The 7 Myths of SBA Loans

Most small business owners have considered financing at some point in the life of their business. You may have considered expansion, buying new equipment, more inventories, purchasing real estate, or just looking for a new capital infusion.

There are many myths surrounding SBA loans. Some of these myths are substantial and strong enough to discourage a small business owner from expanding, getting out from under onerous debt, or even staying in business. Understanding how an SBA loan works and how to successfully get one for your business is a matter of separating the facts from the myths. You may recognize yourself in some of the following misconceptions of SBA loans. You will finish this article more informed and in possession of the facts. The facts regarding SBA loans can help you to be a better, more successful small business owner.

The U.S. Small Business Administration (SBA) was created in 1953 as an independent agency of the federal government to aid, counsel, assist and protect the interests of small business concerns, to preserve free competitive enterprise and to maintain and strengthen the overall economy of our nation. The SBA recognizes that small business is critical to America's economic recovery and strength, to building America's future, and to helping the United States compete in today's global marketplace. Although SBA has grown and evolved in the years since it was established in 1953, the bottom line mission remains the same. The SBA helps Americans start, build and grow businesses. Through an extensive network of field offices and partnerships with public and private organizations, SBA delivers its services to people throughout the United States, Puerto Rico, the U. S. Virgin Islands and Guam.

THE 7 MYTHS

Myth #1- All banks evaluate the risks of a SBA loan request with the same viewpoint.

Financial Fact- Although all banks are subject to the same SBA Guidelines, the rules are subject to different interpretations with respect to analyzing a particular loan request. Some banks may be willing to take greater risks. Some banks will take a more optimistic evaluation of the facts and your business' future success. Therefore, choosing the best bank for your SBA loan needs can make the difference between loan approval and denial.

Myth #2- All banks offer the exact same types of financing for SBA loans.

Financial Fact- Loan pricing and structure can vary substantially at different banks. Interest rates on SBA loans are based on the prime rate plus a margin. Some banks are more competitive in price to be leaders in SBA lending. Some banks will carve-out a provision for accounts receivable and inventory financing from their loan agreement to permit additional third party commercial financing in addition to the SBA loan. For the same loan, some banks will require additional collateral guarantees, such as a lien on your house. Evaluating the adequacy of such additional collateral guarantees is also subject to interpretation.

Myth #3- It takes too long to get through the red tape of SBA loans.

Financial Fact- This may be true if the bank has to deal through the SBA bureaucracy. Many lenders have "delegated authority" to directly approve a SBA loan. They can provide a full written loan proposal within 48 hours, and some provide a loan commitment within a week of receiving a full loan package. Closing the loan depends on the specific requirements of each transaction, but takes no longer than closing a conventional commercial loan. If the loan requires an appraisal, this may add several weeks to the process.

Myth # 4- SBA loans are only for start-ups or small companies, and not for "big" companies.

Financial Fact- The SBA defines a qualifying small business as "one that is independently owned and operated and which is not dominant in its' field of operation." The SBA does not discriminate between start-ups or established businesses, and company size requirements are not the same across the board. The actual standard used in determining qualification is calculated by number of employees or average annual receipts and varies by industry. For example, in the manufacturing and mining industries, a business can have no more than 500 employees to qualify. Average receipts in most retail and service industries can total no more than $5.5 million. The SBA size regulations are located at sba.gov. Most lenders can tell you immediately if your business qualifies regarding income and number of employees.

Myth #5- SBA loans require a lot of collateral

Financial Fact- SBA lenders do consider collateral when reviewing a loan application, but they also look at several other factors. Your character, your creditworthiness with respect to you history of paying your debts, your management capabilities, and your equity contribution are just as important as having collateral. SBA lenders.look at your business as a whole, and although they will not deny you loan solely due to lack of collateral, it can be a contributing factor if there are other weak spots in you application. Ultimately, your ability to repay the loan from your business's cash flow is the most important consideration.

Myth #6- SBA loans are loans from the Federal Government.

