Economic Perspectives with Hopeton Hay on KAZI 88.7 FM in Austin, TX

Archive for the ‘Small Business Loans’ Category

PODCAST: Listen to Interview About Obtaining Small Business Loans at BCL of Texas

Posted by Hopeton on August 18, 2012

Rosa Rios-Valdez

Small business lending was the topic of discussion on the August 13 Monday Morning Edition of Economic Perspectives. Rosa Rios-Valdez talked about how to get a small business loan from the community development financial institution she founded, BCL of Texas.  To listen to the interview with her click here: Rosa Rios Valdez Interview.

BCL of Texas (formally CEN-TEX CDC) was formed in 1990 at the invitation of the SBA San Antonio District office to make commercial real estate loans for established central Texas businesses. Our first loan was to Juan Portillo, who purchased an office building for his business, Tramex Travel. Sixteen years later Tramex Travel continues to grow. To meet customer requests, BCL has expanded its products and services. BCL became a statewide organization in 2004 and filed our dba (doing business as) Business & Community Lenders of Texas.

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BCL of Texas Presents 30 Seconds to Success for Small Business Owners

Posted by Hopeton on April 3, 2012

Bite-Sized Financial Education for Small Business Owners Seeking Capital

Looking for money to help your business grow?  Lenders across the board will tell you to be familiar with the 5 C’s of funding: costs, collateral, credit, capital and capacity.

Costs                                            

Costs refer to the “project costs,” or the detailed expenses related to growing your business.  This can refer to working capital needs for rent, staffing & benefits, utility expenses, shipping costs, property taxes, office supplies, and any other costs related to the day-to-day operations of your business.  Working capital can also be used to cover current costs while waiting for payment from your customers for work already completed.  Another type of project cost is furniture, fixtures & equipment, which includes any machinery needed to create or package your product, or any other movable items used in your business location.  Project costs also might include the purchase of real estate, either in the purchase of an existing building or land, or construction costs related to building the business location of your dreams.

Before approaching your bank or community lender, create your business wish list and consider in detail what the funding will allow you to accomplish.  Are you looking to hire additional help?  If so, what will you pay them?  Will you offer benefits?  Don’t forget to account for employment taxes.  Consider safety training, uniforms, and other ancillary costs as well.

Lenders will expect you to have done your research.  Their consideration of your preparedness goes a long way toward approval, and allows them to be more flexible while working with you.

Collateral

Collateral refers to the security pledged by the borrower as insurance against a loss for the lender.  This can take the form of equity, property, cash reserves, equipment, or any other item of value for which the lender can claim ownership in the event of a loan default.  Often, as in the case of real estate lending, the collateral is created with the loan funds.

When seeking a loan, you’ll want to be prepared to match dollar for dollar your collateral, or business asset value, to the amount of the loan request.  The collateral accepted by a lender can vary widely, but often a lender will require enough to cover the amount of the loan and a little extra.  In the event that collateral is not available, personal guarantees may be acceptable.  There are even certain SBA-programs that will provide a government guarantee for a portion of the loan, without the need for the borrower to cover that amount with collateral.

Although finding collateral can often be an obstacle for a struggling small business owner, lenders will rarely take the on the risk of losing money if the borrower defaults.  It is important to show that you are willing to take on the risk of your business by providing a hedge against a loss.  Be wary of private lenders that require little to no collateral, as they will often take advantage with sky-high interest rates and hidden fees.  Coming up short on business collateral?  Look at pledging personal assets, such as a vehicle, investment funds, or other property.

Credit

Credit is a buzzword these days, as many home and business owners faced the music of ruined credit scores after the recession.  Those with little to no credit experienced difficulty building it from scratch when lenders tightened up their standards and raised the bar, excluding borrowers with low to moderate credit scores from consideration.

Building the credit of a business is a long-term priority, and something to consider from the earliest stages.  For most small business owners, personal credit scores of all borrowers are what most lenders examine when considering a business capital loan.  Missed or late payments, past defaults, bankruptcies and maxed out credit cards are all warning signs that show up on a credit report and can lower the overall score of the applicant.  Here’s a tip to boost your score:  Pay all revolving debts, such as credit cards, and installation debts, such as loans, on time each month.  This accounts for 35% of your credit score.

