Mr. Gene Sperling
Head Of the National Economic Council
The White House

Dear Sir:

Congratulations on your new appointment as head of the prestigious National Economic Council. Clearly you come to the job with extensive experience in all facets of the economy but more so with a deep understanding of the needs of the small business community. You did a masterful job of piloting a small business jobs bill through congress last year in spite of the opposition from those who said no to everything. You really do appreciate the contribution of the small business sector to the economic recovery.

Please do not let this congress undo the great work you have done up till now. It is crucial that the small business jobs bill be there to facilitate the growth of the small business community and their access to capital as they start to rebound in this turning economy. You, of all people on the White House staff, are most aware that small businesses need loans from all facets of the financial community and also from state and local government entities. That is why you ensured that there were pools of funds in the bill to take care of that need.

We in the small business community have faith in you sir. Do not let this new congress derail your efforts.

Sincerely,
Jim Smith
CEO
Ychange International

Working Capital or the measure of a company’s ability to pay off its short term debt is the difference between current assets and current liabilities.

photo credit: Casey Serin

It is critical that you have enough working capital at any moment and here are the reasons why:
Working capital is used to finance the following:
• Construction, renovation or improvements to the leasehold.
• To buy furniture, fixtures, machinery, or equipment.
• To replenish inventory.
• For day-to-day operations of a business and payroll (except owners’ salary).
• For down payment assistance on the purchase of real estate for the business.

There are typically five components of working capital that are important for a small business to understand and monitor:
• Cash and equivalents represent the most liquid form of working capital. Every small business should understand the time dependency between cash inflow and outflow, when peak cash is needed and the level of borrowing needed to meet shortfalls of cash.
• Accounts receivable represents the credit that the business extends to its customers. Small businesses need to know the amount of accounts receivable reasonable relative to sales, how rapidly are receivables being collected, and the slow paying customers
• Inventory can be as much as 50 percent of a small business’s current assets. A small business should know whether the levels are reasonable compared with sales and how fast is the inventory turnover relative to industry trends.
• Accounts payable is the amount of money owed suppliers. Every small business should know whether the level is reasonable relative to purchases and if the payment policy negatively impacts the business’s credit rating.
• Accrued expenses and taxes payable are time obligations of the business and represent a future cash outflow.

Women-owned businesses account for some 30 percent of all businesses in the United States and represent approximately 800,000 new start-ups per year and account for close to 55 percent of new start-ups. There are considerable resources available to help women in business especially in the areas of financing and business planning. These resources are in both the public and private domains.

A good place to start is the Small Business Administration (SBA). They have considerable resources for women owned businesses. They guarantee loans and provide additional services to help in the search for funding. To apply for a loan, you’ll need a business plan, a credit report and some start-up capital.

Here are some prime funding sources for women owned businesses:

In these tight economic times, it is critical that the business owner pay attention to the financials of the company. Money is very hard to come by and revenues are falling while expenses are increasing. To stay in business the savvy business owner needs to take these seven steps:
• Keep good records
Every revenue and expense transaction should be recorded and preferably in one place. Do not use the shoe box method but rather, invest in a computerized financial package like Peachtree or QuickBooks.

photo credit: mundo resink
• Keep a Separate Business Bank Account
Never mix personal and business income or expenses. Keep them entirely separate.
• Forecast revenues and expenditures
Have a business plan and learn to forecast revenue and expenses at least three months ahead. Build a budget that shows the availability of enough funds to run the business operations. If you’re an existing business, you should use numbers from prior years to forecast. Remember a business plan is a living document so be prepared to modify the plan and the financial forecasts as conditions change..
• Manage cash flow
Always compare actual revenue and expenses to the forecast and make sure that there is enough cash to cover expenditures. You also need to have enough cash to pay the government the amounts withheld from employee paychecks when they come due.
• Manage accounts receivable
Receiving payment from your customers in a timely fashion gives you the cash you need to pay your expenses. All customers granted credit should be aware of your standard policy for payment.
• Review financial statements
There are three basic statements which need to be prepared and reviewed: the balance sheet, the profit and loss statement and the cash flow statement. These statements will also be important if you need to get a loan to help with your cash flow.
• Keep sufficient cash reserves
Your company’s cash reserves are the funds available to meet its needs for cash, especially unanticipated needs. You need to maintain sufficient reserves to be used in an emergency and should be replenished as soon as possible. Reserve options include CD’s, marketable securities or even your personal borrowing ability so that money can be put into the business on a temporary basis if needed.

