America's Best Business Practices

Loans have to be repaid. With interest. We already have example of the effect “stimulated” borrowing has on our economy.
I’d be completely crazy to take out a loan when I have no idea what will happen to my clients, economy and my income tomorrow.

This law is garbage.

Udar, thanks for taking your time to comment. I agree that not a lot that has been done in the last two-three years has produced desired results. And the future is indeed uncertain. However, a loan may help some small businesses and I can’t imagine any small business upset about tax cuts. I think this will help many small businesses hang on but I am not sure it will speed any grow. I guess we just have to wait and see.

I did not read through whole bill, but it looks like it is designed to increase spending. Every tax cut that I had seen would only help with offsetting costs of new purchases, start-ups and hires.

As I already said, I’d be crazy to increase my spending at this time, even at a (small) discount.

What I need is simple tax cut – more money to keep, not incentives to spend (and very likely borrow) more.

It might help some, and it might actually hurt some. As with anything, it will be subject of some political spin in the future, and you are correct, we will have to wait and see.

I am anxious to see what is in the bill because we really do need some good news for a change. In my humble opinion, the economy will not really change until we are able to substantially lower unemployment. Here in Minnesota more than 50% of all jobs are created by small business. I believe things will turn around when small biz in America turns around. So I am happy to see our government finally beginning to pay attention to small business. I just hope they really do get it and this isn’t just lip service to save their jobs in the November election. Guess we will find out soon enough.

I think small business will be bountiful but not through borrowing. Micro business will likely be more fruitful. I see my neighbors – 1 spouse forced into retirement and the other laid off – starting their own craft business; when new home construction bottomed out a friend started his own handyman service; a hairdresser working from her home. I’ve heard countless stories of these microbusinesses. Cottage industry is alive and well…and thriving.

Libby, there are many statistics that back up your belief. Some people start their own business because they have no other options left. Others because they have always wanted to do it and in the past the rewards from employment were just too high to risk going into business. Now that the these rewards are gone, they have little risk. So why not now?

Micro or home-based business start-ups are on the rise and are far more prevalent than they have been in past decades. Some will never really get off the ground while others will excel beyond the owners wildest dream. Most will be somewhere in between.

Libby, thanks for taking the time to share your comments.

I’m at the point where I have nothing to loose and I have been wavering on the thought of starting my own business. It’s just the uncertainty of our countries economy that makes me wonder if now is the time. But then on the other hand maybe that is what makes it the right time?

Paul, I have invested the last few years in studying social media and have blogged a lot about it on this blog. The main thing I have learned as to why it is so effective is that the very first step is to build relationships with people rather than just trying to sell them your product/service. I do believe that now is an excellent time to start a business if you have a product/service that people are already using or really need and you have the wherewith all to build positive relationships (e.g. skills, online tools, knowledge, etc.).

There is much commerce transacted every day, even in this economy, and the person that has the best relationships with those transacting commerce can secure their fair share of it. However, you can’t hide your light under a bushel and expect customers to find you and force you to do business with them. And you can’t shove advertising and marketing messages in their face and expect them to do business with you. You need to build relationships and “woo” them (I blogged about this on this blog a couple of weeks ago).

I believe this holds true whether or not you are using social media. Although I must confess that I can’t imagine anyone starting a new business and not using social media. It takes time to build social communities around LinkedIn, Facebook, Twitter or a blog. And everyone even thinking of starting a business “someday” should be building these communities now. “The best time dig a well is not when you are thirsty.”

Thanks for sharing your thoughts Paul and I apologize if I got a little off track with my reply.

I’ve always found business success for most smaller companies to be a lot more dependant on attitude, strategy, action and leadership than trends in economic conditions.

Admittedly, I’ve been guilty of looking at the economy as a culprit when I’m in a blue funk or have gotten lazy – and my business(es) suffer.

Still, I’m seeing a lot of technology starts here with the right people at the helm prospering. I’m seeing creative retailers and even restaurants (an industry with the highest failure rate in the nation) thriving with activities that build customer loyalty and referrals and/or provide incentives for customers to come more often. As Libby has noted, I’ve seen some interesting cottage industries take off in the area (pet sitters, ‘home cooked’ meal preparation/delivery services, handymen that actually show up are just some of the little businesses around here thriving) that have more clients than they can handle.

If the economy is killing your business, maybe you should consider another venture? If you’re using the economy as an excuse for your failure, maybe a more creative approach to getting others to shout about your business is a better solution? Personally, I’m done putting the blame on anyone but me for my business challenges. I imagine I’ll see double-digit growth in short order as a result :-).

You go Nanette!! You make very good points. Thanks for dropping in and sharing your thoughts.