Every individual is entitled to a free credit report each year, and your personal credit report should be pulled and examined on an annual basis for accuracy.  Mistakes can sometimes be found and corrected through the credit bureaus before they hurt your credit score.  Poor credit can be repaired, and there are many non-profits that offer services to assist this pursuit.

Capital

Capital is the amount of money your business has accumulated as a result of the production of goods or services.  It is this need for capital reserves that prevents many start-ups from finding the funding they need to grow, as they have not yet had time to build up profits.

Just as you need a down payment for a house, a small business loan will also require a down payment, called a capital or equity injection.  Planning on growing your business?  Here’s a tip:  Start saving your money today.  Be prepared for your small business to put up 15-20% of the requested loan amount.

Lenders and investors will expect you to have taken personal risk (i.e. used personal funds) to establish the business before asking them to commit to funding.  This is because when you have a significant personal investment in the business, you are more likely to do everything in your power to make the business successful.

Capacity

Capacity refers to the ability of the business to grow and succeed, or more specifically, the ability of the business to repay debts and continue to profit.  Most lenders will refrain from lending to a business that is not growing and cannot service the debt they currently have.  They will analyze the financial information to determine whether the borrowed capital will increase the profits, and if so, whether that will be enough to repay the debt plus interest long-term.  If the business is currently struggling, borrowing funds may seem like a life preserver, but could actually spell disaster down the road.

In addition to examining financial information for the business, lenders will consider the years of experience that you have in your field, as well as your knowledge of business strategies.  Navigating the road to profit is difficult for any business owner, so industry experience is essential to success.  Here’s a tip:  Often small business owners wear many hats, but keep in mind that you don’t have to know it all as long as you have a team to support you.  Include a business coach and professionals that can fill in the gaps in your knowledge.  There are several non-profits, such as BCL of Texas, that can teach you the business skills you need to get your business off and running.

To schedule your free session with a business coach at BCL of Texas, email bizaid@bcloftexas.org, call (512)912-9191 today, or go to http://bcloftexas.org/ .

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Sources of Capital for Small Business Focus of September 19 Economic Perspectives

Posted by Hopeton on September 17, 2011

Janie Barrerra, president of Accion Texas and Sam Thacker, a partner with Business Finance Solutions, are the guests on the September 19 edition on Economic Perspectives, 5:30 p.m. – 6 p.m. on KAZI 88.7 FM.  Listen live online at kazifm.org.

Janie Barrerra, Accion Texas

The mission of ACCION Texas Inc. is to provide credit and service to small businesses that do not have access to loans from commercial sources, and to provide leadership and service to the micro lending field on a national level.

Established in 1994 in San Antonio, ACCION provides individual business loans from $500 to $50,000 for startups and up to $100,000 for established businesses. ACCION also provides business lines of credit from $5,000-$50,000 for established businesses with two years of financial history.

Additionally, ACCION Texas Inc. is a SBA 504 Certified Development Company. The 504 program provides healthy growing businesses with affordable long-term, fixed-rate financing for major fixed assets, such as land and buildings. ACCION works with the SBA and Private-Sector lenders to provide commercial real estate financing up to $10 million, to small businesses under the SBA 504 Program.

Sam Thacker, Business Finance Solutions

Business Finance Solutions helps small to mid-sized businesses find working capital, subordinated debt, real estate loans, equipment sale leaseback, import / export financing and business credit insurance. Since 1994 Thacker has funded nearly $400 million for 350+ clients.

His specialty is using multiple types of financing to meet a company’s unique needs, often using factoring or asset based loans combined with other more traditional financing methods.

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Learn About New SBA Initiatives April 1 in San Antonio

Posted by Hopeton on March 22, 2011

Meet with leaders from U.S. Small Business Administration, give input on new regulations, and learn how you can take advantage of new tools coming out of the Small Business Jobs Act on April 1, 9:00 a.m. – 4:15 p.m. in San Antonio at the Norris Conference Center. Hosted by the San Antonio District Office of the SBA, participants will learn more about getting an SBA loan, competing for federal contracts, finding training and counseling resources, and starting or increasing exports.  Here is an overview of each of these areas:

Putting More Capital in the Hands of Small Business Owners
SBA loans continue to be a critical tool for helping small businesses get the capital they need to grow and create jobs. The Small Business Jobs Act made permanent enhancements to SBA programs, such as raising the maximum size of our top two loan products (7(a) and 504) from $2 million to $5 million. In addition, temporary provisions in the new law include a Dealer Floor Plan financing pilot as well as a program that allows some owner-occupied businesses to refinance their commercial real estate mortgages using an SBA loan. Beyond the Jobs Act, SBA is taking several steps to better serve our lending partners and borrowers, to simplify and streamline loan programs, and to improve oversight of SBA lending.

