Increase Your Chances of Getting Funded With The 5 C's Of Credit

As many of you know the current economic conditions aren’t very friendly to the small business owner.  Lending is tight, credit cards are hard to find and people just aren’t spending money.  There is however some best practices on how to increase your chances of receiving funding even in the worst of economies.  I would like to introduce the 5 C’s of credit.  What many business owners fail to realize is our country has seen these current lending criteria’s before.  Pre-subprime which would probably be pre-1997 the lending criteria was virtually the same.  You needed good numbers, decent collateral, and a strong business plan.  The 5 C’s of credit might be able to help.

Character

What does your company stand for?  Does your management team have a reputation in the community, industry, or workplace?  Do you promote good customer service and do your customers know that?  Lenders want to see that you have created a positive culture.

Capacity
How much can your company take on as far as financial responsibilities such as debt?  Lenders want to know the point at which the boat no longer floats if too much debt is on the books.

Capital

Do you have a 401K or some sort of pension?  Do you have a savings account?  If so have you tapped that cash to grow or sustain your business?  Lenders want to see if you are personally invested in your own company before they give you their money.  If you won’t belly up why should the lenders?

Collateral
What are some of the assets the company owns or you personally own?  Lenders especially today require some sort of asset they can take if you don’t pay off the loan that they can convert to cash.  Try to put up company owned assets before you go to your home or your cars etc.

Conditions
Lenders want to know how your particular industry is handling the current economy.  Is it up or down or flat?  If so what are you doing to stand out to make a difference?

2 comments - Posted by Tom Markel III at 4:43 PM - Categories: Business Startups | Business Financing

The New Rules

As the economy shifts into a different shape, a shape that has never been seen before, the old rules have changed.  I keep hearing people say “I have been doing this for 25 years.  It will work.” Sorry, but what worked 25 years ago just doesn’t work today.  What worked one year ago doesn’t necessarily work today.  The path has been paved over and the new rules of the road are now flashing—if you’re paying attention of course.

Web site Visitors and Users

First, if you don’t have a Web site you’re already far behind.  I don’t care if your business is building plastic clamps for a part that goes in the trunks of Ford SUV’s.  Every business needs a Web site. Historically, the most popular pages on a Web site were its news section, maybe some landing pages and some content pages.  In these new times do you know what we have found to be one of the most popular pages on a Web site?  The “About Us” page.  Web site visitors today are discovering that the “Search” process whether you go through Google, Yahoo, or any other search engine, does not always offer the best results.  Many businesses today, before going anywhere on your site now wants to know what your company is all about.  Does this company believe in what I believe in?  What’s the customer service like?  Is the owner of the business truly dedicated to his or her customers?  Is the company a good company?  The days of slapping up some content to entertain the Google algorithms to get on the first page of Google or Yahoo are over.  You still might get on the first page of Google or Yahoo but now that customers are doing more research, acquiring new customers will be more difficult if your company is not credible.  Be transparent as you can with your customers.  Speak about your story and how you were founded.  Speak about success stories, business goals and objectives.  Speak about your core values and why they are your core values.  Earn the trust of your customers.

Getting a Business Loan

Before the credit markets got silly with loose lending practices and greedy executives, what where the lending rules?  The rules were do you have collateral?  Do you have appropriate income?  Do you have a good credit score?  How long have you been in business?  Are you profitable? 

What were the rules during our recent economic boom?  Do you have a pulse?  Oh great here’s your loan.  Yes, the credit markets are extremely tight right now.  However, if you are going to need a business loan or want a business loan during these times you best be prepared and know what you’re doing.  Make sure you have everything organized in a professional-looking way.  The banks don’t want to take on a single ounce of risk right now.  Making the banks do any kind of extra work to learn about your business is going to threaten your chances of getting a loan.   The best way for banks and lending institutions to learn about your business is through a professional SBA certified business plan.  Without a business plan 99% of banks will throw your application right in the trash.  There are all different kinds of business plan templates at all different prices.  If you are going to pay someone to write a business plan for you make sure it’s a certified business plan.

Sales and Marketing

When I was growing up I walked door- to-door selling Christmas garlands and wreaths to people in my neighborhood.  Back then they thought it was cute.  Today, they would most likely slam the door in my face and probably call the police.  Cold calling, email blasting, recorded voice calling….these methods might still work for some of you today, but you should add social media to your marketing mix. An effective social media effort will attract new customers at almost no cost.  Social media is still this big black hole for many people today, but if you spend some time with social media, it’s not that hard to learn how to effectively use it.  The main question with social media is how do you create the habitual user?  As the owner of your company what can you share with your customers that will get them to come back to visit your site on a daily, weekly or monthly basis?  Once familiarity and credibility is established the customer will naturally use your services or products.  Some social media accounts to look into:  Linkedin, Twitter, Facebook, Digg, Delicious. 

