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Proposal: A Small Business Credit Which Might Just Work

Importance of an Effective Solution: Solving the small business problems is important since it can lead to lower unemployment. Historically, small business has created around 70% of job growth. Most economist and politicians did not understand the true small business problems with our economy. They focused on trying to save large institutions and reforming health care instead of unemployment. As a result, large businesses are stable, but not hiring; and the average local business is trying to survive and not hiring.

Congress’ solution to assist small business was a series of tax credits, which would incent a local business to hire. The result has been businesses which would have hired, still hiring and receiving a credit for something they would have done. The average business, which has not seen revenues or demand growth in years, has not thought about hiring. The strong become stronger and the weak became weaker.

If we are able to cure our local business dilemma we just might be able to get this job creation machine running again; which just might cure one of the most important economic growth factors, unemployment.

The Disconnect: The recovery, which has shown up in economic and national statistics, is for large corporations. Generally speaking, large businesses have stabilized or increased revenues as well as have had great profit margin expansion. Small business, especially if dependent on other small businesses or consumer discretionary spending, has witnessed the exact opposite during the “recovery”. These small businesses have seen revenues continue to decline and profit margins collapse. The result to the bottom line is crushing financially and mentally. Some attitudes can be displayed with the saying “minus eight is the new plus ten”; meaning if your revenues are only down eight percent don’t complain because revenues will continue to decline year over year just as they use to automatically climbed about ten percent a year.

The Cliff Notes of Recent Small Business History: Small businesses had ineffective business models in the “good” years. The business models relied too heavily on debt and lines of credit tied to the owner’s home value. The weaknesses were masked by positive cash flow, insensitivity to perceived risk and the belief revenues and home values only increase over time. This type of model only works if everything goes right (and we are human after all). A challenge to their business model resulted in being labeled as a pessimist.

These businesses were late in releasing staff and in cost cutting because they relied on cash flow metrics instead of liquidity and working capital metrics. The owners were not sensitive to their decaying financial position because cash flow was still positive. However, accounts receivables were declining and turning into collection issues; inventory was decreasing; accounts payable and debts were increasing; and equity was beginning to decrease. The result was a contraction in liquidity and working capital (current assets compared to current liabilities). When cash flow stopped, it was too late for many of these businesses.

Additionally, many local businesses incorrectly applied cost cutting measures. When large businesses implemented cost cutting measures, they were able to minimize value destruction. When local businesses implemented cost cutting measures, they destroyed more value than they saved. These owners believed if they spent no money or less money they were saving. For example, the decisions became similar to buying one item for $5, instead of four items for $10. The rational was $5 is less than $10. They neglected the average price of the item. Additionally, the cost cutting measures of not incurring expenditures included professional advice. This action is comparable to a sick person who refuses to pay for medicine and wonders why they are still sick.

The local business owners usually have an emotional attachment to their employees. They know their spouse and children’s names and understand the employee’s family relies on their employment to feed their family. This emotional bond made it difficult for many small business owners to release employees timely. Larger corporations did not have this type of bond with their employees since the decision to release employees usually comes from a higher management level.

Possible Solution: If Congress wants to helps small business with a tax credit it should be one which strengthens their financial position and gives them a plan for the future. This may not lead to immediate hiring, but it would lay a solid foundation for small business to build upon. Having a solid foundation once again and focused on solutions for their future could increase future hiring as well as calm anxieties.

Therefore, I propose a tax credit for small business owners who hire a professional to write a business plan and assist in the implementation of the plan. The additional costs to the business owner would both be tax deductible and would receive a tax credit of the lessor of 25% of the expense or $2,500. To curb abuse, the plan would have to be attached to the return and the advisor would have to sign a form stating the services were rendered.

Conclusion: Our government and economist apparently don’t understand the small business environment. Past solutions which have been offered work better for large corporations and reward and strengthen businesses which don’t need assistance. A solution is needed which will strengthen small businesses since they have historically generated 70% of jobs.

What Are The Benefits of Writing A Business Plan?

Writing a business plan can be useful for a number of different reasons. Here we will discuss some of the benefits which writing a plan can have on your company, and the potential impact which this process may have.

Normally, a company will only write a plan if they are looking for finance or investment into their organisation. This means, that it is normally a reactive process, and one which is resented by the parties involved, as it can be a strenuous and drawn out process.

