JOBS Act May Help With Microbusiness Capital Woes |  |
- JOBS Act May Help With Microbusiness Capital Woes
- What Type of Financing Is Right For Your Business?
- How to Embrace the Sharing Economy
- How to Grow in Your Small Business
| JOBS Act May Help With Microbusiness Capital Woes Posted: 05 Apr 2012 11:30 AM PDT It’s possible that Congress might just have gotten one right. When does that ever happen? Both chambers of Congress passed the Jumpstart Our Business Startups (JOBS) Act (H.R. 3606), to the accompaniment of much bally-hoo. The bill, which has been touted as a much-needed kick in the pants for the economy, is a rare bi-partisan animal in hyper-partisan election year Washington. That’s something all by itself.
The JOBS Act essentially loosens or simply removes a slew of securities regulations that were perceived as getting in the way of new investment in “emerging growth companies.” So, as long as those companies are raising less than $1 million, they will find themselves facing far fewer paperwork and other regulatory hoops to jump through once this bill takes effect. Definitions of “small business” are always interesting but here’s a factoid for you when you hear people praising this bill as a bit of targeted small business legislation: you are an emerging growth company if your gross revenues are under $1 billion in their most recently completed fiscal year. Somehow, people in Washington always make it sound like earning $1 billion in gross revenues is a simple thing. Anybody can do it, right? This was beginning to look like yet another instance of microbusinesses coming away from another foray into small business policy empty-handed until Senator Jeff Merkley (D-OR) introduced his crowdfunding amendment into the mix. The amendment was co-sponsored by fellow Democrats Michael Bennet (CO) and Senate Small Business Committee Chairwoman Mary Landrieu (LA) — and, to get that bi-partisan label in there, Republican Scott Brown (MA). What the amendment does is to provide an exemption for crowdfunding through web sites like Kickstarter, WeFunder and the U.K.’s CrowdCube. The legislation also provides that the amount that any individual is permitted to invest is reasonably small, so that nobody gets cleaned out by any of these investments. The intermediaries have to register with the Securities and Exchange Commission, and there will be some paperwork requirements of the small businesses, too. No administrative free rides here but, compared with the degree to which buisness owners are required to twist themselves into pretzels for even a small private offering, crowdfunding looks to be much closer to painless. Of course, even with the bill sitting on the President’s desk, the debate rages on. We just emerged from a financial meltdown caused by deregulation and now we’re deregulating again? I guess this is where we get to wait for the sky to collapse again. First, it was the Savings & Loan fiasco in the 1980s and then the housing market bubble that led to the Great Recession, and now this. More deregulation will promote fraud! People will lose money! The government must do a better job of protecting the public from its own stupidity! (Well, no, nobody actually said that but that is what they meant.) Here’s The Problem The biggest hit taken in the economy as a result of the so-called Great Recession was in overall levels of investment. Consumer spending is back up to more than 70% of GDP, government spending is up a little (much less than you’d think to listen to the budget hawks in Congress) and the trade deficit is more or less back to normal. But investment fell by a whopping 25% and it is only not almost-but-not-quite back to its pre-recession levels. At the same time, thanks to its multiplier effects, it’s investment that will make this long, slow, painful recovery much shorter, much faster and much less painful. The JOBS Act, including this crowdfunding amendment, is Congress’ way of pumping some backbone back into timid, not to say still-terrified, investors. It’s the crowdfunding piece that could conceivably help microbusinesses overcome their perpetual problem of lack of access to capital. On the other hand, if the real-life application of the crowdfunding provision turns out to be too paperwork-heavy, microbusiness owners won’t use it. A lot will depend on what sorts of rules the SEC writes to help it implement the JOBS Act. Stay tuned. Jobs Act Photo via Shutterstock From Small Business Trends |
| What Type of Financing Is Right For Your Business? Posted: 05 Apr 2012 08:30 AM PDT When the 2008 financial crisis hit, it spawned a widespread freeze in lending. Many small businesses who once were able to get financing suddenly found themselves cut off from credit. We've seen the impact over the past years, as many small businesses have cut back on hiring, been forced to lay off employees, or even shut their doors altogether.