Financial Fact - SBA loans come from commercial lenders who participate with the SBA in SBA lending. The Small Business Administration is an agency of the executive branch of the Federal Government. It establishes guidelines that lenders must follow when giving SBA loans and the SBA backs each loan with a guarantee that eliminates some of the risk to the lender. The actual funds for each loan will come directly from the financial institution. The SBA loans are backed, up to the amount of the guarantee, by the SBA.

Myth # 7- SBA loans are a loan of last resort.

Financial Fact- Lenders that offer SBA financing should be one of the first places a start-up or small business owner goes when seeking a business loan (unless you have a friend or relative willing to invest in your business). The express purpose of the SBA is to help Americans start, build, and grow businesses in order to promote a healthy economy. SBA loans are structured with longer terms, lower down payments, and can have lower rates than conventional commercial loans so small business owners have increased cash flow. Going to a lender for a SBA loan is especially valuable for business owners seeking loans who may not have collateral required with typical commercial loans. There is a reason the SBA is the largest single financial backer of U.S. businesses in the nation.

You need to assess your business's current health and growth potential. Would it benefit your company if you refinanced old debt? Could you increase business with more equipment? Would a facelift bring in more customers? Would a combination of SBA financing with commercial financing for accounts receivable and inventory help you succeed?

It is critical to your business that you know not only when to seek financing, but how much you will need, and what is available. Many businesses suffer of even fail because their owners do not take out loans when they need to; or they fail because their owners do not borrow enough. Understanding your options will help you determine these things, which can in turn help your business flourish.

Conclusion: an experienced Business Consultant and Commercial Finance Broker can help you separate the myths from the financial facts. They can find the best SBA loans. They can evaluate the best overall financing structure for your particular situation with lower interest rates, longer payback times and lower upfront costs. They can help you understand the big picture and create new opportunities for your consideration.

10 Rules of Smart Marketing

Smart Marketing is not just about "marketing" or what we traditionally think of as marketing. It's about your entire business. It's about helping your business be the best it can be. This is what the Business Advice Blog is all about.

Here are my 10 Smart Marketing Rules. Follow these rules consistently and you will have the ability to build a great business.

1. Know why you're in business.

Every business has a purpose. Knowing this purpose gives you direction.

2. Clarify what you do.

What do you do for your customers? How do you help them get what they want? Understand how you help make their lives better. This enables you to serve them better then anyone else.

3. Identify your resources.

What makes up your business? Look at everything your business is composed of both tangible and intangible. These resources determine what your business can best do and whom it can best serve.

4. Find who wants what you can do and whom you can serve better than anyone else.

Your business is unique. It is able to do things no other business can. Find who wants what your business does best. Target those whom you can serve better than anyone else. They are your best customers.

5. Consistently do more than your customers want and expect.

You need to discover what your customers want and what they expect. Do this by asking them. Then find ways to do more. Beat their expectations every time.

6. Always put relationships before transactions.

We don't buy things or concepts or services. We buy people first. If you want a lot of customers, build a lot of relationships.

7. Help your customers find you.

Make it easy for your customers to find you in the ways they normally search. Make sure your relevant and compelling message is there.

8. Treat everyone well all the time.

There is no "B" list. Everyone deserves great treatment. No exceptions.

9. Tell your customers what to expect. Then do more.

Once you know what your customers want and expect, tell them what you'll do for them. Let them know what to expect. Then do more than what you promised. Over deliver every time.

10. Be yourself.

Being yourself means knowing what your purpose is and what values you hold. Stay true to your values as you serve your customers and employees. You'll find being yourself is easy.

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10 Ways To Increase Your Cash Flow

Just about every business would like to increase their cash flow. Below are ten ways which can help your business to achieve those goals:

Bill Promptly; Take Advantage of Payment Terms
The faster you can invoice a client, the quicker the clock starts to tick for the customer to pay in order to meet the terms of the contract you both agreed upon at the beginning of the relationship. Conversely, if you’ve agreed to terms of Net 30 with one of your suppliers or vendors, don’t pay the bill immediately; wait a little bit to take advantage of those terms and keep the cash in your (hopefully) interest bearing account a little longer.