Starting Friday, April 2nd 2010, as part of the new CARD Act of 2009, companies advertising free credit reports are now required to clearly disclose that what’s being marketed isn’t the free credit report you’re entitled to receive by law.

The Federal Trade Commission provides consumers with one free credit report a year from each of the major reporting agencies, Equifax, Experian and Transunion. Consumers can access their free report by going to AnnualCreditReport.com. But other sites that claim to offer free credit reports often come with strings attached.

Companies like FreeScore.com, CreditReport.com and, of course, the ubiquitous FreeCreditReport.com, famous for its catchy jingles and pirate hat-wearing pitchman, are not part of the government mandate and have been accused of deceptively charging consumers for unwanted services such as credit monitoring products once they sign up for their free credit report. Most of the companies charge around $15 a month for credit monitoring services.

According to the FTC, Web sites are now required to include this message across the top of any page mentioning free credit reports: “THIS NOTICE IS REQUIRED BY LAW. Read more at FTC.GOV. You have the right to a free credit report from AnnualCreditReport.com or 877-322-8228, the ONLY authorized source under federal law.”

“Flying by the seat of your pants”, so to speak, is very exciting but is not a recommended way to run your business. Just remember that almost 90% of start ups never see a second year all because their owners never filed a “flight plan”. To prevent a small business from running sluggishly, the owner needs to invest in a business plan. Here are 10 good reasons for that stinking business plan:

photo credit: David Boyle in DC
1. Help you understand who your target market is and what customer problem you are trying to solve.
2. Help you understand the language your target customer uses to describe your product/service so you can craft a marketing message that he/she can relate to.
3. Help you figure out clearly where your business is headed and what critical steps you need to take.
4. Forces you to perform research to get the start up costs for your new business or for the growth you’re planning for the next phase of your existing business.
5. Gives you a sales document that you can use to raise capital at the banks or lending institutions.
6. Gives you an opportunity to study your competitors’ strengths and weaknesses.
7. Allows you, with the right financial analysis software tools, to vary your business assumptions and see the financial results without spending time or money.
8. The plan is a map by which to run the business and to checkpoint your performance and see whether you’re on course and on schedule.
9. All your key employees can refer to the business plan so that everyone is always on the same page.
10. By using it as a guide and by varying the behavior of the business or by changing the plan as needed, you can prevent yourself from repeating the same mistakes.

Always remember that you never plan to fail, you just fail to plan and that always catches up with you. You need a stinking business plan

Most times a small-business owner who is looking for support and financing needs to look no further than the local neighborhood. Here are six local sources of everything from training to help in securing local government contracts and also sources of loans for small companies.

1. Contact your state, county and local development departments. Among them are: statewide programs such as capital access programs; loan guarantee programs; and small business low-interest loan program that helps small companies acquire land, buildings or equipment.. There are also regional or city-based programs, such as economic development loan pools — low-interest loans for land, building acquisition, renovation or machinery and equipment purchases. Such aid is available since cities and regions are interested in promoting the economic health of their region and creating or retaining jobs in their area.

2. Look for any revolving loan fund (RLF) programs for which you might qualify. A revolving loan fund (RLF) is a gap financing measure primarily used for development and expansion of small businesses. It is a self-replenishing pool of money, utilizing interest and principal payments on old loans to issue new ones. The majority of RLFs support local businesses although some target specific areas such as health care, minority business development, and environmental cleanup.

3. Take advantage of organizations aimed at helping you. The following programs are specifically for women entrepreneurs. Also there is a federal agency for helping minority businesses.

4. Try your local community bank. Community banks are banks that practice “Local Decisions,” “Local Commitment” and “Local Investment” and focus attention on the needs of local families, businesses, and farmers.

5. People-to-people marketplaces like Prosper exist where people list and bid on loans. Interested borrowers begin by creating a loan listing for up to $25,000 that includes the maximum interest rate they are willing to pay. Lenders then begin bidding to fund amounts as low as $50 toward loan listings, potentially driving down the interest rate. Once the auction has ended and the loan is funded, the bids with the lowest rates are consolidated into one simple loan for the borrower.

