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3 myths about small business funding - AZ Big Media

3 myths about small business funding - AZ Big Media


3 myths about small business funding - AZ Big Media

Posted: 28 Feb 2020 12:52 PM PST

Given that politics are always a hot topic, you've likely heard plenty from both political parties about how government at all levels simply doesn't work.

That's not a new complaint, and just about everyone can share a story about some government nightmare they've endured.

But there's a federal agency that bucks the trend: The Small Business Administration. The SBA enjoys broad support from all corners of the political spectrum—and deservedly so. That's because the SBA, which dates to 1953, fulfills its mandate of helping small businesses.

Don't believe me? Google it. Sure, you'll find scattered complaints, but the SBA generally gets strong reviews.

That said, the SBA doesn't always get the credit it deserves and there's a lot of misinformation going around as well, especially among entrepreneurs who are missing out on strong financing possibilities.

Let's talk about three of the biggest myths surrounding the SBA.

The SBA lends money.

Although the SBA can directly lend money in cases of disaster, that's not its main role when it comes to lending. Instead, it serves as a government guarantee program for banks and nonbanks.

That means it essentially serves as a backup to lenders who might otherwise not be interested in making loans to smaller and/or unproven businesses—it offers guarantees up to 85% for loans up to $150,000 and 75% for loans bigger than that. Because lenders are less likely to endure the full brunt of defaults, they're more likely to make loans to unproven businesses.

The SBA does set requirements and application process details. Applications will require personal background information, a business plan, personal and business credit reports, income tax returns, bank statements, and a resume, among other things. It's also possible personal or business collateral is required.

One benefit for you, the borrower, is that the loan terms tend to be longer (up to 10 years) and require smaller monthly repayments because of good interest rates.

The SBA is only for mom-and-pop shops.

Mom-and-pop shops are definitely among the kinds of businesses the SBA is looking to help, but they can also work with much larger businesses.

Through its flagship 7(a) program, SBA-backed loans can be as large as $5 million for needs such as working capital. And through its lesser-known 504(b) program, as much as $12.8 million can be obtained for businesses seeking to buy real estate or major equipment.

A $5 million loan, not to mention a $12.8 million loan, is way above what a mom-and-shop needs.

While there's no one-size-fits-all template for a typical SBA loan customer, most are businesses that are going to have anywhere between $50,000 and $5 million in annual revenues and up to 40 employees. Those businesses are likely to be cash flow positive and are profitable.

Of course, if mom and pop need a loan, small amounts are available, too. There are no minimum guaranty amounts for any SBA loan program.

My banker didn't tell me about SBA-backed loans or said I'm not qualified, so I'm out.

Not to fear: You're most likely not "out."

There are about 2,200 banks and nonbank lenders through the United States who write SBA-backed loans. Each one uses the program differently and requires varying qualifications.

Thus, even if one lender rejects you, it doesn't mean that all will. It's always worth trying another lender (or two or three) if you get rejected—advice that applies when seeking non-SBA loans as well. If you go to a doctor and don't like what he/she says, you may try another physician, so why not do the same here?

In addition, there may be other reasons why your initial lenders may not tell you about SBA loans.

Perhaps they're ignorant about the program. Or maybe their employer doesn't give them incentives that make them want to push SBA loans; remember, your banker is trying to make a living, too, and might push you toward more profitable options for his/her own pockets.

It might even be something as simple as your banker is lazy: Lining up an SBA loan usually does require more documentation than a regular loan.

And large banks often aren't interested in making small loans, which can be less profitable and more risky than larger loans. So, if you get rejected for an SBA loan by a large bank, try a smaller bank, which may well specialize in the program and have lenders well-versed in the process.

Hopefully, I've cleared up misconceptions about the SBA and its lending programs. These programs work, as many business owners will attest, and there's little to no downside in at least considering an SBA loan the next time you need funding. Its website, sba.gov, is helpful as well, providing further information in an easy-to use format.