The comments on this blog are insightful. I want to second Mike’s reply to Nanette’s excellent response!!!

Aw, shucks. Thanks :-).

Interesting reading and good points from everyone on many different aspects of these issues.

My interest comes from the numerous conversations with other small business owners about the lack of financing and willingness of the banks to partner with small business. I understand the Small Business Jobs and Credit Act has now passed. I hope this will open opportunities for financing for small businesses that are looking for SBA loans. However, as I read reviews of the Act, I am not at all confident that will be the case. The Act does not change the lending standards, which have been tightened substantially for borrowers since the recession began. This act does not change the facts that banks require small business owners must, in most cases, give their personal guarantee for any business loan, provide proof of liquidity (which is usually reduced due to the recession and 401Ks becoming 201Ks), have good collateral and have a good FICO score to get a loan at a favorable interest rate. Banks could reduce their lending standards, but this remains to be seen if it will be done as they continue to want liquidity and collateral before they will approve a loan.

In this regard, I believe the jury is out on how much this Act will help small business and specifically, whether local community banks will take advantage of the Recovery Act and become a real partner for small businesses and entrepreneurs.

Mike, I would like to be optimistic because this Act has passed and I hope my concerns prove to not be valid in the days to come.

I loved your comments about our fall colors!

Elaine, I am still smiling about your comment of our 401Ks becoming 201Ks. I believe your points are very valid. Yet as a SCORE counselor, I have seen many SBA loans made (they have always required a personal guarantee) over the past year to 18 months. However, they have not been through the traditional sources… larger banks like Wells Fargo, US Bank, etc. They have been through the small community banks and credit unions.

Nonetheless, there is a lot more that the government could do to really assist small businesses if they ever realize that this is the key to the economy recovering. It is the start-ups and small businesses that create the jobs, not the big companies. Now the politicians are worried about their phony-baloney jobs with the election a few weeks away and try to throw everyone a bone in the hopes of being reelected. I can assure you that if they walked a mile in the shoes of the small business owner things would be fixed pronto!

Just one man’s opinion, but one I respect. :-)

Yes, it is hard to get financing these days (whether you’re a business or just trying to refinance a mortgage). No, government involvement isn’t going to help small businesses. When you go back and look at why SBA funding was introduced and zip forward to how it played out, banks didn’t change their criteria for lending. All they did was transfer the risk on the same notes they were making prior and add costs to the borrower by forcing an SBA guarantee. In fact, many stepped up the qualifications needed for directly funded notes. If the government had stayed out of the banking industry, I might be still be able to get a loan where character is a consideration. If you think more regulations and costs are good for business (the banks or the businesses they’re trying to serve), then, yes, get the government involved some more. Personally, I’m not seeing any good coming out of it.

Nanette, I do agree that private enterprise can do most things better than can the government. However, when you consider all of the money (our money) that the government has dolled out in the form of grants, government loans to large institutions, and general stimulus, you have to wonder where we would be today if more had been focused toward small business rather than where it went. Having said that, I do also believe the biggest relief government can give small businesses is to get out of our way. For example, bureaucrats see the new changes in 1099 reporting as an opportunity to recover additional taxes (probably true) but small business can’t imagine how they can possibly comply and if they can, at what cost? Don’t get me started!!

Right – and when legislators pat themselves on the back about all the money going out to small businesses (that they are ‘giving’ to ‘us’), it’s usually in the form of training that’s redundant and not needed (how many more inner city or rural programs do we need that walk businesses through an eight or twelve week course taught by someone who’s never owned a business to people looking to make a million working part time?). Asking for more (and this goes for lending legislation too) usually creates programs that are costly and ineffective and puts bigger burdens on the backs of small buisness owners. Careful what you wish for, Mike.

Don’t get me started :-). You say yeh to $30 billion in tax dollars being funneled through the federal goverment purported to be designed to help small businesses. I say ouch! Do we really need more of our hard-earned money being used for, on average, the goverment’s 70% on the dollar administration costs with a mere 30% going to programs?

Nanette, quit beating around the bush and tell us how you really feel. And I do believe that the government jobs created to administer the program are probably minuscule in comparison to the administration costs of which you reference. :-(

Actually, how I really feel is terrified. The amount of debt we’re amassing as a country (forget about the precarious nature of so much in this country owned by foriegn money) is a house of cards. I cringe when I see anyone with smarts (like, you, Mike) encouraging a mentality that promotes ‘getting a piece of the pie’ as though the government is some kind of benefactor. Small businesses are the best bet for this country’s survival, but that’s not going to happen through government interference (read program support legislation – it always comes with strings, and costs, and implementation that is so contrary to what is really needed). I don’t know if we’ll be able to pull out of this one, but I am convinced that the only way it’s going to happen is by the private sector discouraging government involvement. Speaking from both personal experience and client stories, putting the feds in the lending mix has only hurt small businesses. Geez, I told you not to get me started :-)

Next time I will listen to you, Nanette! You make some great points but you may have misclassified me (one with smarts). Thanks for sharing your thoughts!

