Michigan Makes Venture Matching Funds Available

The Michigan Strategic Fund (MSF), through the Pure Michigan Venture Match Fund (PMVM Fund), is soliciting applications from for-profit Michigan-based companies that have received an equity investment commitment from a qualified venture fund for commercialization and growth purposes to provide a match of the investment as follows:

  • Qualified venture led investments from $700,000 to $1,000,000 will be matched by a 50% ($350,000 to $500,000) investment from the PMVM Fund.
  • Qualified venture led investments from $1,000,000.01 to $3,000,000 will be matched by a $500,000 investment from the PMVM Fund.

Applications are being accepted now at: http://www.michiganadvantage.org/Pure-Michigan-Venture-Match-Fund/

To see a list of incentives/resources for companies that are located (or want to locate) in Oakland County, Michigan visit: www.globaloakland.com

SBA Launches Temporary Program for Commercial Real Estate Refinancing

Agency will begin accepting refinancing applications Feb. 28 for small businesses facing maturing mortgages, balloon payments

WASHINGTON, D.C. – Small businesses facing maturity of commercial mortgages or balloon payments before Dec. 31, 2012, may be able to refinance their mortgage debt with a 504 loan from the U.S. Small Business Administration under a new, temporary program announced today. 

The new refinancing loan is structured like SBA’s traditional 504, with borrowers committing at least 10 percent equity and working with third-party lending institutions and SBA-approved Certified Development Companies in the standard 50 percent/40 percent split. A key feature of the new program is that it does not require an expansion of the business in order to qualify. 

SBA will begin accepting refinancing applications on Feb. 28. The program, authorized under the Small Business Jobs Act, will be in effect through Sept. 27, 2012.

“The economic downturn of recent years and the declining value of real estate have had a significant, negative impact on many small businesses with mortgages maturing within the next few years,” said SBA Administrator Karen Mills. “As a result, even small businesses that are performing well and making their payments on time could face foreclosure because of the difficulties they face in refinancing and restructuring their mortgage debt. This temporary program is another tool SBA can provide to help these small businesses remain viable and protect jobs.”

The SBA initially will open the program to businesses with immediate need due to impending balloon payments before Dec. 31, 2012.  SBA will revisit the program later and may open it to businesses with balloon payments due after that date or those that can demonstrate strong need in other ways. 

“We are making this initial restriction to make sure our funding goes first to small businesses with the most need,” said Steve Smits, SBA Associate Administrator of Capital Access.

Borrowers will be able to refinance up to 90 percent of the current appraised property value or 100 percent of the outstanding mortgage, whichever is lower, plus eligible refinancing costs.  Loan proceeds may not be used for other business expenses. Existing 504 projects and government-guaranteed loans are not eligible to be refinanced.

Congress authorized SBA to approve up to $15 billion in loans under this program ($7.5 billion in both fiscal 2011 and 2012).  Together with the first mortgage, this temporary program will provide up to $33.8 billion of total project financing.  Additional fees charged to the borrower will cover the cost of this refinancing program and as a result no subsidy will be needed.  The program is expected to benefit as many as 20,000 businesses.

SBA’s traditional 504 loan program is a long-term financing tool, designed to encourage economic development within a community. A 504 loan provides small businesses with long-term, fixed-rate financing to acquire major fixed assets for expansion or modernization.

Typically, a 504 project includes three elements: a loan (or first mortgage) secured with a senior lien from a private-sector lender covering up to 50 percent of the project cost, a second mortgage secured with a junior lien from an SBA Certified Development Company (backed by a 100 percent SBA-guaranteed debenture) covering up to 40 percent of the cost, and a contribution of at least 10 percent equity from the small business borrower.

SBA Loan Guarantees Revert to Pre-Stimulus Levels

The time has come to say goodbye to the 90 percent loan guarantee and reduced fees that supposedly sparked a rebound in Small Business Administration lending; though many reports have indicated small business lending has practically evaporated in spite of the stimulus package enhancements.