6. Visit the U.S. Small Business Administration (SBA). The SBA assists small business owners with starting and expanding their businesses by helping them get loans through private banks and financial institutions. When you apply for an SBA loan you are actually applying for a commercial loan, structured according to SBA requirements, which receives an SBA guaranty. This guaranty is the portion of the loan the SBA will pay back to the lender should you default on your loan payments.

The loan you need may be right around the corner, if you just know where to search. Your local economic development organizations may be the answer to your financing needs.

In these tough financial times, small businesses need to try out new ways of cutting back on their expenses. One new trend is to follow certain feeds on Twitter. This very popular social media site contains a wealth of information on using money wisely. Here are 4 helpful feeds for you to follow:
• USATODAYmoney — Keep track of the country’s financial picture and see how you’ll have to adjust to the changing times through USA Today Money’s tweets. Their items will let you learn how to be smart with your small business cash flow.
• financialtimes — The Financial Times is a recognized authority in the business world, bringing readers financial news with global impact. Follow the publication’s official Twitter feed and learn how the world’s economy may affect your small business..
• TheEconomist — The Economist publishes numerous articles on both macro- and micro-economic matters. This Twitter feed will help you stay informed and prepared for managing the financial side of your small business.
• CNNMoney — The official Twitter feed of CNNMoney.com brings you updates on the latest business and finance items from both Fortune and Money magazines. With so much relevant information as your disposal, you’ll be able to make wise financial decisions for your business.

As a small business owner, you owe it to the business to decide whether your lender is right for your business or not. Banks and lending institutions use five factors to grant credit to you or your business and these are:

Capacity
Your ability to repay the loan. They look at your cash flow and your expected business performance over time to see whether you have the ability now and in the future to be able to keep up with the loan payments.

Character
Simply speaking, this has to do with your credit history and your personal history. The basic question they ask themselves is: “Are you the kind of person they want to do business with?”

Collateral
When all else fails, and you can no longer make the payments, what can they take from you to offset the money still owing them

Capital
Simply what is your net worth and the more it is, the more they will consider that you can borrow.

Conditions
The current economic environment, the state of your small business and your personal status and how that will together impact your ability to repay the loan.

Now lets turn that around and use the same factors to find out whether that lender is right for you.

Capacity
Is the loan the right size and will it be enough for what you need to get done at the moment.

Character
Do the terms match your business needs at the moment. Are the fees and payment schedule right for you, now and in the future?

Collateral
Are there any side benefits that accompany the loan. Are there any credit card processing facilities or other capabilities that can be made accessible to your small business?

Capital
Is the lender able to support your financing needs if you grow and expand very quickly?

Conditions
Is this lender able to support your business sector and size regardless of the change in market conditions?

If you think that you’ll be able to get a grant to start your for-profit small business from the federal government or even from a private foundation, think again. Even with all of the billions of dollars floating around under the American Recovery and Re-investment Act, you still can’t find grants for your small business start-up.

Now, you may be lucky if you are planning to develop or export agricultural goods, including food and forest products. Another exception could be if your business is part of the the Small Business Innovation Research (SBIR) or Small Business Technology Transfer (STTR) programs, which fund the research and development of technological innovation that meets specific government needs.

If you are a woman or minority owned business, you may be lucky if your state offers programs for women (or any other special interest groups — minorities, women, disabled, veterans, indian tribes, etc). Also check with non profit organizations, particularly women organizations to see whether they offer grants.

Note that the SBA specifically states: “The U.S. Small Business Administration does not offer grants to start or expand small businesses, although it does offer a wide variety of loan programs. While SBA does offer some grant programs, these are generally designed to expand and enhance organizations that provide small business management, technical, or financial assistance. These grants generally support non-profit organizations, intermediary lending institutions, and state and local governments.”

If you perform a search under the American Recovery and Re-investment Act you’ll find that there are grants but those grants again do not cover for-profit ventures except as stated above for certain minorities (Indian Tribes) and research and the arts.

You can check out private grants at Grants to Individuals Online, an online database of close to 8,300 foundation and public charity programs that fund students, artists, researchers, and other individual grant seekers. It is a subscription based web site with low monthly, three-month, and yearly subscription rates. It does not appear to cover entrepreneurs starting a for-profit small business.