Comments on: Financing Small Business Growth http://www.coyoteblog.com/coyote_blog/2005/03/financing_small.html Dispatches from a Small Business Sun, 12 Feb 2012 09:39:47 +0000 hourly 1 http://wordpress.org/?v=3.2.1 By: Josh Kerbel http://www.coyoteblog.com/coyote_blog/2005/03/financing_small.html/comment-page-1#comment-836 Josh Kerbel Tue, 07 Jun 2005 18:38:35 +0000 http://coyote-blog.com/wordpress/2005/03/financing_small.html#comment-836 <p>Small business financing is a bitch, no doubt about it. But one of the problems is that many small business owners look at the wrong variables when trying to financing their business.</p> <p>Lots of small business owners make the mistake of using personal assets to securing working capital for a smaller business and ergo, you are limited by the amount of equity in your house. Yes, the money is cheap, but there isn't enough of it.</p> <p>By factoring your A/R (I run a factoring business so shoot me, I am biased), you unlock anywhere from 75% to 90% of the value of your company's A/R, albeit at a higher cost than a mortgage on your house. But as long as your business generates a profit margin that is greater than the cost of the money, it is the right decision.</p> <p>What most small business owners do not ask themselves is "how much profit am I missing because I lack adequate cash flow?"</p> Small business financing is a bitch, no doubt about it. But one of the problems is that many small business owners look at the wrong variables when trying to financing their business.

Lots of small business owners make the mistake of using personal assets to securing working capital for a smaller business and ergo, you are limited by the amount of equity in your house. Yes, the money is cheap, but there isn’t enough of it.

By factoring your A/R (I run a factoring business so shoot me, I am biased), you unlock anywhere from 75% to 90% of the value of your company’s A/R, albeit at a higher cost than a mortgage on your house. But as long as your business generates a profit margin that is greater than the cost of the money, it is the right decision.

What most small business owners do not ask themselves is “how much profit am I missing because I lack adequate cash flow?”

]]> By: Josh Kerbel http://www.coyoteblog.com/coyote_blog/2005/03/financing_small.html/comment-page-1#comment-835 Josh Kerbel Tue, 07 Jun 2005 18:37:19 +0000 http://coyote-blog.com/wordpress/2005/03/financing_small.html#comment-835 <p>Small business financing is a bitch, no doubt about it. But one of the problems is that many small business owners look at the wrong variables when trying to financing their business.</p> <p>Lots of small business owners make the mistake of using personal assets to securing working capital for a smaller business and ergo, you are limited by the amount of equity in your house. Yes, the money is cheap, but there isn't enough of it.</p> <p>By factoring your A/R (I run a factoring business so shoot me, I am biased), you unlock anywhere from 75% to 90% of the value of your company's A/R, albeit at a higher cost than a mortgage on your house. But as long as your business generates a profit margin that is greater than the cost of the money, it is the right decision.</p> <p>What most small business owners do not ask themselves is "how much profit am I missing because I lack adequate cash flow?"</p> Small business financing is a bitch, no doubt about it. But one of the problems is that many small business owners look at the wrong variables when trying to financing their business.

Lots of small business owners make the mistake of using personal assets to securing working capital for a smaller business and ergo, you are limited by the amount of equity in your house. Yes, the money is cheap, but there isn’t enough of it.

By factoring your A/R (I run a factoring business so shoot me, I am biased), you unlock anywhere from 75% to 90% of the value of your company’s A/R, albeit at a higher cost than a mortgage on your house. But as long as your business generates a profit margin that is greater than the cost of the money, it is the right decision.

What most small business owners do not ask themselves is “how much profit am I missing because I lack adequate cash flow?”

]]> By: jb http://www.coyoteblog.com/coyote_blog/2005/03/financing_small.html/comment-page-1#comment-834 jb Mon, 14 Mar 2005 19:28:54 +0000 http://coyote-blog.com/wordpress/2005/03/financing_small.html#comment-834 <p>There are non-bank lenders who will loan on a percentage of receivables and inventory. I used these guys - http://www.fcfinancial.com/ - in the past, and they were easy to do business with. It seems like factoring, I know, but the interest rates are quite good, if you're profitable of course. Good luck.</p> There are non-bank lenders who will loan on a percentage of receivables and inventory. I used these guys – http://www.fcfinancial.com/ – in the past, and they were easy to do business with. It seems like factoring, I know, but the interest rates are quite good, if you’re profitable of course. Good luck.