Offer Payment Incentives; Penalize Late Payers
Many times businesses set forth payment terms of Net 15 or Net 30, but they neither offer any incentives to beat those terms nor penalties if the terms aren’t met. Consider adding both to your invoices to decrease your accounts receivable days outstanding. Chances are most of your customers will pay promptly if there is an incentive involved.

Run Credit Checks on Potential Customers
While this sounds like a no-brainer suggestion, many businesses today take whatever business they can acquire and run checks only when problems arise. Often times it is too late to run a check after issues surface. It’s better for your business over the long haul to reject a customer immediately that slow pays or is consistently delinquent. Slow payers are frequently troublesome clients aside from their propensity to get behind on paying you—they are typically the impossible to please variety that will nitpick your organization and sap its resources.

Sell off Under Utilized Assets and Fully Depreciated Assets
Once an asset has run through its useful life and is no longer a depreciable asset, consider selling it off if you can get good value for it. You’ll get an influx of cash that can help you replace that asset or upgrade to a new technology or model and possibly reduce your debt in the process. Many assets will last well beyond their useful life so you may be able to fetch top dollar from a smaller business looking to improve their operation by adding used equipment.

Encourage Partial Payments
If your business is in a bit of a cash crunch, try encouraging your clients to make partial payments on the front end of projects or working arrangements. Most will be agreeable to such provided you make some concessions on your end such as small pricing incentive or discount to do so. This helps you improve your cash on hand while helping your client spread payments out so that everything doesn’t hit all at once in one lump sum.

Comparison Shop Suppliers Online
The Internet makes comparison shopping a breeze, and some of your vendors and suppliers may take you for granted by not adjusting their pricing to reflect current market and competitive pricing. By checking the competitive landscape every quarter or so, you can gain some leverage by knowing how much you should be paying for particular items especially those that are more commoditized.

Stick to Budgets
This is another suggestion that may seem rather obvious, but there are several projects that suffer budget creep throughout a fiscal year. A couple hundred bucks here or there may not seem like much for a particular project, but it will quickly add up if there are multiple projects going on across an organization.

Spread Out Payments; Don’t Pay All at Once
Spreading out payments through a month versus paying everything on one day can really alleviate a cash crunch due to the natural flow of business and customers’ payment preferences. All of the money due to you in a given month doesn’t come in on one day so why should all of the money going out? This little tip can save a lot of headaches even though the temptation to pay everything on one specific day to get it out of the way may seem logical at times.

Add a Shift Versus Taking on More Space
A lot of small to medium businesses are quick to add office or production space when it may be more cost effective to simply add another shift. If your business is a morning shift only operation, how much could you save by simply adding a second shift versus adding production capacity? Chances are you could save quite a bit of development and rental costs by better utilizing the space you have today.

Pay by Credit When Possible
Paying by credit seems to have a stigma attached to it, but it can buy you some extra time to stockpile more cash to pay things off if you play the terms correctly. Since there are also some low rate credit options available, it may be more cost effective to take on a little interest expense until the cash reserves are built up enough to pay things completely off.

Cash flow problems don’t have to cripple your business if you take a step back and evaluate your options objectively. Implementing a few of the tips above can improve things almost immediately and put you back on the right track to a positive cash flow.

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Top 3 Reasons For Writing Business Plans by Louis Zhang

Whether you are a start up or established business, and whether you are a non-profit organization, writing a business plan can be one of the most useful things you can do for your business. Obviously there are different types of business plans depending on the nature of your company or organization. It's not enough that you have a "hunch" your new start up will be a roaring success, or you believe your latest web. 2.0 idea a surefire "ten bagger" success for the lucky venture capitalist. There are people who need to take a close look at your business plan; whether it's you, internal management or external investors. In this article, we will look at the top three reasons for writing business plans.

First to answer the question: "Is the business feasible?"

Before you actually commit funds, manpower and time on starting a business, it helps to actually have a "dry run" to see if the venture you have in mind has a good chance of success. The business planning process forces you to look at what your competitors are doing and to ask yourself how you can differentiate your product or service. Typically we call this a SWOT analysis - Strengths, Weaknesses, Opportunities and Threats. At the same time you want to identify, as clearly as possible your unique selling proposition. This can be a special feature or something unique about your branding. Just be different and attractive in the eyes of your target market. Going through this process will give you a better idea of you chances for success in the marketplace.

