Commercial banks. Loans to small businesses. Your friendly business banker. These are all terms that now suggest a financial promised land that few people find any more.
For our US and UK clients, we work closely with a private investor who is comfortable with outside the box business financing. They have rather a unique business finance niche, which is a combination of financing new orders and inventory as long as it can be secured. Their accumulated business skills also come into play on behalf of our clients; someone with a great product but in the early marketing stages can often benefit from the hands-on wisdom of those who have already been there.
If you can manage to get business wisdom and capital all in the same place, so much the better.
They are part venture capitalist, part angel investor, part asset-based lender and part business incubator. They are adaptable and not scared off by financial or credit issues. In one successful deal, we were able to work finance an entrepreneur who could NOT be financed elsewhere due to a credit score seriously impacted by several judgments against him. As you might guess, our talented entrepreneur was highly skilled in his area of expertise, and had sharply increasing orders….. and yet, he lacked some of the critical skills to manage the financial part of the business adequately. Our partner is now cleaning up and negotiating away our client's credit problems. And funding his growth.
Our partners also have a knack for sizing up deals quickly; they say yes or no quickly. There are no excruciatingly long loan committees to go through, no waiting outside the door wondering if and when. Generally, a phone call and follow-up due diligence meeting will suffice, backed up by typical business financials.
Our perfect candidate for this type of financing would have interesting new products, growing product markets, and/or good profit margins. We also like growing businesses which create new jobs, or which deal with new products in the green energy space. The group is also partial to minority-owned businesses, and businesses owned by women. (Even though women are not a minority, it still seems that way from time to time.) We look to fund expansion of existing products with some history of sales, and the capital need should be oriented towards increasing sales, not product development.
Other types of businesses currently under funding consideration include: internet sales, home shopping network or QVC sales, food distribution, specialty products in the home improvement industry. The list grows as we see new businesses.
The preferred investment is $100,000 to $200,000 to start, increasing as shipments are successfully processed and they gain direct experience in the client's business operations.
Through their marketing, operational and financial experience, our partners can help fill in the gaps to produce the complete team needed to create a successful business enterprise.
We are located in the New York City metro area. However, we can arrange financing anywhere in the US, as long as the business fits our model.
If you think you might qualify, please complete the form below.
The fastest growing jobs are also the least glamorous. The United States will add 1.3 million health and personal care aides by 2020, according to Labor Dept. projections released this month. That represents a 70 percent jump, greater than any other occupation. Such workers make about $20,000 per year.
If these are the jobs of the future, who are the employers? They're overwhelmingly small businesses. There are about 22,000 home health care establishments, and the largest control less than 5 percent of the market, according to an analysis of the industry to be released Wednesday by FranData. The Arlington, Va., company produces market research reports for the franchise industry.
Franchisors, who license a brand and a business process to independent operators, are clamoring to capture the business of assisting senior citizens who want to remain in their homes. There are more than 60 brands selling home health care franchises, according to the report. Many of them have been franchising for only a few years.
How those companies will treat their growing workforce is a big question for the industry. The report notes that "many direct-care workers involved in personal care lack the training and support necessary to provide quality at-home care, such as administering medications. The poor working conditions and low salaries, at a national median of $8.8 [per hour] ... contribute to a high staff turnover rate."
Employers in many states have been exempt from providing home care workers minimum wage and overtime pay under a 1975 law that considers them "companions." The Obama administration wants to repeal that exemption. In its proposal, the Labor Dept. notes:
Studies have shown that the low income of direct care workers including home care workers continues to impede efforts to improve both jobs and care....
Moreover, the workers that are employed by home care staffing agencies are not the workers that Congress envisioned when it enacted the companionship exemption, i.e., neighbors performing elder sitting, but are instead professional caregivers entitled to [Fair Labor Standards Act] protection.
For-profit placement companies not associated with hospitals or other care providers have come to dominate the industry, from 2 percent of Medicare-certified agencies in 1975 to 68 percent in 2006, according to the Labor Dept. As FranData also notes, they're overwhelmingly paid with public funds. Three-fourths of home health care revenue comes from public programs like Medicare and Medicaid, and pressure to control the cost of those programs could cut into the industry's profits, the FranData report warns would-be franchise buyers.
Industry groups such as the National Association for Home Care and Hospice want Congress to preserve the labor law exemption, arguing that increasing wages without increasing reimbursement could make care unaffordable.
