Grow Smart BusinessUMDNetwork Solutions

Small Business Success Index 4

Index Score*   Grade
73 marginal
Capital Access 67
Marketing & Innovation 65
Workforce 76
Customer Service 88
Computer Technology 73
Compliance 92
*Index score is calculated on a 1-100 scale.

Search Articles

Capital Access Articles

What You Need to Know About SBA Loans

November 18th, 2010 :: mhaubrich

By Maria Valdez Haubrich

Is your business looking for growth capital in a tight economy? A Small Business Administration (SBA) guaranteed loan could be the answer to your problems. The SBA doesn’t directly make loans to small companies, but it guarantees a certain percentage of a loan that is made by participating lenders. This guarantee makes lenders more willing to take a chance on your business.

In fiscal year 2010, demand for SBA loans grew, and so did the number and dollar volume of loans. The SBA guaranteed more than $22 billion (54,833 loans) in loans to small businesses, compared to more than $17 billion (47,897 loans) in fiscal year 2009.

Businesses that have a track record of success, are looking to grow and have collateral to put up against a loan are good candidates for SBA loans. Here’s a closer look at the types of loans available.

7(a) Loans: The SBA’s biggest loan program, 7(a) provides financing for a variety of purposes. Under the recently passed Small Business Jobs Act, limits for 7(a) loans increased to $5 million. Within the 7(a) program are these specialized loan programs:

  • Express Programs: These streamline the financing application process and include SBA Express, Community Express (for businesses in disadvantaged communities) and Patriot Express (for businesses owned by military veterans). The Small Business Jobs Act temporarily increased the cap on SBA Express loans from $350,000 to $1 million for one year.
  • Export Loan Programs: Programs to boost small-business exporting include the Export Working Capital Program, the International Trade Loan Program and Export Express. The Small Business Jobs Act raised the limit on Export Express loans to $500,000, and raised the cap on International Trade and Export Working Capital loans to $5 million.
  • Rural Lender Advantage Program: For companies outside major urban areas, this program streamlines the application process to help small rural lenders make loans.
  • Special Purpose Loans Program: This encompasses business loans for small businesses with a wide range of specialized needs.

CDC/504 Loan Program: Offers long-term financing to buy fixed assets such as equipment and real estate. Loans are made by nonprofit organizations called Certified Development Companies (CDCs). The Small Business Jobs Act boosted the cap on 504 loans to $5 million; for manufacturers and certain energy-related projects, the cap is $5.5 million.

To find out more about SBA loan programs and learn how to prepare to seek financing, visit the SBA website.

 DISCLAIMER: The information posted in this blog is provided for informational purposes. Legal information is not the same as legal advice — the application of law to an individual’s specific circumstances. The information presented here is not to be construed as legal or tax advice. Network Solutions recommends that you consult an attorney or tax consultant if you want professional assurance that the information posted, and your interpretation of it, is appropriate to your particular business.

Angel Capital and Small Businesses: Less Money, More Companies

November 11th, 2010 :: mhaubrich

By Maria Valdez Haubrich

What’s going on with angel financing these days? recently reported on some key trends that might give entrepreneurs reason for optimism about this sector of small business financing.

The Center for Venture Research at the University of New Hampshire has released a study of the first 6 months of 2010. During that time, the study found, total angel investments declined by 6.5 percent (to $8.5 billion) as compared to the same time frame in 2009. However, while they’re investing less money, they’re investing it in more firms: The number of companies receiving angel investments grew 3 percent to 25,200.

It seems angels are also looking to invest in later-stage companies as opposed to startups. Just 26 percent of angel investments went to seed and startup stage investments. This is down from 35 percent last year and 45 percent in 2008.

Last, but not least, more angels are holding back from investing altogether. “Latent angels” (angel group members who haven’t made an investment) rose to 65 percent, a steep increase from 54 percent last year and 36 percent in 2008.

What does it mean for you? Investors are becoming more cautious and hedging their bets. Instead of investing in riskier startups, they’re more willing to put their money into companies that have shown some staying power and are ready to grow.