]]> By: MaxedOutMama http://www.coyoteblog.com/coyote_blog/2005/03/financing_small.html/comment-page-1#comment-833 MaxedOutMama Mon, 14 Mar 2005 18:05:16 +0000 http://coyote-blog.com/wordpress/2005/03/financing_small.html#comment-833 <p>Even though you may be a good credit risk, banking regulation require that loans be supported by a certain percentage of collateral. If the business venture fails and the business is not able to pay its debt, the receipts will not be there either. So from the point of view of a safety and soundness auditor such a loan is really not secured unless the value of the loan compared to the size of the overall business is insignificant.</p> <p>You're right. Without the SBA guarantees, few small growing businesses would get bank loans. This is why venture capital pools have sprung up, but they often cut hard deals. All of this does have significant implications for the economy, though, because most of the growth (especially job growth) is in small businesses.</p> Even though you may be a good credit risk, banking regulation require that loans be supported by a certain percentage of collateral. If the business venture fails and the business is not able to pay its debt, the receipts will not be there either. So from the point of view of a safety and soundness auditor such a loan is really not secured unless the value of the loan compared to the size of the overall business is insignificant.

You’re right. Without the SBA guarantees, few small growing businesses would get bank loans. This is why venture capital pools have sprung up, but they often cut hard deals. All of this does have significant implications for the economy, though, because most of the growth (especially job growth) is in small businesses.

]]> By: Chris Tune http://www.coyoteblog.com/coyote_blog/2005/03/financing_small.html/comment-page-1#comment-832 Chris Tune Mon, 14 Mar 2005 07:21:07 +0000 http://coyote-blog.com/wordpress/2005/03/financing_small.html#comment-832 <p>Don't apologize for using SBA funds. Just concentrate on making your small business as successful as you can! That's what we taxpayers are expecting. We also KNOW that there are "fits and starts" involved in growing a small business. We also know that small businesses grow better than very large businesses, when all the population of businesses is examined.</p> <p>I am an accountant, so I've studied economics, formally. This stuff is all so well established as to be "axiomatic". </p> <p>I'm sorry to hear about Florida. I don't like it when large entities, like States "throw their weight around". But that is basically what they are doing. Perhaps the blogging will get a rise out of other Florida-based bloggers. </p> <p>If enough citizens in Florida became unhappy with this sort of "bait and switch" operating style. . .they could change things in the state.</p> <p>Good luck.</p> <p>Chris Tune<br /> Valley Village, CA<br /> </p> Don’t apologize for using SBA funds. Just concentrate on making your small business as successful as you can! That’s what we taxpayers are expecting. We also KNOW that there are “fits and starts” involved in growing a small business. We also know that small businesses grow better than very large businesses, when all the population of businesses is examined.

I am an accountant, so I’ve studied economics, formally. This stuff is all so well established as to be “axiomatic”.

I’m sorry to hear about Florida. I don’t like it when large entities, like States “throw their weight around”. But that is basically what they are doing. Perhaps the blogging will get a rise out of other Florida-based bloggers.

If enough citizens in Florida became unhappy with this sort of “bait and switch” operating style. . .they could change things in the state.

Good luck.

Chris Tune
Valley Village, CA

]]> By: Ken King | King Marketing http://www.coyoteblog.com/coyote_blog/2005/03/financing_small.html/comment-page-1#comment-831 Ken King | King Marketing Wed, 09 Mar 2005 18:23:29 +0000 http://coyote-blog.com/wordpress/2005/03/financing_small.html#comment-831 <p>It's early yet, but someone (Zopa.com) is taking a stab at addressing the needs of small business (and small investors) through a private sector approach that bypasses the banks. I'm very interested to see how this develops - disintermediation with a nod towards risk management through portfolio lending. </p> <p>At the moment, their lending criteria appear to be based on personal credit and the amounts are quite low to work within U.K. laws regarding commercial lending. However, they do allow lenders to choose to participate in higher-risk/higher-reward lending. The next logical step to me would be to set up markets using alternative forms of security. More info to be found at http://www.zopa.com/ZopaWeb/default.aspx</p> <p>Zopa came to my attention via Johnnie Moore's Blog: http://www.johnniemoore.com/blog/</p> <p>BTW, I'm a long(ish)-time reader, first-time commenter. Great site, one of my first RSS subscriptions after being given an introduction to blogs. I'm half-converted to libertarianism, which makes for interesting conversations in a country (Canada) that was founded on the principles of "peace, order and good government". </p> It’s early yet, but someone (Zopa.com) is taking a stab at addressing the needs of small business (and small investors) through a private sector approach that bypasses the banks. I’m very interested to see how this develops – disintermediation with a nod towards risk management through portfolio lending.

At the moment, their lending criteria appear to be based on personal credit and the amounts are quite low to work within U.K. laws regarding commercial lending. However, they do allow lenders to choose to participate in higher-risk/higher-reward lending. The next logical step to me would be to set up markets using alternative forms of security. More info to be found at http://www.zopa.com/ZopaWeb/default.aspx

Zopa came to my attention via Johnnie Moore’s Blog: http://www.johnniemoore.com/blog/

BTW, I’m a long(ish)-time reader, first-time commenter. Great site, one of my first RSS subscriptions after being given an introduction to blogs. I’m half-converted to libertarianism, which makes for interesting conversations in a country (Canada) that was founded on the principles of “peace, order and good government”.

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