Let’s face it Government is broken!

Mike:
As usual, some stimulating conversation going on here….no pun intended. No matter how many ‘feel good’ small business ‘gifts’ our government points our way, until consumers are ready and able to spend again, there is little need to borrow for anything beyond just staying afloat in this economy.

Like Nanette, most Americans are just plain terrified at the uncertainty facing them, their families and their financial future. What they do know — that their health care costs are going to increase significantly, if they haven’t already lost their job, it’s a distinct possibility, their financial future is questionable, etc. I know of no one at any level who is out freely spending money and feeling optimistic. Then, don’t forget they may be facing the largest tax increase in our history soon…

But, hey, our politicians tell us everything is OK, so we should be brimming with optimism and spending our money fast and furiously. And, I am encouraged that Elaine’s 401K is back up to 201K from where they were as 104Ks a couple of years ago. :0)

Terri, thanks for stopping by, reading my post and taking time to share your thoughts with us.

My personal belief is that the one thing that will do the most to put our economy back on track is “jobs”. When unemployment declines in a meaningful amount, I think consumer confidence will return. However, consider what we have gone through this time around, I am not confident it will ever return to the way it was.

I missed the “great depression”, but my grandparents and to some degree my parents, were never the same. My generation (baby boomers) has been spenders – like drunken sailors. And so have the generations that follow. Speaking for myself, I will never be the same again. The rest of my life I will be very thrifty and stash as much as I can (what we should have been doing all along). I see the same thing from my friends and acquaintances. So I am not convinced that we will return to what it was three to five years ago. And even if we do, my consumption will be far more conservative.

I’d be interested in hearing if this is true for my readers as well. Perhaps, it is just me. And possibly the younger generations will make up for the lack of consumption of the older generations but I doubt it. When you look at the numbers, they are less educated (at least here in Minnesota where I have really studied the numbers) and less skilled at the jobs coming our way in the future. So, I wonder how you, the reader see our future?

Mike:
Your assessment is right on… people are paying down debt and saving at a much higher rate than we’ve seen in our (Boomer) lifetime. Remember those $13 ‘gifts’ our president has to remind us of? Obviously they didn’t do much to stir the economy.

A number of surveys show that consumers are not going to be the same coming out of this recession. Spending habits are changing and are likely to remain that way for the future. They are now being forced to shop by ‘need’ more than ‘want’ due to the uncertainty of what lies ahead for them on the financial front.

As small business owners, we are faced with the ‘chicken or the egg’ dilemma… sure, we’d like to hire people and create jobs, but until the consumer is comfortable spending for our products or services again, why would we add people to our payroll? A tax break isn’t going to do make us rush out and start hiring, that’s for sure.

The upside is that we are learning to do business in new ways, being more efficient and creative in staying viable to consumers.

Millenials have certainly been spenders and may continue to do so. Overall, they will be the most educated generation yet. But, they are coming out of colleges buried in debt that may well hamper how much expendible income they have. With their penchant for wanting customization — just for me —items and services, those who can provide that bent will get their business. The uncertainty of being able to find a job — one that pays well — will definitely affect their spending habits in years to come.

Having just been accepted into Minnesota’s Small Business Development Program (Project Gate II), I am hoping that I may be able to get a loan through the State Farm Service agency. Although I have been selling some of my farm related products (lambs, chickens, eggs, wool, yarn etc.) for some time, this will be a whole new ballgame ~ trying to earn a LIVING doing so! My intention is to start small ~ out of my home, but I do hope to eventually expand to having a shop that is separate from my residence.

I keep hearing that there are all sorts of Government loans or grants specifically aimed at “mature” women, but have yet to find any of them.

I’m hoping (and WORKING) for a good holiday season of sales for my all natural, environmentally safe, animal friendly homemade soaps and wool & wool products. I have an open house and Fiber Festival scheduled at my home on October 30 and even got free publicity by appearing on my local television station’s Noon News program ~ WITH a SHEEP! :-)

Wish me luck! (better yet ~ come to my Open House!)

Nancy

Nancy,

Good luck getting your loan and with your open house! For what it’s worth, it appears as if the market for environmentally safe products is growing, especially if the price is competitive with other brands.

You may be interested in a recent article we published titled, “10 Tips for Small Biz Loans”. It provides some helpful advice on getting a small biz lean. Here is the link:

http://bestbizpractices.org/2010/10/18/10-tips-for-small-biz-loans/