Ami Kassar is the founder and chief executive officer of Multifunding LLC, speaker, and author of The Growth Dilemma. Heavily involved in business finance for two decades, Ami has advised the White House, The Treasury Department and The Federal Reserve Bank on the state of the financing markets. A nationally-recognized expert on business capital, Ami Kassar has helped over 1,000 entrepreneurs raise over $400 million of debt for their businesses. For more information on Ami Kassar, please visit www.AmiKassar.com.

Biz Bits: Lincoln-based small-business lender gets a big award - Lincoln Journal Star

Posted: 29 Feb 2020 09:00 AM PST

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If you aren't in the lending business or don't own a small business that's gotten a loan, then you may never have heard of the Nebraska Economic Development Corp.

NEDCO, as it's more commonly known, is a Lincoln-based certified development company that partners with banks to provide financing for small businesses to acquire land, buildings and equipment or for the construction of a building under the Small Business Administration's 504 Loan Program.

And NEDCO is really good at what it does. For fiscal year 2019, it was the top 504 lender in the four-state region that includes Nebraska, Iowa, Kansas and Missouri.

The company lends all over Nebraska, but you can see its handiwork everywhere in Lincoln. Among recent projects it helped fund are the new 7 Day Furniture store and Stonebrook Exteriors' new headquarters building.

Because NEDCO works behind the scenes, it doesn't get a lot of publicity or recognition, so it's worth mentioning that the organization recently got one of the top awards in its industry.

NEDCO was named Coleman's 2019 Rural Small Business Lender of the Year.

The recognition comes from the Coleman Report, a trade newsletter for the small-business lending industry.

It's apparently a pretty big deal in the industry. NEDCO President Scott Sailors called it an "honor and a privilege" to receive the award.

The recognition even prompted a shout out from Sen. Deb Fischer, who had this to say:

"I applaud Scott Sailors and the team at NEDCO for receiving this special recognition for their hard work in helping Nebraska small businesses secure financing through the Small Business Administration's 504 loan program. Entrepreneurs in our communities bring good-paying jobs and prosperity to our state, and it is important they have the resources they need to thrive, keeping Nebraska's economy strong."

Small Business Administration lending up in Nebraska in 2019

MFP a boon for Nebraska, other states

There has been a lot of media coverage surrounding the Market Facilitation Payments the Trump administration authorized over the past two years to help offset the financial losses farmers faced because of a trade war with China.

The Journal Star's Chris Dunker has used public records requests to find out how much money went to Nebraska and who was getting it. And I've written about dire predictions from the Nebraska Farm Bureau that estimated the state's farmers could be facing close to $1 billion in losses.

A new study from Iowa State University, however, suggests that most Plains states, including Nebraska, have actually come out ahead.

The study, published in the winter 2020 edition of the Center for Agricultural and Rural Development's Agricultural Policy Review, compared the estimated loss from tariffs with the amount of payments each state got.

It found that the vast majority of states came out worse, meaning their tariff losses exceeded the amount of Market Facilitation Payments they got.

However, there were a handful of states that came out ahead, meaning the payments exceeded their losses.

Iowa was the big winner by far, with a net gain of almost $880 million. Nebraska tied with North Dakota for second, with a net gain of $532 million. Other states with a net gain were Kansas, South Dakota, Arkansas and Minnesota.

Subsidies total $694M for Nebraska farmers

Nebraska sees higher health costs

Health insurance has been in the news more than usual over the past few years because of the battle over the Affordable Care Act, expanded Medicaid efforts, Medicare for all proposals and just the relentless price increases.

If you feel as though your health insurance costs have gone up a lot, you're probably right.

A recent study from QuoteWizard, a website that allows people to compare insurance rates and find policies, found that Nebraska has seen the third-highest increase in employer-provided health insurance premiums over the five-year period from 2013-2018. Only Arkansas and Iowa saw bigger increases.

