Some sustained good news in the manufacturing sector–a bellwether for the economy?

November 2, 2009 at 12:30 pm | Posted in Uncategorized | Leave a comment

Wow, it’s been a while since my last blog entry. Things have been busy at the Region 2000 SBDC. We have seen more and more clients wanting to start a business in Lynchburg and the surrounding areas in the last two months. We are also seeing a lot more financing activity, and projects that were on hold for the last year and now coming back alive. This has been true in all of our areas served–small business is definitely picking up in Lynchburg, and Bedford, Campbell, Amherst, and Appomattox counties here in Virginia. We’ve also seen a lot more activity in terms of business acquisitions. 

I believe the worst of the recession is behind us. Now it’s a matter of employment levels going up in order for economic growth to fully take hold. Even construction and housing seem to have picked up. The manufacturing sector, often the bellwether and predictor for the rest of the economy, seems to be having a sustained recovery.

The Wall Street Journal just reported today that the US factory sector had its 3rd consecutive month of growth in October. (Things started improving in August this year after over two years of declines).  According to the Journal, the manufacturing index rose from 52.6 in September to 55.7 in October.  A reading over 50 indicates expansion.  My small business clients in the manufacturing sector in the Lynchburg area are giving me the same feedback that things have picked up.  The Journal today also reported that construction spending climbed by 0.8% in September and that housing-market activity also posted an increase.  Let’s hope this is a sustained recovery after all!…To be continued…

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Kauffman Study on Small Business Credit Card Debt

August 17, 2009 at 10:56 am | Posted in Uncategorized | Leave a comment

“Credit card debt reduces the likelihood that a new business will survive its first three years of operation, according to findings froma new study released by the E.M. Kauffman Foundation. That study suggests that, during many firms’ first few years of operation, their credit card debt increases and then eventually stabilizes to manageable levels, while firms with high credit card debt close, and successful firms start paying off their debt.”

Another reason to NOT go into credit card debt in order to start a business, especially credit cards with interest rates higher than commercial banking rates. Based on my experience working with clients at the Small Business Development Center, I also believe that because credit card funds are easier to access, borrowers don’t always do the necessary due diligence and business planning before they start their business. Whereas, if the borrower was working with a traditional lender they are more likely to go through a more rigorous business planning and credit underwriting process that ensures that only viable projects get funded in the first place. 

This is why it’s important to put together a business plan and cashflow projections and crunch your numbers under differing scenarios before you start your business–an SBDC counselor will help you do all this to objectively assess the merits of your project, before you even speak to a banker!

Signs of economic recovery and a timely plug for the SBDCs

August 11, 2009 at 12:58 pm | Posted in Uncategorized | Leave a comment

According to a recent CNN Money interview with SBA Administrator Karen Gordon Mills, more than 400 banks, that haven’t made an SBA-backed loan since 2007, have now resumed lending after the American Recovery Act was passed in February 2009. Additionally, weekly loan volumes have risen 45% since the stimulus was passed.

Existing businesses, and anyone thinking about starting a business, check out this CNN Money interview which also highlights the role that Small Business Development Centers play in the current recovery.

The Economist’s special report on entrepreneurship

August 4, 2009 at 11:28 am | Posted in Uncategorized | Leave a comment

The Economist magazine is one of my favorite magazines and reading material of any kind! Here are sections from a special report on global entrepreneurship that I thought were revealing, and while it’s global, alot can be applied to our very own region in Lynchburg and the surrounding counties, here in Virginia.

Five myths of entrepreneurship (Source: The Economist, with my comments interspersed, mostly in brackets):

Myth 1:  Entrepreneurs are “orphans and outcasts” – In fact, entrepreneurship, like all business, is a social activity. Entrepreneurs may be more independent than the usual suits who merely follow the rules, but they almost always need business partners and social networks to succeed. Think Steve Jobs and Steve Wozniak of Apple; Bill Gates and Paul Allen of Microsoft; Sergey Brin and Larry Page of Google; and of course Ben & Jerry’s of the ice cream fame. (With social networking sites making this easier, this fact will only be a growing trend). Entrepreneurship also tends to flourish in clusters (think Sillicon Valley, New York, LA, and Boston).  

In the Lynchburg region, this couldn’t be truer. Partnerships abound. I constantly notice savvy entrepreneurs partnering up; it IS about who you know. I’m also hoping that Virginia’s pro-business climate, will help spur greater startup businesses and attract small businesses to Lynchburg and the surrounding counties, and there will an entrepreneurial momentum).

Myth 2: Most entrepreneurs are “young” – A Kauffman Foundation study found that the average entrepreneurial boss was 39 when he or she started. The number of founders over 50 was twice as large as that under 25.

(Yes, the Bill Gates, Steve Jobs, and Michael Dells who dropped out of college to start businesses, do exist, but they are not the norm! My advice to college and high school students with the entrepreneurial bug: Stay in school. Even more so than in previous generations, knowlege is power and you increase your chance of success in business with a better education. Work in the industry first, and glean your lessons learned that you can then apply to your own business, with less painful consequences!)

Myth 3: Entrepreneurialism is mainly driven by venture capital – Fact: Venture capitalists fund only a small fraction of start-ups. The money for the vast majority comes from personal debt or from the “three fs”  – friends, fools and families.