In a few days, the SBA will run out of the $375 million in economic stimulus funds that enabled the agency to offer these enhancements. As a result, beginning Monday, Nov. 23, borrowers will have to make a choice:  They can be put on a waiting list to receive these breaks as stimulus funds become available, or they can apply for a regular SBA loan with higher fees and a lower government guarantee for the lender.

The SBA expects additional funds to become available to make loans under the stimulus provisions since not everyone who is approved for a loan will go through with it. However, loans on the stimulus waiting list run the risk of never getting funded.

As recently as Nov. 18, SBA officials said they expected to be able to make loans under the stimulus provisions into December. But loan applications surged this past week as borrowers and lenders tried to get their applications in before the stimulus money ran out.

SBA lenders, small-business groups and the Obama administration have urged Congress to find money to extend the stimulus enhancements. But Congress has to-date failed to do so.

As a result, government guarantees on 7(a) loans will revert back to the standard 75 percent for loans of more than $150,000, and 85 percent for loans of $150,000 or less. Fees on 7(a) loans and 504 loans, which are used to finance real estate, will revert to their normal levels as well.

Members of the Small Business Community Are Invited to Participate in an Upcoming Live Webchat with US Small Business Administration Leader, Karen Mills

Members of the small business community are invited to participate in an upcoming live webchat with US Small Business Administration leader Karen Mills. Administrator Mills will be answering your questions via White House Live and the WH Facebook app on Monday, November 16 at 3:15pm. Read below for more information about the event or post your questions for Administrator Mills in the comments.

———————————————————————————————–

From: Karen Mills

Subject: Small Business Financing Forum

Friend:

A few weeks ago, President Obama asked the U.S. Small Business Administration and Department of Treasury to convene a forum to discuss how we can best get credit flowing to small businesses to help them make it through this recessions, and put them in a position to grow and create jobs. We’re hosting the forum next week, and I want to make sure that everyone with a stake in our recovery has their voice heard. Which is why I’ll be taking your questions live in advance of the event this Monday, November 16th, at 3:15pm EST in a live video discussion through WhiteHouse.gov/live or through the White House’s live-chat application on Facebook. And whether you can make the chat or not, I’d like to invite you to submit a question ahead of time by emailing us in advance. We’ll post the full video of the chat afterwards. I’ll be able to share the concerns of small business owners I hear in the chat with the President and Secretary Geithner, at the Small Business Financing Forum and in our conversations and meetings afterwards. The President called for this forum because he knows that small businesses are the backbone of our economy, and that they’re driving our recovery. We want to open the doors and bring everyone who’s involved in this historic effort to the table — from Administration officials and Congressional leaders to lenders and small business owners like yourself – so we’ll also be streaming the conference at live WhiteHouse.gov/blog, Wednesday, November 18th, starting at 9am EST.

Warm regards,

Karen Mills, Administrator U.S. Small Business Administration

Importance of Budgeting and Financial Management for Small Business

In this time of economic hardship, small businesses and micro-businesses are among those being hardest hit – particularly with their inability to access lines of credit to help maintain effective cash-flow.  Therefore, it is imperative that these business owners take the steps necessary to budget and effectively manage the funds they do have available.

However, it is a common occurrence that small businesses, particularly micro-businesses having 10 employees or less, tend to shy away from developing an operating budget.  Frequently the businesses are so small or so new that the owners are convinced they have no way of projecting their revenue and therefore have nothing to budget.  This is a serious mistake! 

Budget graphicIn spite of a ‘supposed’ inability to project revenue, the business is still incurring expenses, therefore it needs to develop a basis from which it can discern business trends and identify opportunities which will enable you to make decisions about how you are running the company.  A budget is one of the most important tools to help you do this.

To help you understand the value of developing a budget – and managing that budget – for your small business we offer the article below which recently appeared on Entrepreneur.com.

___________________________________________________________

Even startups need to forecast and plan–especially now.

By Asheesh Advani   |   Entrepreneur Magazine – July 2009

Most entrepreneurs detest budgeting. Working on something as old-fashioned as an annual budget confines the imagination and limits flexibility. Still, budgets are more important than ever in today’s market environment.

