By Howard Johnson’s own count, about 10 banks turned down his start-up company TSCM Security Services LLC for a line of credit between 2008 and 2010.

Even after winning a $10 million contract from the Federal Emergency Management Agency in 2009, the founder and CEO still could not get funding because TSCM had not been in business long enough to be considered a good risk.

“They all said, ‘You’re doing okay but you’re not mature enough,’” Johnson said. “I was still not at that five-year mark” that many banks have set as the minimum time needed to qualify for funding.

CFO Don Brazelton recalled that even the large bank that handled TSCM’s money and payroll turned down the Capitol Heights, Md., company.

Finally, in September 2010, First Virginia Community Bank officials said yes. “They looked at my financials and saw that I was being paid regularly, everything was up to date, and what they did was give me a chance,” he said.

That chance was a $500,000 line of credit that allowed the 8(a) certified, minority-owned, service-disabled, veteran-owned small business to grow from nine employees to its present 27 and take on new clients including the Defense and Homeland Security departments and the National Security Agency.

Lending institutions “come in all shapes and sizes and they all have different market niches that they serve,” so finding the right bank is difficult, said Michael Clarke, president and CEO of Access National Bank, a community bank in Reston, Va.

“It can be particularly frustrating for a start-up company to get a productive banking relationship off the ground because the fatality rate of start-ups in general is very high,” he said.

“Quite frankly, most banks will lose money on a $50,000 loan,” Clarke said. “They’re not making the loan because it’s going to be a wildly profitable venture. They’re making that loan in order to develop a relationship and help a business that might become a $5 million business one day,” he said.

Kevin DeSanto, managing director at investment bank KippsDeSanto, concurred. “During the first couple of years it’s difficult to get bank financing because you don’t have a track record of performance and very few contracts against which folks are going to be able to lend,” he said, adding that there are alternative financing methods including

“There are other forms of financing where people can essentially factor their accounts receivable and get higher interest or higher cost debt financing in those early stages,” DeSanto said.

I am sure you have heard the term “Cash is King”. This is true. Those with cash have stronger buying and/or borrowing power than those without it. With today’s lagging economy, many businesses are experiencing negative cash flow. The business owner who has yet to get up close and personal with their cash flow issues will see their doors close sooner than later. Insufficient cash flow creates a lot of stress on the entrepreneur, can cause business setbacks and personnel issues. It can also impact the quality of goods or services offered to customers.

If you are experiencing negative cash flow, you must complete a comprehensive assessment of your situation. There is no room for procrastination or this will be detrimental to your business survival. In this assessment you will want to ask some really tough questions and answer them effectively. Here is a sampling of questions to consider:

• Where is the business lacking?
• How much money are you losing?
• What are the current drawbacks?
• Did you expand too quickly?
• Did you borrow more money than you needed?
• Can the business sustain its current course of action?
• If you have to make adjustments, where should you start first?

The above list of questions should be used to guide and better aid your attempt at cleaning up your cash flow mess. With this assessment, you should be able to create some concrete solutions for increasing your bottom-line. Taking a proactive approach to solving these issues will give you the boost you need to take the necessary steps to implement applicable solutions.

Knowing your business cash flow position will help to keep you on track. Implementing strategic measures to survive market downturns and increased growth will define whether your business is here today or gone tomorrow.

In your business strategic survival plan, you should consider this – diversification. This concept is applicable to any business. Diversification is critical to moving any business through growth or survival periods.

When using diversification to deal with negative cash flow, here are three (3) core areas to consider:

1. Do business with at least two (2) of the following: Business-to-Government (B2G), Business-to-Business (B2B) or Business-to-Consumer (B2C). If your business is only concentrated on one category, you could potentially be losing sales and contracting opportunities.
2. Managing your “Cash-In” and “Cash-Out” budget. Monitoring how every dollar comes in to the company and how it is spent should give you some clear indications as to where you can improve. For instance, monitoring your outstanding accounts receivable, asking for partial payment upfront, accepting credit cards for payments or paying your bills on day 20 instead of day 1, will improve your cash position.
3. Leverage is a concept that is often over looked, especially in small businesses. Using leverage with your assets, connections or any other resources available can make a difference.

