SMB News Roundup: Stimulus Relief Extends for SBA Loans; SMB Bankruptcies Up in California; and Secrets of a Serial Entrepreneur

As the small business sector is so vital to the health of our economy, there is no shortage of business news regarding efforts to pump life back into this economic engine. For this post, we have decided to highlight all the key stories and developments in the SMB sector – from the good, bad to the ugly. Read on and feel free to share your comments and insights.

Stimulus Relief Extended for SBA Loans

The Senate voted this weekend to temporarily extend funding for two popular stimulus provisions that reduced fees and boosted guarantees on Small Business Administration-guaranteed loans. The provisions, which helped bolster small-business lending over the past year, had run out of funding in late November. With the new extension, included in the Defense Appropriations bill, the government's maximum guarantee on SBA loans is restored to 90%, compared to pre-stimulus levels of 75%. Fees that the agency normally changes banks are also waived. Read the full Wall Street Journal article here.

Small-Business Bankruptcies Rise 81% in California

The Obama administration's new plan to give a boost to small businesses reflects continued trouble in that sector, which is facing new failures even as much of the nation's economy is stabilizing. As credit lines have shrunk and consumers have cut back on spending, thousands of small businesses have closed their doors over the last year. The plight of struggling firms has been aggravated by the reluctance of banks to lend money, said Brian Headd, an economist at the Small Business Administration's office of advocacy. Read the full Los Angeles Times article here.

Obama to Meet with Small and Community Bankers

President Barack Obama will discuss the economy, lending to small businesses and financial regulation when he sits down at the White House with representatives of a dozen small and community banks. Obama scheduled Tuesday's session as a follow-up to a similar meeting he held last week with some of the nation's top bankers. Read the full AP story here.

Small Business Lessons From a Serial Entrepreneur

It is always inspirational to see stories about serial entrepreneurs who have lived through all of the successes and failures. Check out this “Biz Beat” blog post from the Atlanta Journal Constitution on serial entrepreneur Hank Datelle.

“Up In The Air:” Laying Off Employees is a Good Thing

In the Jason Reitman’s hit move “Up In The Air,” George Clooney plays Ryan Bingham, who is a corporate downsizing expert who essentially lives on the road and is a hired gun who does the dirty job of laying people off.

While I have not yet seen the movie, I read the book by Walter Kirn and Clooney’s character in the book is often portrayed in a negative light for his efforts in putting a positive spin on laying people off. When firing someone, he presented it as an opportunity as opposed to something that was actually bad.

Of course, being laid off is a devastating blow for any employee. And, in the day-and-age, it has unfortunately become the cost of doing business. What is not often explored is the simple fact that laying people off can be a very good thing.

That is correct. Laying off staff is a good for business. As I mentioned in my previous post, it does no one any good to keep employees around if the company is then at risk months later. Corporate America is not always a cold place, and most companies tend to do the minimum amount of layoffs of employees -- to keep morale up and do the “right thing.”

The truth is that most companies put themselves at risk by only laying off the minimal amount of people. And, once the storm has passed, and business has stabilized, then companies can bring more talent back. So, is it worth putting an entire company at risk by having a bloated employee base?

President Obama Taking Steps to Help Small Businesses

This week, President Obama announced that he is pushing to eliminate capital gains taxes, extend write-offs, and create employment incentives for small businesses in an effort to boost to a segment of the economy still reeling from the downturn.

President Obama certainly did the right thing by bringing this issue to the forefront. The small business sector is the backbone of innovation for our country. It is also the life-blood of many people running smaller, localized businesses in smaller towns throughout the nation. The bottom-line is that the health of the small business sector is critical to getting our economy back on the right footing.

Specifically, Mr. Obama that he would extend break (through 2010) allowing small businesses to immediately write off as much as $250,000 in qualified investments, and a second break allowing small and large businesses to deduct more capital expenses upfront.

Of course, one of the biggest challenges for small businesses is the inability to get bank loans these days. Mr. Obama proposed to eliminate fees and increase government guarantees in 2010 for loans from the Small Business Administration. He said the Treasury would step up loans to small businesses from the bank bailout fund, the Troubled Asset Relief Program.

These are all certainly steps in the right direction for this beleaguered sector. I look forward to seeing how these efforts will pay off in 2010, which will be a critical year for our economy. Stay tuned for more small business news and tips from this blog. And, I welcome all thoughts, comments and feedback.

2010 Small Business Tips: You Have Weathered The Storm; Now What?

For many small business owners, 2009 was a year of reckoning. We experienced the worst economic meltdown since the Great Depression and many industry pundits and economists are torn as to whether or not we are actually experiencing a recovery.
Regardless of what the economists are saying, small businesses need to operate with a completely new mindset – recovery or not. 2009 was all about survival and if approached correctly, 2010 can potentially be the year for small business to go beyond survival to prosperity mode.

So, small businesses have weathered the storm – so to speak. So, what to do now? Below are some key tips and lessons learned that will help speed the recovery process for small business owners.

Lesson Learned #1: Make Deep Cuts When Businesses Future is Uncertain. The key to business survival is to stay profitable. So, how does one do this? Simply put; you may need to lay off more employees to stabilize the business. It does no one any good to keep employees around if the company is then at risk months later. Companies tend to do the minimum amount of layoffs of employees but then put themselves and remaining employees at more risk shortly thereafter.

Lesson Learned #2: Take More Money than Necessary. Businesses tend to raise the minimum amount of equity or debt necessary based on a financial model that is usually not conservative. Before the Great Recession, companies should have taken as much money as possible during the period when capital was being easily distributed.

Lesson Learned #3: Get to Profitability As Soon As Possible. While venture-backed fund can certainly be the lifeblood for a start up – it is often like having golden handcuffs. These companies are at the mercy of the VCs. Their survival is solely dependent upon the next round of financing. There are many reasons for a VC to pull the plug and it may have nothing to do with the business viability. It could be caused by the VC’s own capital needs or the need to shut down the fund and start another fund. The key to not being dependent on a VC or the next round of funding is to have a self-sustained business.

Lesson Learned #4: Get The Upper Hand with a SBA Loan
Thanks to the American Recovery and Reinvestment Act, the Small Business Administration (SBA) is armed with $730 million for lending and investment programs. The maximum loan sizes have also been increased to $5 million (from $2 million). These loans are also reasonable in nature and achievable to obtain – take advantage of this.

Lesson Learned #5: Spend Money Now on Advertising
Now is the right time to spend money now of advertising for 2010. Simply put; the golden rule of spending money on advertising is a recession still applies. There is also a tax savings for 2009 for most small companies if the money is spent now (even if it is for advertising in 2010).

So, the big question is; what is your small business doing to make 2010 the year of business prosperity?