Where are angels investing? Here’s the breakdown:

  • Healthcare and medical device and equipment: 24 percent
  • Biotech: 20 percent
  • Software: 12 percent
  • Industrial/energy: 11 percent
  • Retail: 9 percent
  • Media: 5 percent

Banks to Increase Lending to Midsize Businesses

October 25th, 2010 :: Rieva_L

By Rieva Lesonsky

Commercial lending to midsize businesses is projected to grow this year, according to data from bond-market advisory firm CreditSights reports After two years of a credit crunch, why are banks now announcing new plans to focus on commercial lending?

The collapse of the housing market is one reason—obviously, banks have lost much of the residential mortgage business that once dominated their portfolios. Second, the passage of the CARD Act, which has restricted banks’ ability to profit from consumer credit cards, has banks looking elsewhere for a way to make money.

Commercial lending, which accounted for as much as 40 percent of banks’ portfolios in 1960, fell to just 15 percent in 2010 as banks relied on consumer credit for much of their business. Now, banks are turning back to commercial loans, which offer them higher margins and terms, says CreditSights, as well as a chance to cross-sell other services to the businesses that borrow.

The Federal Reserve’s July survey of senior loan officers showed that banks were already loosening their standards on many types of commercial loans. Many had also stopped downsizing companies’ existing lines of credit.

Currently, banks are focusing on lending to companies in industries with high growth potential, including health care, technology and energy. But some are focusing on other areas, such as manufacturing. In addition to major banks such as Wells Fargo, U.S. Bancorp and PNC Financial Services, larger regional banks are also getting into the game—so you may want to investigate what’s going on with banks in your area.

Will the change in lending standards be good or bad news for smaller companies? So far, one expert cited by says, it’s bad news—banks are becoming more aggressive in their approach to small companies that have outstanding loans or lines of credit and show signs of cash-flow problems or management weaknesses.

If that sounds like your company, you better get your ducks in a row. If it doesn’t describe your business, the change could be good news for you in the long run. With more banks looking to midsize businesses as a way to make money, it could be just a matter of time until the wealth trickles down to smaller firms.

Good News for Small Business: SBA Loan Numbers, Limits Rise

October 21st, 2010 :: Rieva_L

By Rieva Lesonsky

The Small Business Administration (SBA), whose fiscal year ended September 30, reports some surprising news: Despite a tough economy, the number of SBA loans rose by some 30 percent in 2010.

The SBA approved $16.84 billion in loans (54,826 loans) in the past 12 months—an increase from $13.03 billion in fiscal 2009. (By comparison, in 2007, before the recession hit, the SBA approved $20.61 billion in loans.)

The stimulus enacted in February 2009 is responsible for much of the growth. It eliminated fees and increased the maximum loan guarantee from 75-85 percent to 90 percent. Between February 2009 and May 2010, the average weekly dollar volume was $330 million—much larger than the $172 million weekly average for the seven weeks before the stimulus, The Wall Street Journal reported.

The increase in lending is especially impressive in light of the obstacles borrowers faced. During fiscal 2010, the stimulus provisions had to be extended four times by congressional vote. This led to lengthy delays where borrowers who hadn’t received approval had to get into a “queue” and wait until Congress approved the stimulus extension. The longest wait took place this summer; the provisions expired in May and weren’t extended until the Small Business Jobs Act was signed September 27. Within one week of that signing, the SBA reported that $970 million in loans or 1,939 loans that had been sitting in the queue had been cleared.

As part of the Small Business Jobs Act, effective October 8, the SBA also officially increased the cap on various types of loans:

  • The cap on SBA Express loans temporarily increased from $350,000 to $1 million.
  • The cap on 7(a) and 504 limits permanently increased from $2 million to $5 million; for manufacturers and certain energy-related projects seeking 504 loans, the cap is now $5.5 million.
  • The cap on International Trade and Export Working Capital loans has been permanently increased from $2 million to $5 million.
  • The cap on microloans has been permanently increased from $35,000 to $50,000.
  • The cap on Export Express loans has been permanently increased from $250,000 to $500,000.

These measures should make it easier for small businesses to get the loans they need—at least, until the stimulus provisions expire again at the end of calendar year 2010.

