What is the SBA?

The U.S. Small Business Administration (SBA) is a federal agency, created in 1953, responsible for assisting and protecting the interests of American small business.  The agency operates through a series of field offices around the country - as well as in partnership with public and private organizations - to offer such things as technical assistance (how to do business overseas; how to teach your workers new skills), contracting assistance (how to bid on government jobs), and other areas of importance to small business owners.  These might include recovering from natural disasters, complying with civil rights laws, or helping young entrepreneurs get a business off the ground.  But the main reason most people approach this agency is to obtain an SBA business loan - either as start-up funding or for financial assistance to expand an existing business.

What Are SBA Loans?

With no sense of irony whatsoever, it is not possible to obtain an SBA business loan unless you have been rejected in your application for a conventional loan.  In order to keep this government agency from unfairly competing with commercial lending institutions - banks, credit unions, and so on - the law states that the SBA may not guarantee a loan if the customer can secure one “on reasonable terms” from some private source.  There are a number of different types of SBA loans available to the business owner, depending upon the size of the loan, the use to which it will be put, and other factors.  Here are some examples:

Read More

Cash-Poor Entrepreneur
Many of us have dreams of owning our own business.  Franchise opportunities abound for people who have ready cash to spend, although it can take close to six figures ($100,000) to do a proper job of it - what with the initial franchise fee, start-up or build-out costs, inventory, supplies, and so on.  But what about those entrepreneurs who have a self-employment wish but little or no money to sink into the venture?  Breathe a bit easier, folks, because it CAN be done.

The Real Estate Model
In all kinds of financial times, but especially when things are a bit tight, there are plenty of stories about people who buy houses with “little or no money down.”  Although this article is aimed at actual businesses - “flipping” houses by buying, fixing up and reselling them is clearly a business, but outside the scope of this discussion - many of the techniques used by budding real estate magnates are applicable here as well.  And the secret to buying a business with no money down can be boiled down to a single word - financing.

Read More

Franchise financing is essential in the marketplace today because it can make all the difference between potential entrepreneurs having the cash to invest in a proven business and ultimately missing out on what could have been the best opportunity of their lives. Until recently, franchise financing was limited but the surge in demand for franchises has led to a major change. Now you can find financing from a number of sources, but in order to be able to benefit from it you have to know where you can access it in the first place.

What Is Franchise Financing?

Although many people would love to establish their own businesses and forward their entrepreneurial goals, many do not have the money to do so. Although investing in a franchise may well be a fantastic idea, those individuals do not know about the franchise business financing options that are available. There are many providers that offer you a whole range of products, depending ultimately on your needs, the level of financing required, and what it will be used for.

In effect, franchise financing is there to provide you with the money that you need to be able to invest in a franchise opportunity. Some providers offer help towards your initial investment whereas others will only provide you with financing assistance if you have already invested the initial fee.

Read More

Writing a business should be the first step before you start your business. Reducing your ideas to writing will greatly assist you along the way as you develop and mature your thoughts and decision making. It is often in the process of writing the plan itself that your vision is strengthened and galvanized into you mission statement and direction. Though a business plan, in order to be effective, needs to be a working and actionable document updateable at least on an annual basis and more often if situations warrant. A good business plan will contain the below components which are essential to the overall plan’s depth and ultimate success:
 

Cash Forecasts. Perhaps the biggest failing of entrepreneurs and business owners alike is their failure to carefully contemplate and plan for amount of cash that will be needed to adequately fund the business’s growth and day-to-day operations. It has been often said, “tongue in cheek,”  that one should carefully evaluate and plan for the cash flow that will be needed to run a business and then they should double it Often owners will spend cash without thinking ahead or re-forecasting for the next months and years only to find, if they had a “do-over” that they would have been more prudent with their spending. Developing a systematic and cautious methodology for spending that includes checks and balances, layers of approval, ample cushions and available credit are good defenses to ensure sound cash management practices. Great caution should be exercised to ensure that credit is only used when needed and not when convenient, when there is adequate investment in the expenditure/project by the company, and when there is a sound, reliable and predictable basis for repayment.
 

Budgets.