Fears that raising worker pay will reduce access to home care are overblown, says Rebecca Givan, an assistant professor at Cornell University's ILR School. "It will raise wages for the very, very lowest paid of these home health care workers," Givan says. They're mostly women who are the main earners in their households, she says, and "many of them are relying on public assistance."
Many home health care agencies already pay their workers minimum wage and overtime, though. "There are many high-road employers that this won't affect at all," Givan says.
The businesses using the exemption are essentially being subsidized three times by the government: they get paid by public programs, they pay workers wages that would be unlawful without the "companionship" exemption, and those workers in turn depend on government aid to supplement their low pay. If wages rise and reimbursement rates don't, that may jeopardize profits for those companies. "It's generally some of the highly profitable staffing agencies that may be affected," Givan says.
Turns out customizing video game controllers for gaming addicts who want to shoot faster can be a decent business. Tim Erven says his five-year-old venture, Custom Gaming in Whippany, New Jersey, has been profitable since he started it, with revenue around $300,000 in 2011, and some 250 orders a week now, mostly through its Amazon storefront.
To keep up with demand, the 22-year-old has been trying to get banks to lend him as little as $10,000 to improve his website and rent a warehouse near his home. The six banks he's approached have rejected his applications because of his age and because he hadn't gotten a business loan before, even though his tax returns show profits and his parents were willing to put up their home as collateral. "From what the banks told me, asking for 10 percent of my annual revenue was reasonable, and what tends to be conventional, but even by decreasing the amount I was seeking I was still unable to obtain approval," says Erven, who juggles balances on six credit cards to manage cash flow.
Erven's situation isn't unusual for small business owners navigating post-crisis banking. A recent National Federation of Independent Business study shows that even while demand for credit is on an upward trajectory, the number of small employers able to land a bank loan has not moved in parallel. Bank credit for small firms (defined as businesses with annual sales of less than $50 million) has been ticking up, slightly, since the third quarter of last year, according to the Federal Reserve's quarterly surveys of senior loan officers and other government data. "But it should be much stronger at this point in the economic recovery," says Paul Merski, chief economist at the Independent Community Bankers of America in Washington. (Community banks make nearly 60 percent of outstanding loans to small businesses, according to the trade group.)
Before lending will rebound, of course, consumer spending and real estate prices have to improve. And tempering new underwriting rules is crucial, too, says Merski. At a community banking conference last week, Federal Reserve Chairman Ben S. Bernanke urged bank supervisors to strike a "delicate balance" between encouraging lending and avoiding a race to the bottom in loan standards.
Erven isn't waiting for bankers to nail that balancing act. He plans to meet with Chinese private investors about raising capital from them and moving some of his production to China. "I'm either going to have to give a portion of the company or pay a high [interest rate]," says Erven. "I'd be able to get a much lower rate [from a bank], but that's the reality of what I have to do to get the funding."
President Obama today proposed eliminating corporate tax loopholes and using the money to cut the business tax rate to 28 percent from 35 percent. The tax code "is unnecessarily complicated and forces America's small businesses to spend countless hours and dollars filing their taxes," he said in a statement.
Strange, then, that a plan to simplify the business tax code and cut rates would spark a condemnation from small business groups. This chart tells you why:
The lower rate would only apply to companies organized as C corps, which pay corporate income taxes. They make up less than 6 percent of business tax returns, according to IRS data. (They account for closer to two-thirds of all business revenue and income.) For the rest of the business world, including partnerships, sole proprietors, S corps, and limited liability companies, their business earnings flow through to owners' personal income and are taxed at individual income tax rates.
Eliminating tax breaks without lowering individual income tax rates could effectively raise taxes on some small business owners, says Todd McCracken, president of the National Small Business Association, a Washington trade group. "The business deductions are relatively unified. A deduction's a deduction, whether you're a C corp or a sole proprietor, for the most part," he says.
McCracken likes some parts of the Obama proposal: A plan to make permanent deductions for capital investment (such as equipment and software) and research and development. (Yes, the tax reform supposedly eliminating deductions includes plans to expand deductions.) Still, he says, reforming the corporate tax code and letting the Bush tax cuts expire could leave non-corporate business owners facing a federal income tax rate of over 40 percent next year on earnings over $250,000.