Image by Flickr user Kevin Dooley (Creative Commons)

Small Biz Resource Tip:

October 13th, 2010 :: Rieva_L

Did you know that unlike personal credit score reports, anyone can get a business credit report on your business without your permission? Do you know what your business credit score is? At this site, Experian offers several products to help you monitor and maintain an accurate credit report. Your business credit score can help determine what interest rates you will pay, how much money lending institutions will lend you, how customers view you and more. And to help you make informed decisions, you can also pull reports on other companies you plan to do business with such as suppliers and potential business partners.

Difference Between A Line of Credit And Term Loan

July 20th, 2010 :: Gary Honig

As a business owner looking for help financing part of your business, it is important to understand the fundamental differences of a bank line of credit and a term loan. They are used specifically for different purposes. Applying for the wrong type of loan may cause problems later on as the business grows.

A line of credit (LOC) is usually considered a short term loan. The payments are interest only based on the outstanding funds in use. As you draw down on the line, using it to pay bills, interest is accrued monthly. The line is like an open checkbook for ‘use as needed’ purposes. The critical nature of the LOC is the necessary discipline to put funds from income back to pay down the line. There should be a constant flow of money coming from the line to pay bills and then replenished as customers pay for your goods or services. When applying for the LOC, the bank is typically looking for historical cash flow. What does the revenue look like? Is it steady or fluctuates wildly? The bank will take a conservative view of the existing accounts receivable to get a baseline. For the most part a bank will not be able to consider potential new business when considering a LOC credit limit.

A term loan is a fixed funding transaction. It is a onetime loan based on cash flow of the business plus certain collateral pledged against the loan. The loan should be used for a major expenditure rather than daily cash flow for the business. All the proceeds are available at the time of closing, not like a line where funds are circulating. The payments are interest and principal based on the amortized terms of the loan. For example; a $100,000 at 8% interest over a 5 year term. The bank will assume an ownership position on the collateral, meaning the collateral cannot be transferred or liquidated. The historical cash flow of the business is critical to securing a term loan. The lender needs to see that loan payments will not have an adverse affect on the business operations. Term loans are used to purchase real estate, equipment, for build-outs, or franchising.

There are situations where a LOC that has been used to the credit limit is converted into a term loan, so the business will have to make monthly payments to pay off the old line. The problem becomes the business no longer can gain access to additional funds while the loan is outstanding. Access to capital is the lifeblood of any company, and lack of capital will starve a growing business.

Sweat Equity and Broke

June 30th, 2010 :: Steven Fisher

Over the last 10 years as an entrepreneur I have taken many risks and some have panned out and well others…let’s just say that I should have looked before I leaped. Then again, that is one of the truest traits of an entrepreneur, taking risk and making something from nothing.

Recently, I was reading an article called “The Sweat Equity Myth” by George Cloutier, Founder of American Management Systems. In his article he talks about the concept of “sweat equity”:

“The idea that business owners shouldn’t pay themselves a salary while they’re building a business. I call it working for nothing and being a fool.”

I couldn’t agree more with him, because I have done it and it was one of the worst things I ever did. When I started my first business, things were great and we had tons of clients. Sure it was the dotcom boom but we thought it was a whole new world. So when the sky fell and the bubble burst, many clients went out of business so we had to tighten the belt. Instead of swallowing my pride and lay people off I sacrificed my own salary and cut it in half as a message of solidarity, or so I rationalized to myself.

He goes on to mention something that I should have noticed early on, but didn’t:

“The inability to pay yourself is symptomatic of a much deeper financial problem; it’s should serve as a red flag that your business is not working. Lack of sales or quality control, bloated overhead and other financial woes are the real reasons you’re not making a salary.”

When 9/11 happened the clients we did have froze their contracts and put any new business in pipeline on hold for six months or more. My business, like many others, had a “deer in the headlights” look and many collapsed quickly. We did have some cash reserves so we had to make a decision, go on and try our luck or shut almost everything down to fight another day. We chose the later but paying everyone’s severance left me with nothing and extra debt to boot.

