chose a bank that just wasn’t a good fit for him, mainly because they are not a good unsecured lender. This bank is barely even lending nowadays, period.

Why do I share all of this?  After his efforts came up empty, he called us and asked if we could get him a UBL for $200,000.

I spoke with him this morning and by the end of the day, I had him pre-qualified for $225,000 from three banks I’ve worked with for some time.  Over 80 percent of the applications we’ve submitted to these three lenders over the last two years have been approved, so when we “pre-qual” a deal with them it’s usually going to close.

There are benefits to knowing the right people at the right bank. But this doesn’t mean we get special favors, and it doesn’t mean that any of these lenders bend their underwriting criteria for Hawkeye Management.

Here’s what it does mean:

  • You need to know the right bank.
  • You need to know a highly competent person at that bank, who has closed many loans for your business type. All three of my contacts at these banks are vice-president level or higher and have been with their banks for over five years.
  • You need to know exactly how to fill out their applications. This is more important than you might think.  You need to know what the credit report needs to look like before you submit the deal, so that you know it’s a match and there’s no red flags.
  • You need to know any potential problems before the deal is submitted…you don’t try to hide issues and hope they don’t find them.  Tell them what those issues are up front, so your highly experienced banker believes in the deal and can sell it to their underwriter.

With this particular deal, we took the business owner to different lenders than he tried. But there have been many times where we take a client’s deal right back to the same bank, and run the same deal through our people — who know how to package it and communicate with the underwriters — and we get it approved.

If you are a small business owner and your business could benefit from access to $50,000 or more in an unsecured business line of credit, give us a call.  We have the highest rating offerred by the Better Business Bureau and Dun & Bradstreet, and we charge no up-front fees.  At Hawkeye Management, we’re happy to assist you as you start, build, grow, or maintain your business.

Photo via stock.xchng user mikecco

Posted on: 01-4-2011
Posted in: Business Loan

6 Resources for Women Business Owners Seeking Capital 0

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By Tom Gazaway

Women have come a long way in business, but in one area — finance — they still face many challenges. Old-school bankers can still be prejudiced or just plain ignorant of womens’ business acumen and success. The Center for Women’s Business Research reports more than 10 million firms are now owned by women and employ 13 million people.

Businesses with women owners rang up close to $2 billion in sales in 2008, the center found. One in five firms with revenue over $1 million is woman-owned. Clearly, it’s time for anyone who still only wants to make business loans to men to wake up to the 21st Century reality — women are making themselves at home in corner offices across the U.S.

When it comes to venture capital, women entrepreneurs still face terrific prejudice. A recent report from CB Insights showed only 8 percent of venture-backed seed and Series A funding went to woman-owned businesses in the first  half of 2010. That means the vast majority of women owners seeking to grow their businesses often wind up seeking a business loan or business line of credit to keep their company growing.

Women owners are also frequent victims of business finance scams. If you think you’ve been misled in seeking a loan or business line of credit, contact the Federal Trade Commission and report it.

Fortunately, there are some solid resources women entrepreneurs can draw on to help overcome obstacles to securing financing for their business. A few great places that support women owners:

The Small Business Administration — SBA’s Office of Women’s Business Ownership has a network of nearly 100 Women’s Business Centers around the country. They exist to provide education for women looking to start or grow a business.

Business.gov — this SBA portal site has an extensive list of resources for women owners.

National Association of Women Business Owners — NAWBO is one of the oldest and most active organizations for women entrepreneurs.

The Women’s Funding Network — This venture-capital organization seeks to develop more funders interested in investing in woman-owned businesses.

WomanOwned — This portal site offers a broad array of resources to women looking to build or start a business.

Here at Hawkeye Management, we’ve always been an equal opportunity lender. We are happy to assist women entrepreneurs in finding needed business loans or business lines of credit. If you’re a woman business owner who’s gotten the brush-off at traditional banks, give us a call for a free consultation.

Photo via stock.xchng user graphiteBP

Posted on: 01-3-2011
Posted in: Miscelaneous
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