Is the Economy Right to Start a Small Business?

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If you are thinking about starting a small business now is as good of time as any even with the current state of the {financial crisis|economy}. Now why is this you might be asking yourself? If money is so bad for everyone what is going to make the want to come out and buy from you? Read on to see that the urge to start your own small business is a very savvy thing to do even in hard economical times.

Any successful small business venture is going to need a very quality and well written business plan. If you do not have a solid Small Business Plan in place they you are setting yourself and your business up for failure. When you are starting your own business you not only want to find something that you love you want to be able to fill a niche product that is going to help make your business stand out from the crowd.

How HELOCS’s can affect your credit

Make HELOCs work for you

Today we’re going to discuss how a HELOC (Home Equity Line of Credit) can negatively impact your credit.  Odds are some of you out there have tapped into the equity in your home to finance your business endeavors.  Quick and easy right?  Yes, but it may have devastating effects on your personal credit.  You’ve done everything you’re supposed to, paid on time, and have no clue why your score went south.  Here’s why:

30% of your personal credit score is made up of how much of your credit has been utilized.  Of particular importance to a lender is the percentage of your revolving you have used.  When that number exceeds 30% your scores can suffer.  When that number exceeds 50% your scores can plummet.  Sometimes by as much as 50 points for a single occurrence.

Standing on shoulders — how great is your business?

Learning experiences

My best business lessons come from my clients. Central among these lessons is that good businesses make money, but great businesses build communities that make good business possible. “Great businesses” doesn’t mean only big public corporations. Private businesses are not only the foundation of our economy – they are essential to civic infrastructure. No other group of community leaders brings to bear the skills and entrepreneurial drive of the man or woman who owns a business.

A company that invests in its community not just money, but the talent and passion of its people, especially its owners, positions itself to move from being a success to being significant. “Being a good corporate citizen is good for business. Companies that give by donating money, products and services or volunteer time gain recognition by supporting their communities. Corporate giving can increase your company’s visibility, reputation for goodwill and employees’ sense of purpose.” — The Denver Office of Strategic Partnership’s Business Good Citizenship Kit.

Debt Verses Equity Financing

One of my readers has recently posed the question “in what cases should a manager look at equity verses debt financing”.  First let’s make sure we understand the difference between the two.

Debt financing is exactly what it says.  Incurring debt (taking out a loan) to finance the start-up or purchase of a business.  You can also take out a loan to grow or expand a current business.  Debt financing can take on many different forms.  SBA loans/lines, traditional business lines of credit/loans, equipment leasing, etc.  You can also find alternative debt financing through vehicles like credit card advance funding, hard money loans and hedge fund loans just to name a few.

Equity financing typically comes from an angel investor, a venture capital firm or the like.  When a group or individual makes a cash infusion into your business in exchange for an interest in your company, it is an equity investment.

SBA Financing Tips

Small Business Administration

As the credit markets continue to tighten, an old reliable source of financing for small businesses, the U.S. Small Business Administration (SBA) and its loan programs, is once again being looked at as a critical component in providing liquidity in the market.  It is now imperative small business owners understand what is required of them to tap into this source of financing. The SBA lending market has changed dramatically over the past 120-180 days and the effect on lenders in this market has been dramatic as well.  Several top SBA lenders have completely left the market with most others pulling back significantly.  Losses and defaults are up and can no longer be offset with high interest rates (prime rate is at an historical low and capital costs are relatively high) or premiums earned on the secondary market, as there is no secondary market for SBA loans currently.  This means SBA lenders are now approaching loans in a much more conservative manner and assessing risk instead of simply booking sufficient volume to stay ahead of delinquencies and defaults.  This is being done on all loan applications, not just yours.   There is going to be much more due diligence on the part of the lender and more hurdles for the borrower to jump.  The days of 100% financing and fixed rate loans may be a thing of the past, but reasonable financing is still available to those borrowers willing to work a little harder and smarter.