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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.

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Raising Capital 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.

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.

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

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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.”

Proper Use Of Collateral

March 26th, 2010 :: Gary Honig

Business owners who are operating revenue driven companies often turn to outside sources of capital when looking to grow faster. Either a company can sell shares (and shared ownership) to raise capital or they can borrow against collateral. Collateral usually means some sort of tangible asset such as equipment or receivables.

When using collateral for borrowing, it can be costly to not recognize the ramifications of pledging certain assets. This means, once collateral has been borrowed against in the form of a loan, the loan must be paid off in order for the same collateral to be used again. All lenders can quickly ascertain whether a loan exists and what collateral has been assigned. Asset based lending companies require a first security position on the collateral they are financing. Pre-existing loans or credit activities that have been issued a secured position on collateral make additional funding impossible.

Generally the problem stems from a line of credit, which was used up over an extended period of time. Ideally, a line of credit from a bank should be properly managed and treated like a revolving loan. Money should be taken from the line, but regularly paid back to pay down the line. Having the discipline to borrow and pay back on a line of credit will keep the financial condition of the company sound. This means certain expenditures must wait until profit or other investment is available.

What finally happens with the mis-management of a line of credit is – the line has reached the maximum credit limit. In today’s lending environment, the bank will be unwilling to extend further credit and probably will change the structure of the outstanding amount into a “term loan.” This means the total amount is due on a monthly installment payment plan, leaving the company with their collateral spoken for and no ability to raise additional capital through alternative sources.

So the critical lessons here are, knowing when the company assets are being used as collateral and don’t get caught in a dead end where there is no access to badly needed working capital.

Show Me the Money, or at Least Where I Can Get Some

March 12th, 2010 :: Steven Fisher

Remember the film Jerry McGuire? In the film, Cuba Gooding who plays the star football player and only client of sports agent Jerry McGuire, played by Tom Cruise. As he is negotiating for his client, they start trading the mantra “show me the money” and increase in volume until it is a cry for getting the most for what you do.

For the past two years, small businesses have been challenged about getting banks to “show them the money “and get loans or other sources of capital to run their business. Over the last year the Network Solutions and the Center for Excellence in Service at the University of Maryland’s Robert H. Smith School of Business has released the findings of their Small Business Success Index survey. The index is designed to track the competitive health of the small business sector over time, and the results are always interesting.  Scores in 6 categories are graded; on February 16, the third edition came out and capital access got even lower marks this quarter with a D+. We are going to dive in and see what the challenges are facing small businesses with getting access to capital.

Everyone Talks About a Tough Economy. Are We at the Bottom?

If you listen to some news reports, the economy is a major factor holding back the success of small businesses. The economic outlook deteriorated in the first half of the year, and has not improved between June and December.

From the SBSI report, “Has the economy hit bottom? Half of small businesses – 50 percent – have been highly impacted by the downturn in the last 12 months, compared to only 36 percent a year ago. In the past six months, the recession has touched more small businesses. In June, one out of four small businesses (25 percent) had been minimally impacted by the recession, but by December, less than a fifth (19 percent) had been minimally impacted”.

Another interesting factor from the report is that “half of small businesses – 50 percent – have been highly impacted by the downturn in the last 12 months, compared to only 36 percent a year ago”. This data was supported from the fact that in the past six months, the recession has touched more small businesses. In June, one out of four small businesses (25 percent) had been minimally impacted by the recession, but by December, less than a fifth (19 percent) had been minimally impacted.

Getting Creative to Get Capital to Make It Through

The sources of funding relied on by small businesses has changed markedly in the past 6 months as cash reserves and traditional funding sources have disappeared. The following are steps taken in the past two years and how this has changed since the last survey wave in June:

  • Almost half of small businesses (46 percent) have met their capital needs by cutting their own pay; just six months ago, only a third (33 percent) had resorted to this step
  • 42 percent have had to take a loan from owner savings, compared with only 32 percent six months ago.
  • 39 percent have relied on credit cards (compared to 33 percent in June)
  • 33 percent used a business line of credit (compared to 31 percent in June)
  • 21 percent used a bank loan (20 percent in June)
  • 14 percent took out a home equity loan (10 percent in June)

The SBSI survey found that few have relied on outside investors (5 percent) or SBA loans (4 percent), and only a fifth report having relied on no special funding sources in the past two years. Bank loans have become increasingly scarce. A fifth (18 percent) of all businesses indicate the source has gotten scarcer in the past year, compared with just 13 percent noting this in June; among those who took out bank loans, 43 percent believe the source is getting scarcer.

There is a light at the end of the tunnel. And it is not a freight train.

Despite all these challenging issues, companies are learning to be lean and do without making their balance sheets primed and ready as the economy improves. Granted, we do need lines of credit and other sources of capital to fill in gaps when customers don’t pay exactly on time but small businesses must meet payroll and keep the lights on. The economy is improving although not as fast as we would like it to, still there is a light at the end of the tunnel and it is not a freight train. It is a sunnier day and a positive P&L report.