I’ve heard all the excuses for avoiding budgeting. “Startup cash flow is too unpredictable.” “One big customer order could change the course of the business, so what’s the point in setting a budget?” “I can’t predict the capital market, so how can I forecast how much cash I’ll raise and be able to spend this year?”

In my experience, these excuses mask the fact that right-brain creative entrepreneurs just don’t like left-brain financial planning. So, if you’re running your startup solo, you should force yourself to develop a budget to hold yourself accountable. Here are three reasons why:

  1. It will help you to become a better manager. When done properly, budgets can be extraordinarily useful in testing and refining your ability to forecast and manage. While boards like to use budgets to hold managers accountable, the startup CEO can use budgeting to test whether the drivers of his business hold true. One straightforward way to do this is to set an annual budget with a set of key assumptions (e.g., number of new clients; product price), then reforecast the year every quarter by updating those assumptions with the latest results.
  2. It will help you raise money. When I raised money from angel investors or institutional investors, I learned firsthand the importance of budgeting. Investment terms often specify that management must provide the investors or the board with an annual budget. Developing a company culture that tracks results to budget will help you meet and exceed the expectations of your investors.
  3.  It will help you avoid running out of money. The No. 1 risk to any startup is running out of money. If you’re like most entrepreneurs, you’ll fluctuate between a conservative reality and an aggressive dream state, which keeps you motivated and helps you inspire others. When you build your budget, start with expenses, not revenue; they’re much easier to forecast. This will keep you grounded and reduce your risk of running out of money.

Asheesh Advani is president of Virgin Money USA, author of Investors in Your Backyard and founder of CircleLending, which pioneered the business of managing person-to-person loans and mortgages and was acquired by the Virgin Group.

Recovery Act Changes To SBIC Program Mean Increased Funding Available For Small Businesses

sba logoWASHINGTON – Effective today, small businesses that would otherwise have difficulty securing private equity or venture capital may find funding easier to get as a result of changes made as part of the American Recovery and Reinvestment Act to the U.S. Small Business Administration’s Small Business Investment Company program.

“The Recovery Act expands SBA’s venture capital program to increase the pool of investment funding available to the Small Business Investment Companies licensed by SBA,” said SBA Administrator Karen G. Mills. “We believe those companies will be better equipped by these changes to help sustain and grow small businesses for their next important growth steps.”

Read about the specific changes at http://snipr.com/mireo .

Changes to SBA 504 Loan Program Will Allow Businesses To Refinance Existing Debt, Expand, Create New Jobs

WASHINGTON – Small businesses seeking to expand will be able to refinance existing loans used to purchase real estate and other fixed assets as a result of permanent changes to the U.S. Small Business Administration’s 504 Certified Development Company loan program. The changes were authorized in the American Recovery and Reinvestment Act of 2009.

 

The permanent changes will allow small businesses to restructure eligible debt to help improve their cash flow which, in turn, will enhance their viability and support growth and job creation. The 504 loan program can be used to purchase business real estate or fixed assets, such as heavy equipment or machinery, and expand current development projects.  Read the complete news release from the SBA HERE.

Small Businesses Can Apply for ARC Loans Starting Today

***********************************************

U.S. Small Business Administration

– News Release –

***********************************************

Release Date: June  15, 2009   

WASHINGTON – Starting today, June 15, SBA will begin accepting loans for a temporary new program called America’s Recovery Capital.  “ARC” loans of up to $35,000 are designed to provide a “bridge” for viable small businesses with immediate financial hardship – to keep their doors open until they get back on track.

“These ARC loans are another tool in the SBA toolkit which will provide critical support to small businesses struggling to make it through these tough economic times,” said Administrator Karen G. Mills. 

ARC loans are deferred-payment loans of up to $35,000, available to established, viable, for-profit small businesses that need short-term help to make their principal and interest payments on existing and qualifying business debt. ARC loans are 100 percent guaranteed by the SBA and have no SBA fees associated with them.

ARC loans will be disbursed over a period of up to six months and will provide funds to be used for payments of principal and interest for existing, qualifying small business debt including mortgages, term and revolving lines of credit, capital leases, credit card obligations and notes payable to vendors, suppliers and utilities. SBA will pay the interest on ARC loans to the lenders at the variable rate of Prime plus two percent.  