Quote Wizard found that average premiums in Nebraska rose from $5,268 in 2013, to $6,851 in 2018, a 30% increase.

Preliminary ACA signups rise more than 3% in Nebraska

The good news, according to the study, is that employers actually picked up more of the premium costs as they increased. In 2013, the employee share of costs was 22.1%; in 2018, it was 20.3%.

You can find the full report here: https://quotewizard.com/news/posts/states-with-most-expensive-health-insurance.

Listing the lists

Regular readers of this column know I sometimes like to end it with a rundown of recent rankings of Lincoln and/or Nebraska in national reports. Here are the latest ones:

* Fifth-best state capital to live in (WalletHub)

* Third-happiest new homebuyers (LawnStarter)

Best of the Buzz

Excerpts from recent Biz Buzz posts:

* 402 Creamery announced on its Facebook page that it's planning a second location in southeast Lincoln.

The ice cream shop at 311 N. Eighth St. in the Haymarket said it will open a location sometime in March near 56th Street and Pine Lake Road.

* Another downtown restaurant, Rutabagas Comfort Food, appears to have found its new location.

The vegan restaurant said in January that it would be moving in March after its short-term lease at 230 N. 12th St. was up.

Though it has not announced that spot, it recently applied for a liquor license for the former Lazzarri's Pizza location at 1434 O St. that closed at the end of 2019.

* According to a liquor license application filed in late January, a bar called Wilhelm's Bierhalle is going into the former McFarland & Sons space at 710 P St. that's next to Lazlo's.

McFarland & Sons closed in the fall of 2017, and the location was briefly repurposed into a Watering Hole location, which only lasted a couple of months. The space has been vacant since January 2018.

Reach the writer at 402-473-2647 or molberding@journalstar.com.

On Twitter @LincolnBizBuzz.

Utah's Lendio, An Online Marketplace For Small Business Loans, Secures $55M - Crunchbase News

Posted: 28 Feb 2020 08:30 AM PST

Lendio, a Lehi, Utah-based free online marketplace for small business loans, has secured $55 million in capital. That includes $31 million in equity led by Mercato Partners' Traverse Fund and a $24 million debt facility from Signature Bank.

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According to the company, the equity round was oversubscribed by existing investors including Napier Park Financial Partners, Comcast Ventures, Blumberg Capital, Stereo Capital and Runa Capital. It brings Lendio's total raised since it was founded in 2011 to $108.5 million, according to Crunchbase data. The company's last raise was a $19 million Series D, raised at a pre-money valuation of $75 million in October 2016, according to Cruchbase data.

Lendio plans to use the new capital "to increase the scope and precision" of its loan marketplace while expanding new bookkeeping and lender services functions.

The startup has 75 loan products on tap and describes itself as a one-stop-shop for business owners looking for capital to start, operate and grow. Lendio has facilitated more than 100,000 loans to nearly 35,000 business owners across the U.S. to date, totaling over $2 billion. It says its year-over-year growth rate has averaged 75 percent over the past two years. The company has more than doubled its customer base in the last two years, according to CEO and co-founder Brock Blake.

It's also nearly doubled its headcount from 170 people about one year ago to just over 300 today.

According to Blake, Lendio reduced its monthly burn rate to break-even since taking on the Series D round of funding in 2016.

"While the company was in a position of profitability and didn't need to raise funds, this Series E round will allow Lendio to grow several recently-launched business units," he wrote via email.

What it does

The company says it wants to make it easy for small business owners to get loans. Owners can complete a 15-minute online loan application that is processed by Lendio's machine-learning algorithms and matched with" a pool of suitable lenders."

Lendio's loan team reviews those options with the business owners and then works to facilitate, often within 24 hours, it claims.

The company has strategic partnerships with the likes of American Express, Heartland Payment Systems, PayPal, LendingClub, Kabbage, NerdWallet, Comcast Business, Staples and Funding Circle.