Download the SBSI Report Right Now

If you are reading this on the web site,, you should see a link to the report or if you don’t or a looking at this in a feed reader, you can get the report at

Getting Access to Capital for Your Small Business – GrowsmartBiz Podcast with John Backus

March 4th, 2010 :: Steven Fisher

In our second episode of the GrowSmartBiz Podcast we speak with John Backus, Founder and Managing Partner of New Atlantic Ventures ( He is a seasoned technology investor and entrepreneur with 25+ years of experience investing in and managing rapidly growing, high-technology companies.

His thoughts on Small Business’ challenge to getting access to capital

Here is the podcast:

John shared some of his thoughts on how small business’

  • Funding will be challenging through 2010 and should be
  • Understand Your Customer and What They Expect in Return from Buying and using your product
  • Deliver a product that solves real problems and saves money in the short term

He had some thoughts on those who have become entrepreneurs or thinking about becoming one:

  • Follow your dream
  • Don’t be afraid to start in a downturn. It is actually to your advantage
  • Be doing it, not just talking about it

Top 3 Messages that a Small Business should take away:

  1. Do Your Research before You Jump
  2. Get Very Close to Your Customer and Understand What They Want and are Willing to Pay for It
  3. Focus on generating revenue early

More About John

Prior to founding New Atlantic Ventures in 1998, John was a founding investor and the President and Chief Executive Officer of InteliData Technologies, a Fast 50 growth company in both 1997 & 1998.  John led InteliData’s predecessor, US Order, through a successful $65 million IPO in 1995. John currently manages a $225 million venture portfolio at New Atlantic Ventures.

He currently serves on the board of directors of MPowerPlayer, Ftrans, Koofers, Qliance & RemitPro. He is the past Chairman of the Wolf Trap Foundation Board of Directors, the past Chairman of the Northern Virginia Technology Council (NVTC) Board of Directors, the founding Chairman and current Board member of the NVTC TechPAC, and was appointed by former Virginia Governor Mark Warner to co-chair the Virginia Research and Technology Advisory Commission which he served on for 4 years.   John began his career at Bain & Co. and Bain Capital, where he was the first Bain & Co. management consultant to take a full time operating role (as CFO) in a portfolio company.

Tell Us How You are Doing

So how are you and your small business doing out there? What things have you learned on getting access to capital that you would share with your fellow entrepreneurs?

Getting Financing and the Five C's of Credit for Your Small Business

January 18th, 2010 :: Steven Fisher

Broken-Piggy-Bank-150x150Ever try and get a loan? It is not necessarily the most exciting experience but it sure can be nerve racking. It is when you really need credit you are least likely to get it. When people apply for a line of credit in their small business they might not be aware how different it is when trying to get it on a personal level. For example, many places will not lend to you unless you have been in business for at least two years. Many times you will to personally guarantee a loan so you need to have your personal credit in as good of shape as your business.

For individuals and business there are five key elements a borrower should have to obtain credit: character (integrity), capacity (sufficient cash flow to service the obligation), capital (net worth), collateral (assets to secure the debt), and conditions (of the borrower and the overall economy).

We found this great explanation from the Department of Commerce site. Let take a more in-depth look at these elements:

Capacity to repay is the most critical of the five factors, it is the primary source of repayment - cash. The prospective lender will want to know exactly how you intend to repay the loan. The lender will consider the cash flow from the business, the timing of the repayment, and the probability of successful repayment of the loan. Payment history on existing credit relationships - personal or commercial- is considered an indicator of future payment performance. Potential lenders also will want to know about other possible sources of repayment.

Capital is the money you personally have invested in the business and is an indication of how much you have at risk should the business fail. Interested lenders and investors will expect you to have contributed from your own assets and to have undertaken personal financial risk to establish the business before asking them to commit any funding.

Collateral or guarantees are additional forms of security you can provide the lender. Giving a lender collateral means that you pledge an asset you own, such as your home, to the lender with the agreement that it will be the repayment source in case you can’t repay the loan. A guarantee, on the other hand, is just that - someone else signs a guarantee document promising to repay the loan if you can’t. Some lenders may require such a guarantee in addition to collateral as security for a loan.

Conditions describe the intended purpose of the loan. Will the money be used for working capital, additional equipment or inventory? The lender will also consider local economic conditions and the overall climate, both within your industry and in other industries that could affect your business.

Character is the general impression you make on the prospective lender or investor. The lender will form a subjective opinion as to whether or not you are sufficiently trustworthy to repay the loan or generate a return on funds invested in your company. Your educational background and experience in business and in your industry will be considered. The quality of you references and the background and experience levels of your employees will also be reviewed.

What have been your experiences getting credit for your business?

We all have some interesting stories or things we learned getting our first business loan or line of credit. What is yours? Leave a comment.