0 comments - Posted by Tom Markel III at 2:10 PM - Categories: Business Startups | Business Financing | Business Consulting

3 Creative Ways to Stay in Business

So we all know its a tough time right now. Questions come to the surface on a daily basis. How do we cut our costs? How do we generate more revenue when no one is spending money? How do we brand ourselves when it costs an arm and a leg to do so?

In March of 2008 companies all across the nation lost 50%, 60%, 70%, 100% of their business and there was no end in sight. I would like to share with you 3 creative tactics to stay in business and actually grow month over month.

1 - Its all about customer service. What is going to stand out in a customers mind when thinking about paying for a service? How was I treated? What kind of promotions did they give me? Are they truly thinking about me? Step number one is to know your customer. CALL THEM. Many customers in a downtime just want to talk to someone about their problems. Spending time with the customer will tell them you care. Thank them for being a customer and ask them if you can do anything else for them and their business. The human touch always gets the cash flowing.

2 - When's that next promotion? If you drive round town or watch television what are you always noticing? There are SALE TODAY signs everywhere. Try to have monthly or even weekly sale promotions. Sign up today and get 10% off. Free for the first 30 days. Get creative with your business on how you can promote your products. Make sure its a new promotion each week or month. It will tell the customer you are thinking about them and their needs. iBank gave away a free laptop the other day as a promotion. GET CREATIVE!!

3 - Performance Based Contracts and Comp Plans. The last thing your employees and vendors want is to be laid off or to find out your canceling your account. In this recession iBank's overhead quickly became more then its revenue and guess what? Our CEO didn't lay off one person and didn't cancel a single account with one of our vendors. We sat down with both our employees and our vendors and said "What can you do for us to stay in business and continue to pay you" you wouldn't believe the reaction. Employees gave up weekends, took pay cuts, went to commission only complains. Vendors lowered their prices, went to a performance based contract, canceled payments for a month or two. Work with your people and your vendors. You will need them more then ever in the tough times to get back to where you need to be and sustain positive growth.

0 comments - Posted by Tom Markel III at 3:44 PM - Categories: Business Startups | Business Financing | Business Crisis Management | Business Consulting

Small Business is the Key to our Financial Recovery

Much of today's economic environment can be compared to the earth's natural environment, where often chaos and disaster can produce beneficial results. In the natural world, where would we be if the forest, algae and the rest of the foliage along with all of the animal life were to continue to grow unchecked and untested? In the natural environment of our world, if there are no natural disasters to cull out, clean up and rejuvenate the forest, the entire eco system becomes weak, withers and dies. It has been observed many times that at the time, lightning, floods, fire, wind and rain can have devastating effects, but over the long run we see that all of these disasters produce benefits which at the time we cannot see. Just as it is in nature, I believe that economic disaster can produce long term benefits even though at the time chaos and disaster are all that can be seen.

It seems that every 7 to 10 years our economy goes through a "severely unnatural disaster". I believe that this cycle of disaster is a completely natural phenomenon. Just like an overgrown forest, the economic eco system becomes overgrown with lofty positions, vague business practices, and loose accounting. I believe that the economic disaster we face today is part of the natural process of culling out, cleaning up and rejuvenating our financial eco system so that the entire economy does not wither and die. I have personally seen this happen 4 times before, and through every disaster, I've found that whenever an economic door is closed, a window is opened.

In today's economy these windows are opening faster than ever before. In the disaster of the 80's recovery occurred in 36 months, in the 90's 28 months, and in 2001 recovery occurred after 18 months. Given this historical perspective, I believe that the recovery of the current recession could take less than a year. Yet what really irks me is how so many experts believe that big business is the answer to the question of how to fuel the recovery. Congress has approved billions of dollars of taxpayer's money to be given to the car companies and financial institutions, while virtually ignoring the largest producers of employment in our country, the small businesses. When last I checked, nearly all big businesses have laid off tens of thousands of people. What has all the financial bailout done except help to exploit the people who have worked at these companies? Are we not advocating simply seeking a profit at all costs at the expense of people?