Then look at your projected financials - do you have the required funds to start your business? Where are you going to raise the capital? How soon will the business break even? All of them are pertinent questions.

Secondly, a business plan is used to help secure loans from banks or financing from outside investors. Typically if you are a start up, you will find it very hard to get any financing from your local bank unless you have landed collateral, regardless if you have a plan written or not. If your business is established for several years and have healthy cash flow, then the bank will definitely want to see your financials before given you any loans or bridge financing.

If you are looking for angels or venture capital investment, then a business plan, particularly the executive summary is what they will require. What's more important to these investors, more than the plan itself, is the entrepreneur's track record and the strength of your management team. Be sure to include these important points in your business plan.

Last but not least, a written business plan should be constantly evolving. It acts as a blue print to guide management in the execution of business strategy and to meet goals. By constantly reviewing and updating the plan, it is used as a useful communication tool within the company to guide business growth.

We've looked at some good reasons from writing business plans. Now, if you don't think you know how to write one, help is available. Look for a template online, such as at the site given below. Or better still get business plan software. The good ones, such as Business Plan Pro 2007, are easy to use and will guide you to input the necessary text and numbers and come out with a complete plan for you. There's absolutely no reason why any business person should not have a business plan blueprint.

About the Author

For more on business plans, and tips and templates to help you write a winning business plan for different types of start ups, established business and non profits, go to www.businessplans4u.com

Or

Contact Dexter Morgan a professional small business consultant with MFS Consulting dexter@bettermybusiness.com

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How determined are you to be a winner?

I often sit around and look for situations to inspire me to write an article that the small business owner can benefit from. I don’t know how many of you watch golf tournament. I watch sporadically – hoping, like many others, that Tiger Woods would win. He didn’t.

He put on a hard charge at the end. He certainly didn’t embarrass himself. And I am certain he gave it everything he had. But on that day, he was not his best, or the best.

The best was Phil Mickelson. And I should begin by saying that I am not a Phil Mickelson fan. The early tag on Mickelson was that “he was a choker.” It took him 12 years to win his first Masters title – actually, to win his first major title.

And every year, I would listen to announcers introduce Mickelson’s play by saying, “No one has ever come in second more than Phil Mickelson.” What I heard them say is, “No one’s ever choked more than Phil Mickelson.” But finally, in 2004, he won the Masters. And then in 2005 he won the PGA Championship.

Sunday, and literally throughout the tournament, if you watched Phil Mickelson play, he looked like a champion. He had the look of “winner” – on his face, in his walk, and in the self-confidence that he displayed -- both making shots and scrambling.

The lesson here is that success doesn’t just breed success. Success breeds self-confidence. And success gives you that feeling, once you achieve it, that you could achieve it again, and again. Even if you falter along the way, once you’ve succeeded, you say to yourself, “I’ve been there. I know what it feels like. I can repeat it. I can do it again.”

What are the successes you’ve been trying for? How long have you been trying to reach them? How determined are you? How much are you studying and practicing to get there?

The success secret is: You have to visualize it, and feel it, and study it, and do everything you can to experience it – before you can make it happen for yourself, and ultimately make it into a habit. It may take you 46 attempts to get your first big victory – but once you get it – you can get it again.

I wonder if any of you have the tenacity to lose 46 times, and still emerge victorious. After 10 or 12 years of wearing the banner of “loser,” you can emerge as a winner. A world champion.

What do you think Mickelson’s qualities were that finally got him that first big win after more than a decade of losing, or should I say a decade of trying?



Here are a few to ponder:

1. He kept his eye on the prize.

2. His determination was unyielding.

3. He practiced every day.

4. He had a coach.

5. His self-belief kept him going.

5.5 And in the end, he proved he could win under pressure.



He didn’t just win a championship. He won what is considered by many, the championship. I think if you ask any golfer which of the big four championships he would rather win, the Masters would come out of every mouth.

Winning it once was proof to the world. Winning it twice was proof to himself.

Posted By Dexter Morgan - Small Business Consultant

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