It can be demoralizing to a business owner when they are experiencing insufficient cash flow. If the issues are not addresses early on, this will negatively affect your staff and customers.  Take action today to stem the cash hemorrhage affecting your business financial position. It cannot wait.

Small businesses access to credit lines is still stagnant. Entrepreneurs continue to face tight credit and limited access to loans. Some business owners who once had excellent credit are now facing financial strains. This is due, in part, to the decline in business sales or other opportunities. This could also be due to the cost of goods or services, in order to perform at their best.

Business owners are now facing another dilemma: they are facing canceled credit lines. This issue has affected many small business owners. They figured they would still have their credit lines to keep them afloat through the lagging economy. This is not the case. Banks are wary of businesses using credit as a stop-gap measure when cash flow is low or nonexistent.

What many business owners do not realize is the process that banks use to monitor their clients. Banks have processes in place to monitor how funds flow through a business. These internal processes allow the banks the opportunity to know when their risk exposure has been elevated. They are then able to put measures in place to reduce their exposure to default by business owners.

Here are three (3) reasons why banks will close your line of credit:

1.  Current Credit Status – Banks will check your credit from time to time. This process varies per bank, but know that they do check. Even if you have great credit, they are still going to check it. Some banks will assess both your business and personal credit at least every six months or so. If there are any negative changes, this will alert the bank to your financial position, or show them a pattern of what the future possibilities could be. Once your credit takes a nose dive, they can and will reduce or cancel your credit line. The bank will likely notify you, hopefully in a timely manner. Be sure to read all the mail you receive from your bank. You just never know what they will change.

2.  Credit Line Usage – Even with great credit, a bank that does not feel comfortable with your spending habits can choose to close out or reduce your credit line. Since banks monitor your credit, this means that they are also monitoring your spending habits. If your balance is consistently over a third of line and they see this as a pattern on your other open credit lines, they can and will take action.

3.  Changes in Line Terms – Banks often make changes to their contractual terms. This could be due to regulatory or internal changes. If there are new laws, then the banks must comply. If the bank is experiencing a lot of credit line defaults, they can implement changes to alleviate their risk exposure. You should be notified of these changes with time for you to respond.

If you have a credit line and you use more than one-third of line value regularly, you need to pay close attention to your credit and spending habits. Checking your credit will tell you who has accessed your report in the last year. To avoid your line being exposed to this closure issue, reduce your balance or pay it off as quickly as possible.

“Since 1996, BizFilings has helped small business owners protect their personal assets through incorporation and has provided tools to help them stay compliant throughout the life of their business. Our newly formed partnership with SCORE cements our shared goal of providing small business owners with the tools and knowledge essential to grow their business,” said BizFilings’ Director of Business Development Patty Rojas.

“SCORE is excited about our new partnership with BizFilings, as we are both committed to helping business owners get started on the right track,” said SCORE’s Director of Marketing, Bridget Weston Pollack.

As part of that common goal, SCORE and BizFilings have produced and will distribute a new e-guide on legal structures called The Guide to Incorporating Your Business. This e-guide is designed to illustrate a business’s options and to assist in deciding the structure a business will take. The experts at BizFilings and SCORE explain the advantages and disadvantages of incorporation, the details of the incorporation process, and post-incorporation processes in this comprehensive e-guide available here: www.score.org/resources/business-registration-incorporation-toolkit.

SCORE and BizFilings will also host live webinars and online workshops covering business incorporation.  Presented by BizFilings specialists, these workshops will provide helpful information and action steps that entrepreneurs can use to choose a legal structure and stay compliant.

Find all of the SCORE/ BizFilings resources on the Business Registration and Incorporation Toolkit page here: www.score.org/resources/business-registration-incorporation-toolkit.