Strengthening Small Businesses’ Ability to Compete for and Win Federal Contracts
The federal government awards hundreds of billions of dollars each year in federal contracts, nearly one-fourth of which goes to small firms. The Small Business Jobs Act contained 19 provisions that will help small businesses compete more effectively for federal contracts and subcontracts. The SBA is rolling out these provisions that will help ensure more fairness, more opportunities, and more tools to help match federal agencies with small businesses that provide high-quality products and services.

Expanding Resources for Counseling and Training
SBA has at least one District Office in each state, as well as about 14,000 affiliated counselors at Small Business Development Centers, Women’s Business Centers and SCORE mentoring chapters. The Small Business Jobs Act is helping support these groups in a number of ways. For example, $50 million more is being provided to support the network of about 900 Small Business Development Centers throughout the country. Also, SBA is working with a broad group of counselors to equip them with more tools and information to help small firms start or increase exporting. 

Expanding Exporting Opportunities for Small Business
Small businesses looking for new opportunities to increase sales and profit, and take advantage of increased demand for high-quality U.S. goods and services should consider exporting. The Small Business Jobs Act includes exporting resources to help small businesses by making the SBA Export Express pilot loan program permanent, increasing maximum sizes for SBA’s three export loan programs, and creating a new State Trade and Export Promotion (STEP) grants pilot program which will provide funds to states to assist small business interested in exporting. These expanded opportunities also help build upon President Obama’s goal of doubling exports in the next five years via the National Export Initiative.

To rsvp for this event click here.

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Seeing the Future for Your Business- Author of Ten Steps Ahead and SBA Focus of March 14th Economic Perspectives

Posted by nchanel on March 11, 2011

Hopeton Hay interviews Erik Calonius author of Ten Steps Ahead on Economic Perspectives on Monday, March 14th, at 5:30pm. Listen live at KAZI 88.7 FM Austin or online here: KAZIFM.org. He will also interview Pam Sapia at the SBA about the new lending initiatives announced in February.

See into the future for your business; no crystal ball necessary. It’s what successful visionaries possess that has propelled their small businesses into successful empires.  This book reveals what sets them apart from us.

In his book, Ten Steps Ahead: What Separates Successful Business Visionaries from the Rest of Us, Calonius investigates how and why entrepreneurial visionaries like Steve Jobs and Richard Branson seem to always be “ten steps ahead.” He also shows us how we can get there, too, by carefully cultivating specific skills. Using his knowledge of neuroscience and his one-on-one interviews with business leaders, he explores how these legendary trailblazers have an uncanny ability to not just see, but to shape where the world is heading.  Available in bookstores March 17th.

Erik Calonius is an awarding-winning former reporter, editor, and correspondent for the Wall Street Journal. He also authored The Wanderer: The Last American Slave Ship and the Conspiracy That Set Its Sails. He has collaborated on some 20 books, including Predictably Irrational, a NY Times bestseller.

Also featured, Pamela Sapia is the District Director of the San Antonio District Office for the U.S. Small Business Administration which serves 55 counties in Texas including the Austin/Round Rock metropolitan area.

In FY 2009, the San Antonio District Office assisted more than 20,746 people through training, counseling and business-development programs. During the same period, it approved 827 small business loans totaling over $238.8 million.

Sapia has served as the Supervisory Business Development Specialist where she was responsible for the marketing and outreach and government contracting functions of the office.  Sapia has also served as an Economic Development Specialist and as a Loan Specialist. Her experience includes that of Minority Business Development, Loan Processing, Loan Servicing, Liquidation, and Marketing.  She has developed relationships with borrowers, contractors, lenders, media outlets, congressional staffers, and government representatives throughout the city, county and district.

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504 Loan Refinancing For Eligible Small Business Assets Under Jobs the Act

Posted by Hopeton on February 21, 2011

Market research shows that a large percentage of commercial mortgages outstanding are set to mature within the next few years, particularly those held by community banks.  As real estate values have declined, however, even small businesses that are performing well and making their payments on time can have a hard time refinancing these loans and may need to restructure their debt.