The good news is that small business lending is at a 4-year high. According to a report from Thomson Reuters, lending to small businesses increased 18% between November 2010 and November 2011. And the good news doesn't end there. Legislation currently moving through Congress is designed to make it easier for small businesses and startups to raise capital and enable small-scale investors to more easily put their money into promising new ventures. The JOBS Act, whose acronym stands for Jump-start Our Business Start-ups, stands to be one of the few bipartisan bills to pass Congress this year. The JOBS Act is aimed at companies with revenue under one billion dollars. If you're a local merchant or solo business, you know there's a big difference between your capital needs and those of a multi-million dollar company. When it comes to securing money to start, expand, or just continue your business, you'll need to choose wisely. Some options will be too complex, others too risky. Some will provide too much, and others not enough. Here's a snapshot of the various financing options that might fit your needs: Debt Financing: Institutional Lending You can apply to many sources for debt financing, including banks, credit unions, savings and loans, commercial finance companies, and the U.S. Small Business Administration (SBA). State and local governments also offer programs to assist in the growth of small businesses. Banks are the primary funding source for small business owners, and can provide you with a line of credit that comes with a repayment schedule and an interest rate. During the application process, a bank will look closely at your company's cash flow, collateral, and the liquidity of your assets. It also helps if you've already established a relationship with the bank, including personal banking, before asking for the loan. Debt financing is attractive to small business owners, since it can be easier to obtain than equity financing and you don't have to give up any equity in your company. On the downside, you'll need to pay back your loan with interest, and may need to provide personal collateral (such as your home) to guarantee the business loan. Debt Financing: Friends & Family Many entrepreneurs borrow debt financing from family members and friends. This funding typically comes in small amounts without a lot of hassle or paperwork. Be advised that while this approach lets you avoid all the legal red tape, it's not without its own personal strings. Any business has its risks and things can get ugly when you lose a friend's money or can't pay them back. Grants If you're involved in technology, you can consider applying for competitive grants from the U.S. government's Small Business Innovation Research (SBIR) program. This program provides more than $2 billion annually from 11 Federal agencies (such as the NIH and USDA) to small businesses to spur R&D and high-tech innovation. SBIRs are highly competitive. In addition, there are numerous state, regional, and minority grant opportunities available. Grants are free money that should not be overlooked. Equity Financing While debt funding is the most common form of financing for small businesses, many companies are financed each year by private or institutional investors in exchange for an equity ownership stake in the company. There are three common types of equity financing:
Should VC funding be an option for you, be aware that different venture capitalists take different approaches to managing their investments. Most prefer to maintain a passive influence, but will react strongly if the business does not perform as expected and may insist on changes in management or strategy. This need to relinquish some of the decision-making and some of the potential for profits are the main disadvantages of equity financing. Final Words Remember that the impression you make on the financiers you approach is all-important. If you already have a good relationship with your banker, that might be your best option. If you will be approaching a new source for the first time, be sure that you make a professional impression. Although your financial application is the bottom line, making a positive impression can help tip the scales in your favor. More business owners are seeing opportunities to invest in their business's growth. Since the lack of available small business financing was a leading cause of many businesses folding during the worst of the recession, perhaps the recent lending data is a good sign that the economy is getting better for small businesses.
From Small Business Trends |
| How to Embrace the Sharing Economy Posted: 05 Apr 2012 05:30 AM PDT Most businesses worry about selling things. But perhaps they should think more about sharing them.
There's a whole crowd (or Uniiverse, as it may be) of consumers now actively participating in the so-called "sharing economy." The idea is that people are increasingly interested in borrowing – or renting – anything from power tools to spare bedrooms to baby clothes to bicycles, so they don't have to buy things they only need occasionally. To see what I mean, check out sites like GetAround, Airbnb, SnapGoods, LooseCubes and SkillShare. Well known businesses like Netflix were also built on the idea of sharing. But it's not just about things: The sharing economy is also about sharing ideas and information. Social media and the connectivity it begets has made sharing cool and helped spawn interest in group activities like cash mobs. Sustainable business advocates encourage the "sharing" trend because it cuts down on needless consumerism by promoting "collaborative consumption." Time magazine last year called the sharing economy one of "10 Ideas That Will Change the World." Of course, this movement toward more borrowing and less buying could be fodder for entrepreneurs looking for the next business concept. But it's also presents opportunities for established businesses. Here are some tips for embracing the sharing economy at your business:
Have you tried out the sharing economy, either at your business or personally? If so, what did you think? Share Photo via Shutterstock From Small Business Trends |
| How to Grow in Your Small Business Posted: 05 Apr 2012 02:30 AM PDT You need the right approach to grow successfully in your small business today. Fortunately, there are plenty of people who have traveled this way before and can give you advice about your journey. We’ve gathered some of the more important points below and hope they help you make progress in your company. Career Growth & BootstrappingMoving up in a small business. If you think big corporations are the only place with room to grow, think again. Small businesses can also offer a great opportunity to advance with the right set of skills. Do you work in a small business with advancement opportunities? Glassdoor Blog Bootstrapping mistakes that can crush you. If you’re bootstrapping your startup, you’re in good company. Launching a business without outside funding has advantages, but watch out for missteps that could finish you. 21Times Marketing & TeamworkGrowing through segmentation. Growing your market doesn’t simply entail finding more and more customers. It might mean finding out the categories into which your existing customers already fit. M4B Marketing The science of teamwork. If it seems challenging putting together your small business team, that’s because it is. Where do you start when creating a team for your small business or startup? How do you know you’re on the right track? Harvard Business Review Outside the Comfort ZoneLessons in growth from MTV. Stop preaching to the choir. If you really want to increase the number of people in your network or community or want to reach potential customers who don’t currently come to you, focus on the people outside your group first. Fast Company Stop making excuses! If you really want to get ahead, stop taking the safe and easy path. In your business or in your life, there’s something to be said for the riskier road. Excuses may be your way of trying to pick the safest choice. But is that always the right one? Respectfully Disobedient Customer Service & Social MediaServe your way to success. When seeking to expand your market, don’t forget the obvious. Word of mouth campaigns can start with a few enthusiastic customers and spread like wildfire. Don’t underestimate the value of some great customer service to get things going. Smart Business Guide Getting social for success. It’s no secret that social media has been important for small businesses in recent years. Prepare for this to be even more true moving forward. Here are some of the reasons why. WebMaster-Success Tech & TenacityTech/IT critical for growth. Two small business owners discover the importance of tech and IT support in general, even in a business that doesn’t center on technology. It’s a cautionary tale about the need for tech audits as your business grows. You’re the Boss Growing a kick-ass business. Entrepreneur Marie Forleo talks about growing a small business into a brand and about the things every small business owner must be ready to do along the way. BizSugar.com From Small Business Trends |
| You are subscribed to email updates from Small Business News, Tips, Advice - Small Business Trends To stop receiving these emails, you may unsubscribe now. | Email delivery powered by Google |
| Google Inc., 20 West Kinzie, Chicago IL USA 60610 | |
No comments:
Post a Comment