Repayment will not begin until 12 months after the final disbursement.  After the 12-month deferral period, borrowers will pay back the loan principal over a period of five years.

ARC loans will be made by commercial lenders, not SBA directly.  For more information on ARC loans, visit www.sba.gov

For more information about all of the SBA’s programs for small businesses, call the SBA Answer Desk at 1-800 U ASK SBA or TDD 704-344-6640, or visit the SBA’s Web site at http://www.sba.gov.

So, Can You Get a Loan – Or Not?

As the nation’s economic difficulties continue to drag on, every so often you start to hear rumors that things are ‘picking up’ and that lenders are opening up the pipeline for small business loans.  Since many of the emails I get from small business owners are related to requests for setting them up with a lender (which, by the way, is NOT a direct service that our firm provides), I thought it would be helpful to put some factual information out for review.

In dealing with my professional contacts and conducting my research for this article, several things have become evident to me about the small business lending situation; they are as follows:

  1. the larger banking chains in the nation were previously the primary source of small business loans – including the high-risk loans.  Those same banks are the ones that over-extended  due to the lending practices they previously had in place, and have been forced to curtail lending.
  2. smaller community banks have always taken a more personalized approach in lending to small businesses including comprehensive reviews of appropriate financial ratios to evaluate the business; a comprehensive review of the person/business requesting the loan; and, insuring they have a strong understanding of the business, its industry, and the owner’s plan to grow the business and thereby insure repayment.  Their loan standards have always been more stringent, but their loan default rate is also signficantly less.
  3. given the low-risk approach taken by smaller banks, today’s economic challenges really haven’t caused them to change much about their lending practices – they’ve always been conservative and are continuing to be so; however, they are also lending money!
  4. some people/businesses are just not credit worthy.  Just as many people bought houses much bigger than they could actually afford  because they were able to obtain 0% down, interest-payment only loans; many businesses also previously received loans they should not have because their business financials did not really justify it.

So to answer the question directly, yes, credit-worthy small businesses with solid financials and a solid plan can get loans.  However, those loans will likely come from sources you would not have previously been aware of – or considered, had you been aware of them.  An example is a lender our firm is currently establishing a relationship with in order that we might provide them with referrals to our small business clients in need of loans; previously these same clients that would now be on our referral list would not have been interested in obtaining a loan from this firm because it is not a U.S. based firm.  However, the firm has an excellent loan program and lots of money available to lend – IF you can meet the criteria to receive the loan.  Another example are the small community banks in your hometowns – again, they have money to lend and are willing to lend it IF you can meet the criteria.

To help you understand what’s necessary to qualify you to receive that loan – or alternately, outside investment (both will look at similar criteria, at least at the early stages) – please review this article from the New York Times and this segment of our BlogTalkRadio show, Strategic Growth Concepts for Small Business, entitled “What are Investors Looking for in a Business Plan and Where Do I Find Them“.  In this segment our expert panelists discuss the criteria you need to meet to obtain both investors and loans.

So to summarize, loans are available IF you qualify for them and IF you are prepared with an effective plan to convince those in charge that your business has what it takes to operate effectively for the long-term and will have the capacity to repay the loan in-full.  You will be required to provide 1) a comprehensive business plan AND 2) you will need to show a strong financial history AND 3) you must be credit-worthy.  Our firm can assist you with #1, but you will need to be responsible for #2 and #3.  Please contact us if you need assistance with your business plan.

Lastly, if you know of a lender that is working effectively with small businesses and would like to make their information available to our readers, please list their information in the COMMENTS section along with your name, company name and email.

___________________________________________________________

The author, Linda Daichendt, is Founder, CEO and Managing Consultant at Strategic Growth Concepts, a consulting and training firm specializing in start-up, small and mid-sized businesses. She is a recognized small business expert with 20+ years experience in providing Marketing, Operations, HR, and Strategic planning services to start-up, small and mid-sized businesses. Linda can be contacted at linda@strategicgrowthconcepts.com and the company website can be viewed at www.strategicgrowthconcepts.com.

Follow

Get every new post delivered to your Inbox.