(Ask any Small Biz Development Center consultant like me: There are NO grants or freebies for virtually any small business. Financing for a business (particularly if it’s from a bank, rather than the 3 F’s but even sometimes 3Fs) requires the 5C’s:  Credit, Collateral, Capital, Conditions, and Cashflow. At the SBDC, we help small business prepare their business plans and loan packaging to get funds for their business. We work with financing sources at all different levels, federal, state, local, and private banks. Check out our in-house loan programs for small business owners in Lynchburg, and the counties of Amherst, Appomattox, Bedford and Campbell at:  http://lbdc.com/index.php?/financing

Myth 4: Entrepreneurs must produce some world changing new product – Fact: some of the most successful entrepreneurs concentrate on processes rather than products. (i.e., give your customers more convenience, efficiency, or reinvent an old product with an innovative process).

Myth 5: Entrepreneurship cannot flourish in big companies – Startups are often more innovative than established companies because their incentives are sharper: they need to break into the market, and ownerentrepreneurs can do much better than even the most innovative company man. BUT, big can be beautiful too. Big firms oten provide startups with their bread and butter. In many industries, especially pharma and telecoms, the giants contract out innovation to small companies.

(Here in the Region 2000/Lynchburg area, we have worked with several startups that were spin-offs of larger established companies such as Areva, BWXT, Tyco, Ericcson, and GE. The small companies were not only former employees of the big companies, but they continue to be key suppliers to their former bosses, and it’s a collaborative relationship benefitting both).

So, the million dollar question – Is there any silver lining to the current downturn and recession confronting entrepreneurial capitalism?

According to The Economist, “harder times will eliminate the also-rans and, in the long run, could make it easier for the survivors to grow. As Schumpeter said “downturns can act as a “good cold shower for the economic system”, releasing capital and labor from dying sectors and allowing newcomers to recombine in imaginative new ways.

Today the ground is far less solid than it was in his day, so the opportunities for entrepreneurs are correspondingly more numerous. The information age is making it easier for ordinary people to start businesses and harder for incumbents to defend their territory. Back in 1960 the composition of the Fortune 500 was so stable that it took 20 years for a third of the constituent companies to change. Now it takes only four years.

Microsoft, Genentech, Gap and The Limited were all founded during recessions. Hewlett-Packard, Texas Instruments, United Technologies, Polaroid, and Revlon started in the Great Depression.

(The Economist goes on to say that most entrepreneurs surveyed say that while times are tough now, they do predict that their businesses and their workforce will grow, and there is likely to be less competition in their industry. Don’t be left behind, be one of the survivors. Check out our SBDC resources to help small business survive the downturn at: http://www.vamis.net/DocumentMaster.aspx?doc=1133 ).

Small business owners, here’s something you should know: The ARC loan program

July 29, 2009 at 12:53 pm | Posted in Uncategorized | Leave a comment
The Small Business Administration is offering a special loan guranty program to help struggling small businesses make payment on existing debt. America’s Recovery Capital (ARC) Loan Program is available to viable small businesses experiencing financial hardship that can demonstrate reasonable projections that indicate an ability to repay the debt.
 
A viable small business is one that has a history of good performance that is beginning to struggle with making loan payments, but can reasonably project that it can get back on track with the infusion of ARC loan funds and the benefit of deferred payments.
 
ARC Loan Basics:
  • Deferred payment loan, up to $35,000
  • Loan provided by commercial lender and 100 percent guaranteed by SBA
  • Interest-free to borrower; SBA pays interest to lender 
  • Proceeds used to make principal and interest on qualifying loans
  • No fees charged by SBA or lenders
 
ARC loans are designed to help businesses experiencing immediate financial hardship for reasons such as:
  • Declining sales and/or revenues
  • Increasing expenses
  • Reduced working capital
  • Cash shortage due to frozen inventory or receivables, accelerated debt or reduced or frozen credit lines
  • Difficulty in making loan payments on existing debt
  • Difficulty in paying employees
  • Difficulty in purchasing inventory, materials, or supplies
  • Difficulty in paying rent and/or other operating expense
Loan proceeds may NOT be used for business startup or for business expansion. Borrowers whose loans are already severely delinquent or whose past performance or future cash flow indicates that the business is not viable are not good candidates for an ARC loan.
 

  1. Click on the following SBA link for more information: http://www.sba.gov/recovery/arcloanprogram/index.html
  2. Share this information with your lender to help determine if you are a candidate for an ARC Loan. Find out if your lender would like to participate in the ARC loan program and/or is already doing so. This is a lender driven loan program. 
  3. Contact us at the Region 2000 Small Business Development Center at   (434) 582-6170. We can help you determine if the ARC loan is right for you and help you with the application process. 
NEXT STEPS:  Applying for an ARC Loan

Virginia is a Top 5 state for business

July 29, 2009 at 12:42 pm | Posted in Uncategorized | Leave a comment

U.S. News & World Report has ranked VA as one of the five best states for business! This is exciting news for those of us who work with entrepreneurs and businesses in the Commonwealth. I hope this will encourage more people to open a business in Virginia, and especially in the Region 2000 area based out of Lynchburg.

Hello world!

June 11, 2009 at 4:14 pm | Posted in Uncategorized | 1 Comment

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