Under the Small Business Jobs Act, the SBA will implement a temporary program—authorized until Sept. 27, 2012—allowing small businesses to refinance eligible fixed assets in its 504 program without requirement of an expansion, as is the case with typical 504 loans. This program will provide small businesses the opportunity to lock in long-term, stable financing, as well as protect jobs.

Key Program Features

  • SBA will launch this temporary program on Feb. 17, 2011 and will begin accepting loan applications on Feb. 28, 2011.  The program will end on September 27, 2012.
  • Borrowers can finance up to 90 percent of the current appraised property value, or 100 percent of the outstanding principal, whichever is lower, plus 504 eligible refinancing costs.
  • SBA will initially open the program only to businesses with immediate need.  Priority will be on those businesses potentially at risk because they face loan maturity or balloon payments before Dec. 31, 2012.  SBA will later revisit the program parameters, and may open the program to businesses with later balloon payments or that can demonstrate need in other ways.
  • The program is structured like SBA’s traditional 504 loan program: borrowers will work with third-party lending institutions and SBA-approved Certified Development Companies (CDCs), typically private, non-profit organizations to obtain financing, in a traditional 10%/50%/40% split.
  • SBA estimates that as many as 20,000 businesses may ultimately participate in this program, which will provide up to $15 billion in SBA-guaranteed financing leading to total project financing of over $30 billion.
  • The program, which is completely separate from SBA’s traditional 504 program, is zero-subsidy, requiring no cost to the taxpayer: It will be funded entirely through additional fees assessed for refinancing projects.

Key Risk Mitigating Factors

  • Applicants must demonstrate that their loans are current and that they have successfully made all required payments in the last year.
  • A new, independent appraisal will be required for all projects.
  • SBA will perform full and thorough underwriting on all refinancing applications (i.e., there are no ‘delegated’ lenders).
  • Initially, the first mortgage loans on existing 504 projects are not eligible, and “cash out” refinancings are not permitted.  SBA may later revisit these restrictions.   In addition, no government guaranteed loan is eligible for this refinancing program.

SBA’s 504 Loan Program

SBA’s 504 loan program is a long-term financing tool, designed to encourage economic development within a community. The 504 Program accomplishes this by providing small businesses with long-term, fixed-rate financing to acquire major fixed assets for expansion or modernization.

Proceeds from 504 loans must be used for fixed asset projects, such as:

  • The purchase of land, including existing buildings
  • The purchase of improvements, including grading, street improvements, utilities, parking lots and landscaping
  • The construction of new facilities or modernizing, renovating or converting existing facilities
  • The purchase of long-term machinery and equipment

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.

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SBA New Lending Initiatives Focus of Jan 31 Economic Perspectives

Posted by Hopeton on January 28, 2011

With small business owners and entrepreneurs in traditionally underserved communities continuing to face challenges accessing capital, the U.S. Small Business Administration announced two new initiatives aimed at increasing SBA-backed loans to small businesses in these markets.

Yolanda Olivarez

Yolanda Olivarez, Regional Administrator for SBA Region VI, which is headquartered in Dallas and includes Texas, Arkansas, Louisiana, New Mexico and Oklahoma, will discuss these initiatives on the January 31 edition of Economic Perspectives. Listen live at 5:30 p.m. on KAZI 88.7 FM or at kazifm.org.

SBA and U.S. Department of Commerce studies have shown the importance of lower-dollar loans to small business formation and growth in underserved communities. With that in mind, the two new loan initiatives – Small Loan Advantage and Community Advantage – are aimed at increasing the number of lower-dollar SBA 7(a) loans going to small businesses and entrepreneurs in underserved communities. The agency’s most popular loan product, 7(a) government-guaranteed loans can be used for variety of general business purposes, including working capital and purchases of equipment and real estate

Built on what the agency refers to as its “Advantage” platform, both Small Loan Advantage and Community Advantage will offer a streamlined application process for SBA-guaranteed 7(a) loans up to $250,000. These loans will come with the regular 7(a) government guarantee, 85 percent for loans up to $150,000 and 75 percent for those greater than $150,000.

Small Loan Advantage will be available to the 630 financial institutions across the country in the agency’s Preferred Lender Program (PLP). Under PLP, which includes most of the agency’s highest volume lenders, SBA delegates the final credit decisions to lenders.