Over time, I did recover from that but in another business made the same mistake thinking that it was noble of me to sacrifice my sweat for equity I already had in the first place. Bottom line: Pay yourself first.

I would like to expand on that by including George’s tip to avoid this easy entrepreneurial trap:

  • Always work to make a good salary. Then cover the expenses. Not the other way around.
  • Reward yourself (but within reason). Here’s a rough formula: Pay yourself 3 to 4 cents on each dollar of revenue for doing the job of CEO.
  • Imagine you weren’t in the picture. Ask yourself how much you’d pay a general manager to run your business if you had to go away. That’s the least you should be paying yourself.
  • Remember your priorities. Don’t lose sight of why you’re running a business in the first place-to improve your quality of life.
  • Spread pay cuts around. Take a 5 percent cut along with the rest of your staff, but don’t put a 30 percent pay cut on your own back.
  • Ask yourself this question: If your business doesn’t allow you to pay yourself a living wage, what are you doing wrong?
  • Remember: There are no rich martyrs.

So what will you decide when this moment occurs in your entrepreneurial journey?

Enhanced by Zemanta

Startup Fever with Six Million New Startups in the US in 2009

June 22nd, 2010 :: Steven Fisher

Six million. Wow. I heard this on a Marketplace podcast (you should subscribe to it if you don’t) that talked about this report out today from the Kauffman Foundation. It it they stated that start-ups hit a 14-year high in the middle of last year.

That is a big number and they got their core data from self-employment stats the Census Bureau and the Labor Department publishes, and sure enough, 2009 was a stellar year. It revealed that more than half-a-million people started their own businesses each month. And that is up nearly 5 percent from the previous year.

This is one of those numbers that confirms two things – people start businesses in recessions and that the United States is a startup nation. Granted, this number was up due to higher unemployment but it shows us that when we are faced with a new challenging situation we won’t sit still. In fact, many new entrepreneurs I have talked to looked at their layoff with a severance package as the final kick in the pants they needed to start their business and achieve a life long dream.

One of the big trends in this report is that many of these people are part of the emerging Homepreneur trend which Emergent Research covered in a recent report. Even though they might be small, these small business are the engine of job growth in the United States.

Here are some highlights from the findings:

  • Groups ramping up startups include African Americans and folks 55-64.
  • Advantages include: cheap talent, cheap rent, reduced competition.
  • Failure rate stable as in other years: 50% in the first 5 years.
  • Small business credit cards cost more than before – a 14% increase vs. the consumer increase of 2.5%
  • Small business credit cards not protected by new consumer protection laws passed by Congress

I am excited to see more startups that have launched with no equity out the door, or by early revenue from solid deal flow that helps them grow organically. Since they have built their business in a tight credit market not getting capital has forced them to work with what they have instilling a discipline that will serve them well.

Thinking About Becoming an Entrepreneur or Taking Your Business to the Next Level?

We have two great resources you should check out – the Small Business Success Index and “The Rise of the Homepreneur“.

The Rise of the Homepreneur” which discusses the findings of the report “Homepreneurs: A Vital Economic Force” which is a new report published by Emergent Research, a small research and consulting shop in Lafayette, Calif. “We’re seeing more and more home-based businesses that are real businesses,” says Steve King, who coauthored the new report with Carolyn Ockels. To prepare the report, they analyzed U.S. Census data and Small Business Administration research, along with data from our very own Small Business Success Index, a survey of 1,500 companies sponsored by Network Solutions and the University of Maryland’s Robert H. Smith School of Business.

The Small Business Success Index™ (SBSI) is in its third wave of the report, sponsored by Network Solutions® and the Center for Excellence in Service at the University of Maryland’s Smith School of Business. To download a copy of the Small Business Success Index and also find out how your business scores on the six key dimensions of small business success, visit

Enhanced by Zemanta

Women in Business: Growing an International Non-Profit from Scratch

May 26th, 2010 :: Monika Jansen

We don’t talk much about non-profits in this space, though they are businesses, too, and growing them is just as difficult as growing a for-profit business. In fact, I would argue that starting and running a non-profit is even more difficult due to the money factor.  You need seed money to get going, but because non-profits are generally un-sustainable, year after year, you must rely on individual donors and grants to ensure your mission can continue.  On the plus side, working in the non-profit world can be really rewarding.  Everyone is committed to the cause, and your work is making the world a better place, whether on the micro level, macro level, or somewhere in between.    