The National Federation of Independent Business, a frequent foe of the Obama White House, panned the proposal, saying in a statement that "the focus should be on individual rate reform." Not every small biz lobby agrees. Small Business Majority, a group that generally supports Obama's policies, praised the plan and noted that "reforming the tax code will eliminate dozens of loopholes that consistently leave small businesses paying an unfair share of taxes."
McCracken says the plan is short on specifics but looks like a mixed bag. He favors reform that would tackle the individual tax code alongside corporate taxes. The chances of any major tax plan passing in Congress this year, he notes, are very slim. So even if corporate tax reform spells trouble for small businesses, they probably don't have to worry about it any time soon.
Entrepreneurs, tech executives, and venture capitalists have long complained that America's visa rules keep aspiring entrepreneurs who lack U.S. passports from starting companies in the U.S. Now immigration authorities are reviewing those rules to see if they can make them work better for entrepreneurs.
We're not talking about creating a startup visa or changing the number of people the U.S. lets into the country under various programs. No one expects this Congress to pass broader immigration reform. But U.S. Citizenship and Immigration Services says it wants to make sure its existing system is realistic for high-growth companies.
The agency is hosting an online summit today to discuss how immigration policy affects entrepreneurs. Then five business and academic leaders from the private sector will work with immigration authorities to review visa laws and make sure they "provide pathways that are clear, consistent, and aligned with business realities," Stephanie Ostapowich, a spokeswoman for the agency, said in an email. (The agency calls these "entrepreneurs in residence" and hasn't yet announced who they are.)
The current system hamstrings foreign-born entrepreneurs, says Vivek Wadhwa, a researcher at Duke University (among others) participating in the summit. "Silicon Valley is bleeding right now," he says, with high-skilled immigrants returning to start companies in China, India, Brazil, or other countries because of barriers to staying in America. (Wadhwa is an occasional columnist for Businessweek.com.)
For example, Wadhwa says the current rules prohibit startups from sponsoring visas for their founders. He also notes that immigration authorities sometimes consider companies with no revenue or those not selling physical goods fraudulent, even though early-stage tech companies often have neither.
Wadhwa says Alejandro Mayorkas, the director of Citizenship and Immigration Services, and other White House officials are hearing tech executives' calls for an immigration fix. "These people have spent time in Silicon Valley," he says. "Almost every CEO here has been ripping into them. They really get it now."
Employers who rely on low-skilled workers from abroad have a new set of rules to digest. On Feb. 10, the Labor Dept. issued 575 pages of regulations for its H-2B visa program that U.S. employers use to bring foreign nationals to fill temporary non-agricultural jobs. H-2Bs generally allow for a maximum 10-month stay and are often used by small, seasonal businesses such as housing contractors, landscapers, and seafood processors. The application process, which involves filing paperwork with the Labor Dept. and Immigration authorities, has been growing steadily more complicated and time-consuming. Now it's even tougher.
Among the biggest changes in the new rules, which go into effect on April 23: They'll have to demonstrate to state agencies--not merely attest--that they weren't able to locate enough U.S. workers. They'll have to post the jobs in a national online registry administered by the Labor Dept. and start advertising in local publications about two weeks earlier than in the past. And they'll also be responsible for employees' travel costs to and from their home countries, provided the worker completes a certain number of days on the job.
The goal of the new rules is to respond to efforts by the Obama administration to increase employment. "The H-2B program is designed to help businesses when there is a temporary shortage of U.S. workers," Secretary of Labor Hilda L. Solis said in a statement. The changes "will ensure that the program is used as intended by making these jobs more accessible to U.S. workers and providing stronger protections for every worker."
Seventh-generation oysterman Mike Voison, chief executive officer of Motivatit Seafoods, an 85-employee seafood supplier and processor in Houma, La., says he'd prefer to hire locals, rather than foreigners. But since Hurricane Katrina, Voison has struggled to find Americans willing to do the low-wage work. (Pay at Motivatit starts around $8.50 an hour.). "You say there's an 8.5 percent unemployment rate in America," says Voison. "Look, I would love every one of those 8.5 percent to come work."
Voison is concerned that the new rules will "hurt American jobs." For every one of the 30 or so H-2B workers he employs, "there are about two American jobs that I feel are supported by that," says Voison. "I have a management team, I have truck drivers, I have people that make boxes, I have people that pack the product, I have American jobs in the plant besides those."
Voison has been contemplating building a facility in Mexico where "ample labor" exists. "That would be terrible--my community depends [on us]," he says, but the new rules "are just not going to work for bringing in foreign labor."