About SCORE

Since 1964, SCORE has helped more than 9 million aspiring entrepreneurs. Each year SCORE helps launch 58,000 new businesses and create 71,000 jobs. SCORE provides small business mentoring and workshops to more than 375,000 new and growing small businesses annually.

For more information about starting or operating a small business, call 1-800/634-0245 for the SCORE chapter nearest you. Visit SCORE at www.score.org. Connect with SCORE at www.facebook.com/SCOREFans and www.twitter.com/SCOREMentors.

About BizFilings

BizFilings is a full-service, online incorporation service provider, offering small business owners a fast, easy, and economical way to form a corporation, limited liability company (LLC), or other business structure online or by phone. BizFilings also offers a full range of business filing and compliance products, including nationwide Registered Agent Service, helping keep businesses in compliance with state regulations. BizFilings can be found online at http://www.BizFilings.com. BizFilings is a part of Wolters Kluwer Corporate Legal Services, a business of Wolters Kluwer, a market-leading global information services company.

READ MORE AT: www.SCORE.org

An episode of the popular ABC TV show “SharkTank” presented the opportunity to focus on a critical area of a business – its breakeven point. Business owners seeking venture capital on the Shark Tank program could not effectively present their breakeven point.  This is all too often the case for business owners. Some startups and business owners have never heard of their breakeven point, or do not have a clear understanding of how to come up with the figure it represents.

This might astonish many who are versed on business planning and developing enterprises. Unfortunately, since there are so many startups annually, many of these individuals are not getting the training necessary to develop these core business competencies.

Breakeven Point

The breakeven point refers to the minimum amount of money a business must make to cover its monthly expenses.  If you are paying out more than the company is generating, then you are not breaking even. Of course, if you are making more money than is needed to pay your monthly expenses, then you are “Cash Flowing”.  Remember, “Cash is King”.

This is vital to whether your business can be operational or not. If you are consistently operating below this point, you must consider alternatives. If you are not careful, your business could turn into an expensive hobby.  You did not go into business to be consistently putting money down the drain. Knowing what the breakeven point is for your business will help you strategize on how to increased sales.

Breakeven Analysis

You cannot always be putting your own money into the business. It should be paying you. In order to make changes, you must address the areas of your business that are affecting your bottomline. For you to come up with your breakeven point, you must complete a comprehensive “Breakeven Analysis”. Once you do, you will have a dollar amount to keep in mind that you must make monthly in order to survive.

The above example shows that the breakeven point is $5,000.

The breakeven analysis should take into consideration your products and/or services, cost of goods, along with all fixed and fluctuating expenses. This can be found by reviewing and updating your cash flow projections. This will give you a baseline to use in order to come up with that monthly amount you must make to breakeven point.

The breakeven point is the most important aspect of your business and financial plan. If you need additional training or resources, check with your local area S.C.O.R.E. office, Small Business Development Center or Women’s Business Center.

On Thursday, the U.S. Senate approved legislation that will legalize crowdfunding and allow the general public to make equity investments in start-up companies and small businesses. By a 73-26 vote, the bipartisan CROWDFUND Act (Capital Raising Online While Deterring Fraud and Unethical Non-Disclosure) was passed as part of the JOBS Act or Jumpstart Our Business Startups Act (Is it just me or are they reallygood at coming up with these acronyms?).

The legislation will lift SEC restrictions on soliciting investors through advertising and allow companies to use crowdfunding platforms to raise up to $1 million per year from a larger pool of small, unaccredited investors. Small private businesses will also be able to sell up to $50 million in shares through a public offering before having to register with the SEC. With both parties clamoring to be perceived as supporting the growth of business, the bill sailed through the House two weeks ago and has the backing of the President. It will likely be one of the few bipartisan bills to easily pass congress this year.

Now that the legalization of crowdfunding is within reach, there is even more buzz about the promise of crowdfunding and the potential for this landmark bill to change business, investing, and even the larger economy in significant ways.

According to the New York Times, former AOL executive Steve Case who campaigned in favor of the bill said in an interview that despite the significant role that the Internet plays in most people’s lives, “the ability to use that platform to leverage investment has been limited.” For companies and for investors, “this democratizes the access to investments.”