Whenever you ask a small business owner about their motivation when it comes to their business, invariably you will find that motivation comes less from a sense of wanting profit for the sake of greed, but from a sense of responsibility to their employees, their customers and their family. Come on experts and congress! Let's start to bail out the 5 million small business owners from their crisis. Are there not 300,000 small businesses filing for bankruptcy or simply closing up shop monthly? Shouldn't the government provide assistance to small businesses like they did with Bear Stearns, and AIG? I guarantee that the small business owner will not spend the money on bonuses or to pay down debt. They will create new markets, and bring new products services and innovation to existing markets, and in order to do this, they will need to hire employees to get the job done. If we can do this right, we have the opportunity to turn this economy, and this country around.

But we as owners and managers have a responsibility as well. We need to think of different and innovative ways of generating wages so that we can keep our people working, keep up morale, and keep people thinking and contributing. Let's turn our business models into circles where everyone participates, not pyramids of delusion that lead from the top down. Leading from the top down only works when you share your vision, and everyone in the company comes together to help. Like a forest fire in the natural world, in order to put out the fire, everyone must bring a bucket of water if we are to put out this economic disaster.

This economic disaster will pass. History has shown this to be true countless times. If you understand this, and understand that this is a time that should be taken advantage of, when the weak and overgrown parts of our economy have been culled from the economic environment, the small business owner will be poised to take advantage of a great recovery, and will end up stronger in the long run. It may take some retooling of your thinking, and it may take some assistance, but in the long run the benefits will outlast this short term disaster.

-Tom Markel

CEO iBank.com

1 comments - Posted by vladi at 4:39 PM - Categories: Business Startups | Business Financing | Business Crisis Management | Business Consulting

How to Keep Your Cash Flowing

Cash flow is always crucial for small-business owners—and with the current credit crunch, simply getting paid is becoming more and more difficult.

At a business event for women that I attended recently, dozens of business owners told me the problems they are having collecting on their receivables. One entrepreneur who projects $3 million in sales this year told me her receivables were regularly running over 90 days. Another entrepreneur is projecting 2008 revenues of nearly twice last year’s. But that’s not doing her much good right now, because a big corporate client owes her nearly $200,000—and it’s more than 120 days past due.

For women business owners, collecting on past due accounts can be complicated by psychological factors. First, we tend to want to be liked. That means we sometimes have a problem being the “tough guy” when it comes to collections. Second, we tend to personalize business. If we have a friendly phone relationship with a client, or schmooze about our kids every time we meet for a business lunch, we think of them as a friend. We assume our “friend’s” company will pay on time, so we don’t need to worry. And when he or she does pay late, we feel uncomfortable reminding our “friend” about the money we’re owed.

In today’s economy, you can’t afford to assume you’re going to get paid on time. And you shouldn’t wait until the payment’s past due to start taking action.

Keeping your cash flowing begins with your billing system. Here are some simple policies to follow, if you aren’t already:

Set up your accounting systems so bills go out as soon as the work is completed. (You’d be surprised how many entrepreneurs finish a big project, then let several days go by before sending out the bill). Make sure all bills clearly state what they’re for, with any identification numbers or other information the client requires.

Using e-billing can be a smart move to save money (printing and postage costs), get your bills to the client faster and get paid faster. A quick Google search can help you find companies that will help you get set up with e-billing.

Next, consider incentivizing companies you do business with to pay you on time. (You may even be able to get them to pay early). For example, offer a discount if clients pay within 30 days. If you can afford it, offer an even bigger discount if they pay net 15.

If a lot of customers pay you with credit cards, you have to pay the credit card company a few percentage points. To avoid this, offer incentives to customers to pay in cash.

When the initial 30 days comes and goes and you haven’t received a check, follow up with the customer immediately. If you’re like many women entrepreneurs, this idea makes you nervous, doesn’t it? “I’m sure they’ll pay. I’ll just give them a few more days.” Remember, this is business, not personal. And I’m not suggesting being obnoxious. All that’s needed is a polite call or email following up to make sure the bill was received, and asking if they have everything that is needed for payment. If indeed the bill has simply been overlooked, this will prompt the client to take action.

If the client cannot pay at this time, push a little harder. Try to get a clear answer as to when you can expect payment. If the client can’t pay the full amount right away, offer to create a payment plan.

All small businesses are in the same boat right now, and clients will appreciate your willingness to work with them. But remember, you still need to get paid, so be polite but firm. Those friendly relationships you have built can work to your advantage here.

Honesty works both ways. If you have delayed paying bills because of your own cash flow situation, call the companies you owe money to and be frank with them. Being forthcoming and willing to work through the situation will help you in the long run.

