Here is a good Q&A posted on the the USA Today Small Business page that highlights where to find business loans in today's nutty climate.
By Steve Strauss for USA TODAY
Q: Steve, it is no secret that credit and money are still tight, but what is a secret is where small business should go now. My line of credit has dried up last month and I am at a loss. What are our options? — Michael
A: The good news is that there still are options out there, it's just that if you want to find the money to start or expand your business, you may need to look in new places and be more creative.
The era of 'easy credit' is over, that's for sure.
In fact, according to Senator John Kerry, the chairman of the Senate Committee on Small Business and Entrepreneurship, in a letter to President Bush on this subject, the country's largest source of long-term small business capital, the SBA 7(a) loan program, has fallen by nearly 50% compared with the same period last year.
That's the very bad news.
So what do you do if you need capital for your business right now? Here are some options:
Bank loans: With many large banks now partially owned by the government (say what?!), with so-called toxic loans still on the books, and with the credit crunch not nearly uncrunched, you will find big banks are not the friends to small business that they once were.
But small banks still are, and that's where to go now. Community banks are still making loans. They are still offering lines of credit. They still say yes. Why? There are a few reasons:
• Small regional banks have always been run conservatively, so few have bad loans on the books.
• Many are local institutions, with deep roots and significant assets.
• Regional and community banks have proven to be better lenders, and so still have assets to lend.
Credit unions: Similarly, credit unions may also be a good place to go for a loan right now. Like local banks, credit unions are not exposed to the same risks that big banks are. As such, local credit unions have seen their portfolio of small business loans increase.
SBA loans: Small Business Administration loans have been a traditional source of small business lending, but that is drying up for various reasons: Cut backs by the Bush administration and increased fees have been the most common reasons. To exacerbate things, since SBA loans are, by their very nature, government-backed, and as the government is now busy backing banks with $700 billion elsewhere, things may get even tighter.
I wouldn't expect things to ease up on the SBA front until a new administration takes over in January.
State and local governments: There are no shortage of local government programs and agencies that may offer you financial assistance. For instance, check out local Economic Development Centers.
Credit cards: Credit cards have also been a traditional way for small businesses to fund the dream, and that remains true. However, because far too many small business owners get in over their heads with credit cards, a word of caution is in order. Just don't use them if you can't pay them back.
And if you do use them, be sure to transfer your balances onto the card with the lowest interest rates, and then pay off as much as you can as soon as you can. Using new cards with introductory artificially-low teasers rates is also a good way to keep borrowing costs down.
Other financing: Manufacturers and suppliers might offer a line of credit, or even inventory on consignment. They want to keep your business.
Also, check to see what sort of financing your business "partners" may offer. For example, Microsoft (a company I do some work with) offers technology funding to small businesses. Their "Total Solution Financing" helps small and midsized businesses finance their technology purchases with fixed-rate loans, and they do something similar with software licensing. You may have business partners that you work with who have programs of which you are unaware. Ask.
Bottom line: Time to get creative with your financing.
Today's Tip: Here's one final idea: Check out something called peer-to-peer lending. This form of private lending is increasing in popularity. Private lenders compete for your loans. Check out, for example, www.Prosper.com.
Monday, October 27, 2008
Thursday, October 23, 2008
YEP, MORE ANGEL INVESTING NEWS!
Here is a continuation of yesterday's post. Deal flow for pure start-ups is definitely slowing and capital is shifting to less risky areas...but I'm bettin' you didn't me to tell you that.
Here's an interesting article from Reuters.
CHICAGO (Reuters.com) — Fiberstar Inc., a small company that converts orange juice pulp into a line of food ingredients and other products, is no longer a start-up. Founded a decade ago, it now has a customer base of loyal multinationals and annual revenue in excess of $5 million.
At this point, the company might seem an unlikely candidate for funding from angels, the private investors who back start-up ventures with typical commitments of less than $1 million.
But that’s exactly who Minneapolis-based Fiberstar, which in the past has relied exclusively on angel investors for private equity, is going after to help raise up to $10 million for working capital and new production facilities to keep up with increasing global demand.
“Our goal is to continue to raise funding from angel investors and angel groups,” says Dale Lindquist, Fiberstar’s president and chief executive. “We’ve respected the investment that they’ve made and as management we’re trying to protect it.”
“It’s very unusual for a company to go as far as we have working solely with angels,” he adds.
It’s becoming less unusual, says Jeffrey Sohl, director of the Center for Venture Research at the University of New Hampshire. Investing in more established companies is just one of several signs that angel investors are seeking a higher degree of comfort as they look for safer bets in a volatile economic climate, he says.
“The angels are doing post-seed - more later-stage work than they normally would,” says Sohl, noting that venture capital groups, which frequently fund private companies higher up in the development food chain, have also boosted their investment thresholds in recent months.
In a highly unpredictable economy, when credit markets are tight and traditional sources of capital such as bank debt have dried up or become increasingly difficult to obtain, angel investors are taking on more prominence as a source of alternative financing.
Total angel funding during the first half of 2008 has been surprisingly steady, rising 2.1 percent to $12.4 billion, compared to the same period in 2007, according to first half data released by the center earlier this month.
Sohl points out that the numbers also show that angels, who typically take preferred stock or other equity in exchange for their investment, are exhibiting increasingly cautious behavior.
The total number of deals funded in the first six months - some 23,100 according to data collected by the center - has fallen 3.8 percent. Meanwhile, the average size of each deal is up 8 percent, and along with it, the number of investors behind it. The center notes that the total number of angels participating in the first half grew 2.l percent to some 143,000, investing either individually or as part of angel groups. Fiberstar, the food and beverage company, has 152 angel investors.