Business planning, can be an extremely powerful process, as it is in effect a way of pulling the business owners out of the day to day running of the company, and will sometimes enable them to think about the bigger picture. It is all to common that owners spend too much time working in the business rather than on the business. The process of writing a business plan, can enable the shareholders or directors to focus on the business and it’s strategy, forecasts, projections and really a whole sense of direction for the company. This can be extremely powerful, and it has been proven time and time again, that a business which has a clear strategy and direction is far more likely to be successful than that which is just reactive the business which it receives.

The process of writing a business plan will normally enable an individual to think outside of the box, particularly when looking at things like porters 5 forces. This will enable an individuals or business to think about those things which could really make a big different to the potential of the business.

There are lots of different business plan templates which are available, which have the effect of making the process a whole lot easier. This will provide a format for the business plan, making sure that you are covering all of the main areas.

Most lenders and equity investors will require some kind of a business plan as part of their application process, and this is normally why businesses will use a business plan in the first place. Using a well structured plan, will assist in providing a highly professional image of your business to a potential lender or investor. Many bankers will view the quality of the plan as a reflection of the quality of the individuals who are involved in the business, therefore if you are prepared to invest the time and energy into writing a business plan, this will normally result in a quicker decision from the financial institution or investor.

Using a third party consultant to assist your business with writing its business plan can be extremely useful. Normally a business consultant will have ideas, suggestions and feedback which they will want to offer as part of this process, which can often help to further develop the company and its sense of direction. It will also help to be impartial, as a third party consultant will give an independent opinion on the information which they are provided with.

If you are looking to develop a new business, increase the volume of sales which your current company transacts, are looking for external investment, or for any other reason, write a business plan today. It does take time and energy, but for the reasons highlighted above, it is definitely worth this investment of time and energy. For a free template, visit

Small Business Loans For Bad Credit – Know This Before You Get A Small Business Loan

There was a time when business owners could simply walk into a bank and get a loan for the business based on their working relationship with the bank and loan officer. With today’s turbulent economy, those times are over, and banks are not willing to expend poor credit business loans. Today’s loans are issued primarily based on the credit score of the business owner, which can make it frustrating to search for a loan to expand or improve your business. Rather than turning to your local bank to find small business loans for bad credit, there are some other alternatives to help you to understand how to get a small business loan with bad credit.

In some cases, local business owners can find small business loans for bad credit by speaking to a smaller, local bank and asking them to consider factors other than the owner’s credit score. Many people don’t realize that their business also has a credit score, which is based on the same factors as a personal credit score- your business credit cards and other unsecured debts, payment history for bills, and the outstanding balance on any loans your company has. If your business has a good credit rating, you may be able to obtain a loan even if your own credit rating is lower.

Online specialty lenders sometimes offer small business loans for bad credit. Some of these lenders actually search for businesses that need money. Many of these lenders offer loans that have high initial interest rates, with the provision that the interest rate will be lowered as the business owner demonstrates the ability to make on-time payments. If you are confident in your business’ ability to pay back the loan, this type of loan can be ideal for your business.

An alternative to poor credit business loans is available to business owners who own their own home. In many cases, you can take out either a home equity loan or offer your home as collateral for a secured loan. For those business owners who are confident in their ability to pay back the amount borrowed, using a home as collateral toward bad credit business loans can be a way to get a lower rate and better loan terms.

When you are looking for a more flexible way to get money for your business to make purchases and pay small bills, you may want to consider looking for poor credit business credit cards. There are lenders who are willing to offer credit cards to businesses in lieu of small credit business loans, and by using small business credit cards for bad credit, you can help to build up the credit score of your company. If you need money to make small purchases, such as office equipment, fuel, or supplies, applying for poor credit business credit cards can offer you far more flexibility than poor credit business loans.

Finding the money you need to make your business work may not be as intimidating as you think. Using the resources of lenders who are willing to extend small business start up loans for bad credit, can not only help you stay afloat in a difficult economy, they can help your business grow. Don’t let worries about bad credit keep you from applying for commercial loans.

However, do keep in mind that when you are looking for Small Business Loans For Bad Credit, you have to look at all the alternatives and compare the interest rates of different loans to ensure that you are getting the best deal possible. Often times, you will get the best rates for loans that are secured by some form of collateral.