If these tactics still don’t get your cash flowing the way you need it to, consider an asset-based loan 

0 comments - Posted by vladi at 10:28 AM - Categories: Business Startups | Business Financing | Business Crisis Management | Business Consulting

How to Save Money on Technology

In this state of our economy, companies are looking everywhere to cut costs.  One area that can keep costs low is in technology.  Most businesses use Microsoft Office to write e-mails, create documents and spreadsheets, and many other things.  However it comes as a surprise to most business owners and “non-techies” that programs like Word, Excel and PowerPoint are not a part of the Windows operating system, therefore they are a separate, and expensive, piece of software that is installed on your computer after you have paid for it.  Prices for Microsoft Office can range from $300 to over $500, more than the cost of some full PC’s. 

Often to help offset these costs, business owners will either buy it at the same time that they buy their computers which can reduce the cost, or they know someone that has a copy of the software.  Make no mistake, installing Microsoft Office from a CD that your kids have is ILLEGAL.  It can lead to fines and at the very least a lot of hassle.   Instead you can use one of the free alternatives that are just as good, if not better than Microsoft Office and are perfectly legal.

            One example of free office productivity is Open Office (http://www.openoffice.org).  This program is just like office.  It has Word Processing, Presentation, and spreadsheets, and the best part is it is free.  This program is compatible with Microsoft, meaning files can be saved in a format that Microsoft can read, and it can also open Microsoft Office files.  One caveat: as of this writing, Open Office is not compatible with the latest version of Microsoft Office (Version 2007), however they are working on it.

            Another example is Google docs (http://docs.google.com).  The difference between Google docs and MS Office or Open Office is that Google docs resides online.  There is no software to install.  This has its advantages and disadvantages.  Not having to install the software makes it easy to get up and running, which is great, also Google docs makes sharing your docs with other people very easy since it is all online.  The bad part is that if you don’t have a connection to the internet, you don’t have access to your documents, but in this world of constant connectivity that is becoming less and less of a disadvantage.

            In addition to these two freebies, there are plenty of other productivity suites that are not necessarily free, but do cost much less than Microsoft products.  Some examples are Sun Microsystems’s StarOffice  (http://www.sun.com/software/staroffice/index.jsp).  This full featured program may not be free, but at $69.95, it’s a lot cheaper than Microsoft.

            There are downsides to these programs to keep in mind.  For one, it means learning a different skill set.  If you’re used to using Excel to create spreadsheets, Open Office will take a little getting used to.  For another thing, at least with Open Office, support is done by volunteers instead of a paid staff.  This can lead to some interesting searches for help as opposed to Microsoft that you can call for help (for a fee).

            However these downsides are temporary, and compared to the cost of using Microsoft products, you will make up your costs of loss of productivity with all the money you save on your software.

Ken Phibbs – iBank Network/Data Base Manager

0 comments - Posted by vladi at 9:34 AM - Categories: Business Startups | Business Financing | Business Crisis Management | Business Consulting

NEWS FLASH!! CREDIT IS NOT FROZEN!!

There is a perception along Main Street and Wall Street that credit cannot be found. That is dead wrong. There are thousands of banks and credit unions all across the country that are actively lending to small businesses and individuals. Their business model is much the same today as it was last year and much as it was five years ago. THEY MAKE LOANS THEY BELIEVE WILL BE PAID BACK CONSIDERING A VARITY OF ECONOMIC CONDITIONS. This is the way all lenders used to operate, but many, as we have clearly seen, lost site of this very basic lending model.

The key consideration here is, do not assume lenders are not lending. Many lenders are seeing increased deposits and therefore increased liquidity and are very interested in closing loans. Lending is how they stay in business. They just want to be paid back. With all the negative media attention (by design, don’t you think?) it is very easy for a small business owner or an individual to conclude that a small business loan will not be forth coming so why try. That is the wrong viewpoint to have. PLEASE TRY!! You may be surprised how much interest there will be in you and/or your business.

Getting approval for a loan request will require some combination of positive cash flow and/or quality security. Depending on the lender and the type of loan you are seeking, more or less weight will be given to cash flow or quality security. For a small business, a solid business model that is throwing off positive cash flow is almost always a winner. The same thought process works for individuals as well, that is, are you making more than you are spending. Yes, there really are a lot of individuals and families that live this way.  There are lenders that are very security focused, but no respectable lender enters into a lending transaction with the expectation of liquidating the security. Expect to pay a higher price for this type of loan, unless there is a very easy path to liquidation. With the slowing economy asset liquidation has become an increasingly costly and unpredictable process.

In conclusion, build your case, be reasonable in your expectations, anticipate the questions that will be asked and expect a yes on your loan request. A lot of loans will be made following this formula.

0 comments - Posted by vladi at 5:49 PM - Categories: Business Startups | Business Financing | Business Crisis Management | Business Consulting