“What this is telling us is that the angels are spreading out their risk a little more,” says Sohl.
Marianne Hudson, executive director for the Lenexa, Kansas-based Angel Capital Association, notes that she saw this trend begin to take hold last year. Her organization, comprised of more than 170 angel groups, saw average deal size in 2007 rise 10 percent to $266,000. At the same time, Hudson, whose members self-report their investing results annually, saw the average number of investors per deal rise to 55 from 44.
And while Hudson expects that trend to continue in the current economy, she sees another important signal of skittishness among her member groups: the increased use of loosely formed syndicates to jointly fund deals.
“We are seeing more and more angel investor groups co-invest with each other,” she says. “The angels are minimizing their risk.”
Angels will clearly remain an active source of capital as the economy worsens, say these and other experts on alternative sources of financing. Data show an increased appetite for sectors such as software, health care, manufacturing, green technology and other energy-related concerns.
But for start-ups and later-stage private companies alike, the latest numbers signal what will also likely be a very competitive field for a limited supply of investment capital.
“There’s more demand for us - we can pick and choose,” says Knox Massey, executive director of the Atlanta Technology Angels. “Somebody out there is not going to get funded.”
By Deborah L. Cohen(Deborah Cohen covers small business for Reuters.com. She can be reached at smallbusinessbigissues@yahoo.com)
Here's an interesting article from Reuters.
CHICAGO (Reuters.com) — Fiberstar Inc., a small company that converts orange juice pulp into a line of food ingredients and other products, is no longer a start-up. Founded a decade ago, it now has a customer base of loyal multinationals and annual revenue in excess of $5 million.
At this point, the company might seem an unlikely candidate for funding from angels, the private investors who back start-up ventures with typical commitments of less than $1 million.
But that’s exactly who Minneapolis-based Fiberstar, which in the past has relied exclusively on angel investors for private equity, is going after to help raise up to $10 million for working capital and new production facilities to keep up with increasing global demand.
“Our goal is to continue to raise funding from angel investors and angel groups,” says Dale Lindquist, Fiberstar’s president and chief executive. “We’ve respected the investment that they’ve made and as management we’re trying to protect it.”
“It’s very unusual for a company to go as far as we have working solely with angels,” he adds.
It’s becoming less unusual, says Jeffrey Sohl, director of the Center for Venture Research at the University of New Hampshire. Investing in more established companies is just one of several signs that angel investors are seeking a higher degree of comfort as they look for safer bets in a volatile economic climate, he says.
“The angels are doing post-seed - more later-stage work than they normally would,” says Sohl, noting that venture capital groups, which frequently fund private companies higher up in the development food chain, have also boosted their investment thresholds in recent months.
In a highly unpredictable economy, when credit markets are tight and traditional sources of capital such as bank debt have dried up or become increasingly difficult to obtain, angel investors are taking on more prominence as a source of alternative financing.
Total angel funding during the first half of 2008 has been surprisingly steady, rising 2.1 percent to $12.4 billion, compared to the same period in 2007, according to first half data released by the center earlier this month.
Sohl points out that the numbers also show that angels, who typically take preferred stock or other equity in exchange for their investment, are exhibiting increasingly cautious behavior.
The total number of deals funded in the first six months - some 23,100 according to data collected by the center - has fallen 3.8 percent. Meanwhile, the average size of each deal is up 8 percent, and along with it, the number of investors behind it. The center notes that the total number of angels participating in the first half grew 2.l percent to some 143,000, investing either individually or as part of angel groups. Fiberstar, the food and beverage company, has 152 angel investors.
“What this is telling us is that the angels are spreading out their risk a little more,” says Sohl.
Marianne Hudson, executive director for the Lenexa, Kansas-based Angel Capital Association, notes that she saw this trend begin to take hold last year. Her organization, comprised of more than 170 angel groups, saw average deal size in 2007 rise 10 percent to $266,000. At the same time, Hudson, whose members self-report their investing results annually, saw the average number of investors per deal rise to 55 from 44.
And while Hudson expects that trend to continue in the current economy, she sees another important signal of skittishness among her member groups: the increased use of loosely formed syndicates to jointly fund deals.
“We are seeing more and more angel investor groups co-invest with each other,” she says. “The angels are minimizing their risk.”
Angels will clearly remain an active source of capital as the economy worsens, say these and other experts on alternative sources of financing. Data show an increased appetite for sectors such as software, health care, manufacturing, green technology and other energy-related concerns.
But for start-ups and later-stage private companies alike, the latest numbers signal what will also likely be a very competitive field for a limited supply of investment capital.
“There’s more demand for us - we can pick and choose,” says Knox Massey, executive director of the Atlanta Technology Angels. “Somebody out there is not going to get funded.”
By Deborah L. Cohen(Deborah Cohen covers small business for Reuters.com. She can be reached at smallbusinessbigissues@yahoo.com)
Wednesday, October 22, 2008
WHERE HAVE ALL THE ANGELS GONE?
Here is a link to very recent article from Inc. magazine. Although the credit markets are beginning to budge some we have seen a dramatic decrease in SBA Loans. At the same time, this article highlights some interesting Angel Investing data points.
Inc. Article
What are you seeing out there? Are funding transactions still taking place?
Inc. Article
What are you seeing out there? Are funding transactions still taking place?
Friday, October 10, 2008
Subscribe to:
Posts (Atom)