Over at TechCrunch, the founder of crowdfunding start-up CircleUp talks about how the legalization of crowdfunding could “open up new funding possibilities for neglected areas of the economy” and “change start-up investing forever.” He also reminds us that with only 1% of the country acting as angel investors and less than 1% of all small businesses getting outside equity investment, start-up investing has been reserved for the 1% – that is, up until now.

As we’ve mentioned before, critics of the bill fear that loosening SEC regulations will increase the risk of fraud. A key part of the bill seeks to reduce the costs of going public by phasing in SEC regulations. Companies that have been public for less than 5 years with up to $1 billion in revenues would be exempt from regulations that were put in place to protect investors from incidents like the fall of Enron and the bursting of the dot com bubble. In an interview, Senator Carl Levin of Michigan said, “We are about to embark upon the most sweeping deregulatory effort and assault on investor protection in decades.”

In an effort to address some of these concerns, Senate Democrats added several amendments to the legislation that would increase protections for investors. Under the Senate version of the bill, crowdfunding platforms will be required to register with the SEC and an income based cap will be created to limit the amount that unaccredited investors can contribute.

Read More:  www.TriplePundit.com

By Karlene Sinclair-Robinson

Earlier this week, the Wall Street Journal headline read: “Should the Small Business Administration Be Abolished?”  The internet buzz is swirling with conjecture. There is, of course, no concrete evidence to this and organizations such as WIPP (Women Impacting Public Policy) are against the Small Business Administration (SBA) closing. This action would devastate many local programs supported by this government agency in many areas of the country.

When an arm of the government which supports, in some way or other, millions of entrepreneurs comes under fire we must pay close attention. Without the assistance of the various support services that the SBA offers, many startups and seasoned entrepreneurs would not be in business today.  These businesses employ millions of individuals nationwide, not to mention the thousands who start their own businesses each year.

Through the Small Business Administration, there are over 100 Women’s Business Centers scattered across this nation. This figure does not include the many Small Business Technical and Development Centers nationwide and many other organizations that are supported peripherally by the SBA in support of small businesses on the local level.

Role of the SBA

It is important to note that this government agency is the voice for small businesses at the federal level. It defines, applies, and serves as the cushion for this segment of the market force from defining business size and minority classification to guaranteeing loans for small businesses and much, much more. The SBA is widely recognized through its lending support programs. Some of these programs have been around many decades. These programs include the 7(a), CDC/504, Export, Military, Microloan and Disaster Programs, to mention a few.

It is a common mistake to assume that the SBA is a lender. This is not the case. The Small Business Administration is NOT a lender. What the SBA does though is “guarantee the loan”.  They guarantee loan repayments to approved lenders in case borrowers default. The popularity of the program illustrates how banks are reluctant to risk their capital without the support of the government.

On the flip side is this – many startups are having a difficult time accessing information and resources to start and/or grow their businesses. Too often I hear clients say they “wish they had known of place like this”. There are many that still do not fully understand the purpose of the SBA or know how to access a SBA supported business development center.

The marketing arm of the SBA needs to step up the game in blitzing the businesses and showcasing their products and services.  How great would it be if more entrepreneurs had a better understanding of the purpose and reason for the Small Business Administration?

Get Involved

Business owners, please weigh in on this topic today! Call your congressperson, write letters, emails, and voice your concerns via social media sites such as Twitter and Facebook. The powers that be need to hear from you.

Wall Street Journal Article: Should the Small Business Administration Be Abolished

http://online.wsj.com/article/SB10001424052702304537904577277701392070324.html

Late credit card payments fell in February for Capital One, Discover, Bank of America, Chase and Citibank, The Wall Street Journal reported. American Express reported that its late-payment rate stayed at 1.4% for the second month in a row. This is good not only for consumers, but also small business owners who use credit cards to finance their business needs. Properly managed credit cards can be an excellent way to fund a business. However, knowing which one to choose is not always an easy decision. In the recent blog post “How to Select a Good Business Credit Card,” The Business Finance Store offers tips on what to look for when choosing a business credit card to finance a small business.