Jillian Poole

Jillian Poole

I have been lucky to watch an amazing non-profit evolve for the past 8 years.  In 2002, I began working as the assistant for Jillian Poole, founder and CEO of The Fund for Arts and Culture.  I got to do a lot of really interesting work: travel and budget planning, grant writing, correspondence writing, and report editing; I have been their Editor since 2003.  Their mission statement sums up pretty neatly what they do:

The Fund provides assistance to selected major arts and cultural institutions to assist in their adjustment to a free market economy. Our senior consulting experts serve pro bono and share their expertise in administration, management, governance, planning, public relations, marketing and fundraising with visual and performing arts organizations.  We believe that promoting healthy, vibrant and welcoming institutions of art and culture strengthens civil society.

Jillian founded The Fund following her retirement from the John F. Kennedy Center for the Performing Arts in Washington, DC, where she had been head of the development (fundraising) department.  “The year was 1991, just after the fall of the Berlin Wall,” said Jillian.  “And like many things in life it came about through pure serendipity.  There was a need, and I knew people who could help fill that need.”

They began their work in Russia and quickly expanded to other former Soviet bloc countries.  Jillian continually recruited senior museum and arts administrators to serve as consultants.  As she said, “A rolodex is an expandable thing.  It grows in unexpected ways, often with unforeseen encounters and certainly with almost every major endeavor.”  Word of their expertise and positive impact traveled quickly.  As the only organization offering hands-on, interactive seminars and workshops, the more than 100 consultants engaged by The Fund traveled to more than 20 countries.   (It is important to note that these consultants worked pro-bono, and many were eager to travel on behalf of The Fund again.  It was an enriching experience for them as well, and many have noted that they learned as much as their seminar participants.) 

The global economic collapse has forced some changes, as fundraising has been negatively impacted in a big way over the past two years.  After 20 year leading The Fund, Jillian has stepped down as CEO.  (A new CEO has not yet been named.)  I asked her if she would have done anything differently, and she replied, “I tend to look forward, not back.  There are many things that could be done, and some that must – and whether they will be remains to be seen.”  Though it seems like an evasive answer, her attitude perfectly reflects that of a leader: keep moving forward and make the changes you need to make to stay viable. 

I asked her for one piece of advice she’d give to someone interested in starting a non-profit, and she said, “Build a strong board to help you, always bearing in mind the essential 3 Ws – Work, Wisdom and Wealth.”

Interest Free Loans!

April 2nd, 2010 :: Gary Honig

Sounds great doesn’t it? Well that is exactly what businesses do everyday when they offer credit terms to their customers. Sure it’s considered normal to allow a customer thirty days to get their bookkeeping in order to pay the bills. But many large companies take advantage of credit terms and take 60 – 90 days to pay an invoice. That becomes 3 months of interest free money. Your money. You are essentially helping to grow their company using your resources, time, material and energy.

This problem is compounded by many small businesses who fail to recognize the critical nature of extending credit to customers who would otherwise not qualify. Being in business and offering credit to customers is just like being a bank. A bank lends money to borrowers based on strict guidelines. Small businesses offer credit terms on little or no guidelines at all. When it comes time to go to a commercial lender and attempt to borrow capital, the creditworthiness of customers is definitely taken into consideration. One large sale that ends up not paying, which could have been avoided with proper credit management, may potentially wipe out a years worth of profit.

How to avoid selling to poor credit customers;

  1. Use a credit rating agency like Dunn & Bradstreet or Experian
  2. Know how to read these reports
  3. Be conservative when offering a credit limit based on the report
  4. Ask for financial statements – Balance sheet, Income statement
  5. Ask for credit references, and follow up on them
  6. Let the customer know the faster they pay the quicker they can order more
  7. Keep an eye on payment history before allowing more credit
  8. Stay on top of collections, develop a routine