Read More

These time tested techniques will do much to enlighten you to discover “hidden information” and relevant data as you prepare your 2008 Year-End Income Tax Returns. Whether you are a C Corporation, S Corporation, in Ministry, an LLC or LLP, Partnership or proprietorship looking beyond the numbers is the best way to discover critical and insightful news to help make wise and informed financial and business decisions. Whether you have a CPA prepare the return for your business or you chose to “go it alone” seeking out and utilizing this data will make you a wiser and more dutifully informed owner and entrepreneur. Evaluating and staying abreast of these key ratios, components and insights well help you steer clear of financial disaster:
 

Limit Debt Payments

We are continually exhorted to limit our debt payments but our society and now even our government has gotten on the band wagon of debt is good. In fact even the recent $15,000 “tax credit” announced by the IRS is not really a credit at all but a loan, as these monies will have to be ultimately repaid. By limiting your debt payments, you allow yourself to both have discretionary spending, to take advantage of opportunities, and to fulfill your mission statements and dreams. For the only way to have money, is not to spend it. A good general rule of thumb goes back to the old days of mortgage lending when debt could not exceed 25% of aggregate income and cash flow. In a bad economy a better goal would be 15% and when it is anticipated that interest rates are going to rise, then limiting your total debt payment to less than 10% would be prudent and advantageous. If we do not limit our debt then we will certainly become its slave.
 

Avoid Credit

If there is a key item on this list, it would be to avoid credit in its entirety.

Read More

Helping to lift the veil of business is a key concern and goal for all those concerned in pursuing the furtherance of your business venture. Keeping these basic tenants in mind will do much to ensure your business success, and in so doing will enable the spiritual goals of it as well. These considerations will help you along the way and to ensure that your plans are both achievable and achieved.
 

Financial Model/Business Plan

Perhaps the most important first step is the development of a Financial Model/Business Plan. Such a plan should take the form of a written document and should be detailed enough so that someone independent of your operations would be able to review and to quickly discover your business resources, talents, goals, and plans to get there. A good business plan would contain all of the following:

• Description. Knowing and documenting who you are and what your short and long term vision are the essential components of this section.
• Marketing. Knowing how you plan to grow your business, church or ministry is integral to having a workable and viable plan.
• Financial Management. Knowing your financial strengths and weakness and your cash flow needs and need for capital are a critical part of the process.
• Management. Knowing not only the needs of key management players and the “trigger dates” for bringing on additional staff and administration are integral components of the success quotient.

Writing a business plan is your first step to maintain order and to develop a well-thought out and seasoned plan. It is during this process that many “missteps” can be avoided with wise and judicious planning.
 

Plan, Plan, Plan

Business Planning and its continual updating are essential.

Read More

It is a known fact that money makes money and it certainly makes the world go round! However, clichés aside, banks actually provide a real investment opportunity for entrepreneurs looking to build a sizable business empire. There are plenty of banks for sale, believe it or not, as a result of the harsh global economic conditions. Many are going out of business or need an injection of cash because they cannot afford to keep going. However, there are a number of things to consider before buying a bank and much involved in the process, including the following:

Preparation
Do you have a financial background in terms of business? If the answer is no then you should avoid buying a bank. However, if you do have a strong financial background the in may be the opportunity you are looking for. You must have experience in investing and taxation, and have a strong business head for monitoring profits and loss if you want to succeed. Investment knowledge is perhaps the most crucial step because of the skills that come with it, including the ability to gage risk and potential.

Unlike investment in another business, you cannot take a back seat in the running of a bank so you must be prepared to devote time and energy into your new business. If you are an established entrepreneur then you may not want this commitment but it is essential if you are to succeed. Many banks will already have existing managerial and support staff in place but you should only draw on their experience at a later date and not rely on it.

Buying Your Bank
Now you have decided to devote your time to getting a bank off the ground you should find one. For this you will need specialist knowledge because many banks are generally not advertised for sale.

Read More

It is not a mistake to always be thinking of the day you implement your exit strategy and sell your business as you are in the process of growing it.  Many years before you go to sell your business, you are making decisions on new product lines, strategies, or new customers.  There are many factors you consider to make such decisions including risk, capacity, opportunity costs, etc.  One question you might ask yourself is the effect that decision will have on the value of your business some time in the future.  How will a Business Broker or M&A Intermediary value your Business for Sale?

A critical trade off with many product lines, customers, or strategies is the age old revenue vs. margin argument.  Is it better to start a product line that will increase revenue, but have a detrimental effect on your profit margin?  Is it better to take on a large customer, even though they demand a steep discount on your products?

When it comes to the value of your company, the answer is clear.  Revenue wins.  The positive effect that higher gross sales will have on the value of your business to a buyer is proportionally higher than the the detrimental effect on the value of your business which will come from a lower margin percentage.  In other words, a buyer will value a bigger revenue number more than a larger profit margin.

Read More