SBA Administrator Karen Mills also today named Catherine L. Hughes, chairperson and founder of Radio One, Inc., and a former SBA borrower, to chair the agency’s new Advisory Council on Underserved Communities.

The Council will provide input, advice and recommendations on how SBA through its programs can help strengthen competiveness and sustainability for small businesses in underserved communities.

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Financing Small Business, Real Cost of Living Focus of January 10 Economic Perspectives

Posted by Hopeton on January 9, 2011

Jimmy Henry and Lloyd Herbert will discuss Prairie View A & M’s Cooperative Extension Program’s Financing for Your Small Business workshop on the January 10 edition of Economic Perspectives on KAZI 88.7 FM, 5:30 p.m. – 6 p.m.  Listen live online on kazifm.org.  Other guests include Carmen Wong Ulrich, author of The Real Cost of Living, and Nikki Green will have the latest segment of Young Money Today focusing on student loans.

The Financing Your Small Business workshop will be held January 20, 12 p.m. – 1:30 p.m. and 5:30 p.m. – 7:30 p.m. at the Carver Library, 1165 Angelina Street, Austin, Texas.  The workshop will cover  how to borrow $500 – $100,000 from AccionTexas, the largest microlender in the nation.  The workshop will also provide information on how to start a small business and how to make money selling to the government.

In The Real Cost of Living, well-known personal finance expert Carmen Wong Ulrich makes personal finance personal and takes into account that we all have motivations that go way beyond number crunching. From marriage and family to career, investing, and more, Carmen examines the “real cost” of the choices we all make every day.

Carmen Wong Ulrich is an expert contributor to The Dr. Oz Show and Glamour‘s personal finance columnist. She is the former host of CNBC’s daily personal finance show On the Money and can be seen regularly on Today, MSNBC, and Extra.

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Collateral – Financial Fitness for Small Business Tips

Posted by Hopeton on December 21, 2010

The purpose of the  Financial Fitness for Small Business Tips is to provide information that will help aspiring and existing small business owners be better prepared to finance the start-up and growth of their businesses in today’s economic environment.  The following tip was provided by Emerson Hall, Community Affairs Specialist for the Federal Deposit Insurance Corporation Dallas Regional Office.  For more information on the financial literacy resources provided by FDIC go to http://www.fdic.gov/consumers/education/.

Collateral are assets that have value and can be liquidated in the event of loan default;  and in most cases provides tangible security for the lender and investor upon extending funds to a business. Collateral provides the business owner the ability to pledge it’s assets as a secondary source of repayment in the event cash flow is unable to satisfy debt payments. Lenders and investors take some comfort in having collateral securing their funds in the event of non-payment. The collateral can be liquidated to cover some or all of the outstanding debt.

Collateral is normally a requirement to obtain financing for a business. If collateral is not available it does not automatically indicate lenders or investors will decline a request for funds, but having collateral does provide an enhancement for funding to be extended.

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Cash Flow – Financial Fitness for Small Business Tips

Posted by Hopeton on December 14, 2010

The purpose of the  Financial Fitness for Small Business Tips is to provide information that will help aspiring and existing small business owners be better prepared to finance the start-up and growth of their businesses in today’s economic environment.  The following tip was provided by Emerson Hall, Community Affairs Specialist for the Federal Deposit Insurance Corporation Dallas Regional Office.  For more information on the financial literacy resources provided by FDIC go to http://www.fdic.gov/consumers/education/.

Cash flow is defined as the movement of cash into and out of a business enterprise and is described by many as the life blood of any business. Positive cash flow is an essential element of a successful business. In order to establish and maintain a viable business, a business owner must understand and properly manage the business cash flow.

Proper management of cash flow reflects the owner’s ability to operate the business, whereby, all expenses are paid timely and having sufficient funds remaining to make debt payments. Lenders and Investors consider cash flow as a critical aspect of the business operations when evaluating a business for potential funding. Cash flow management requires attention to all the details of the business enterprise.

Most inflows from a small business are derived from operations: cash sales and collections of receivables. Other possible sources of cash inflow would include investment income from interest of dividend income, and financing income form sales of assets (not in the ordinary course of doing business) borrowed funds, lawsuit and insurance payments.

Posted in Financial Fitness for Small Business Tips, small business, Small Business Loans | Tagged: , , | 3 Comments »