For Mercato Partners' Senior Investor Ryan Sanders, Lendio's "ability to combine data analytics with the human touch to connect small businesses quickly and precisely with ideal lending partners has made all the difference in its success."

The new capital will be used in part to expand the company's online bookkeeping platform and further integrate it with its loan marketplace platform, Sunrise by Lendio. It also plans to enhance its lender services division. The company gives banks, credit unions and other online lenders access to its white-labeled online application via a software-as-a-service partnership model.

Meanwhile, lenders are now outsourcing the customer-facing sales function to Lendio, the company said.

The company also has a social component (which I always love). For every new loan facilitated on Lendio's marketplace platform, Lendio Gives–an employee contribution and employer matching program–provides a microloan to a low-income entrepreneur around the world through Kiva.org.

Blake said Utah was an obvious choice to start a fintech company.

"From a regulatory standpoint, Utah is very business friendly, the cost of living is affordable, and there's a deep talent pool to draw from," he said. Plus, he appreciated "the strong VC community and the entrepreneurial culture pervasive across the state."

Illustration: Li-Anne Dias

DocuSign announced today it would acquire Seal Software, which develops AI-powered contract discovery and contract management software solutions, for...

Cash-flow positive gaming platform Roblox raised $150 million in a Series G round led by Andreessen Horowitz's Late-Stage Venture Fund.

Atlassian, Salesforce Ventures and others also participated in the round.

One thing's for sure: most seed rounds aren't very big, but they are getting bigger.

How coronavirus is disrupting small business - Yahoo Finance

Posted: 28 Feb 2020 06:26 AM PST

The coronavirus is casting a large shadow over the business world, and many companies, including some U.S. small businesses, are struggling to cope with the financial losses. 

Ben Baltes, cofounder and CEO of Toybox Labs, a 3D printing manufacturer based in Oakland, Calif., told Yahoo Finance's "The Ticker" the outbreak has disrupted Toybox's supply chain, pushing production significantly behind schedule. 

"We came off a nice holiday season, and sold out of inventory," said Baltes. Shortly after the holiday season the coronavirus outbreak hit China, stifling manufacturing and production throughout the country. "We have 600 printers left. Usually we're shipping around a couple thousand per month so that's impacting sales quite a bit."

The toy industry relies heavily on China for its parts, making it particularly vulnerable to manufacturing closures throughout the country. It's the world's largest toy maker, responsible for approximately 85% of toys sold in the U.S., according to the Toy Association. And the slowdown in production is putting the toy industry at risk of another year of declining sales. 

"The only thing we can do is hold this out and wait a couple months while this passes," said Baltes. To slow sales, Toybox scaled back its marketing push, advertising 'only a fraction' of where it typically would.

In terms of the potential losses from the manufacturing slowdown in China, it's still a bit early to gauge the full impact. For Toybox, its manufacturing facility reopened its doors Wednesday, but it's only running at around 70% capacity.

"The impact from the beginning part of the year cascades into other parts of the year. Since our company has been experiencing pretty rapid growth throughout the last couple of years, this is really going to impact our later months quite a bit," Baltes said.

Toybox Labs' factory in China resumes production following coronavirus shutdown.

The coronavirus outbreak has raised questions about the U.S.'s reliance on China, and whether businesses should start moving production to other parts of the world.  While it may seem like a good idea, Baltes quickly pointed out that it's not as easy as it sounds, especially for more complex products that rely on multiple levels of China's supply chain.

"The issue is that China's supply chain is very deep, so if we were doing something simple like plastic toys, which we're not, it would be much easier to move to Vietnam," he said. "The problem with China is that all the level-two and level-three parts of the supply chain —motors, magnets, steel rods—  that's all made in China. So if you're building a product like Toybox which is a 3D printer, it's much harder to move the supply chain because all of your pieces are going to come from China anyway."

Seana Smith is the anchor for The Ticker.

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