Borrowing money is a necessity for many businesses. Given the tight lending market, business credit cards are a good way to get access to capital. While small business owners may not be able to avoid the expenses that their business encounters on a daily basis, they can maximize their return on them. Read more about what to look for when choosing a business credit card at The Business Finance Store Blog.

The Business Finance Store is a business financing and consulting firm that offers customized Business Financial Solutions. Seasoned professionals offer assistance in a variety of financial solutions to help small businesses succeed such as: Business Financial Solutions, Legal Solutions, and Accounting Solutions.

The staff at The Business Finance Store understands that starting and growing a business is an exciting time. They keep it exciting by taking care of some of the most difficult aspects, by providing legal advice, helping with vital responsibilities like accounting & bookkeeping, and by obtaining business finance. They can quickly and easily guide entrepreneurs through many different complicated processes and put them on the path to success.

For 10 years The Business Finance Store has been helping startups and other small businesses legally structure their companies, find the right franchises, get the funding they need, and achieve the American Dream of owning their own successful business. Since expanding nationwide in 2007, they have helped thousands of companies and have funded over $60 Million in business credit lines, not including SBA loans. The Business Finance Store sees limitless potential in the current climate, and looks forward to many strong years of growth to come. Take some time to review their services, and give them a call.

For more information, or a free, no-obligation analysis of your business needs, visit The Business Finance Store website: http://www.businessfinancestore.com. A member of their professional staff will contact you to discuss your business’ short and long-term goals. Whatever you need, The Business Finance Store is there.

(Reuters) – Business credit cards were a big help for Doris McMillon’s communications consulting business, allowing her to buy supplies for workshops and coaching sessions weeks before her clients paid her.

But in 2009, when Chase jacked the interest rate on her whole balance from 9.9 to 23.9 percent, McMillon was outraged.

“You are a slave to the lender,” she said, adding that keeping up with payroll, gasoline, and phone payments has become a struggle. Frustrated by her inability to make headway on the roughly $4,500 debt, McMillon recently used a pension payment from a prior job to pay it down.

“What some of these banks have done to small business owners is unconscionable,” she said.

Since this story was first published, McMillon says Chase promised her a $300 credit and informed her she had made three late payments since she opened the account in 2007.

JPMorgan Chase, parent company of the Chase consumer and commercial banking unit, would not comment specifically on McMillon’s case.

Roughly two years after the Credit Card Accountability Responsibility and Disclosure (CARD) Act banned arbitrary rate hikes and excessive fees for consumer credit cards, small business credit card users not covered by the legislation are still vulnerable.

Small businesses play a crucial role in an economic recovery as the major source of new jobs. The Obama administration has made small business growth a top priority, but proprietors say credit card practices are holding them back.

Drawn in by attractive rewards programs, special expense-tracking tools or difficulty getting other financing, many small business owners fail to recognize their cards have almost no consumer protections, though they are often held personally liable for their debts.

“All these practices that were recognized as deceptive and unfair by the (Federal Reserve) – and were codified as such by this legislation – are still being perpetrated against small business owners because their business credit cards aren’t protected,” said Todd McCracken, president of the National Small Business Association, an advocacy group. It is “just ridiculous.”

Banks are still recovering from losses during the 2007-2009 credit crisis, and are facing restrictions on their activities because of heightened regulation.

The CARD Act alone swiped an estimated $11 billion from banks’ annual revenue, according to card advisory firm RK Hammer.

As the economy slowly improves, banks are trying to drum up new business by ramping up credit card offer mailings. Strategies differ between banks, but some, including JPMorgan, are pushing business credit cards that come with more freedom to change the terms on customers.

Across the industry, the volume of household mailings for business credit cards rose 32 percent in 2011 to more than 186 million offers, with JPMorgan Chase, Capital One and American Express leading the pack, according to Ipsos, a global markets research firm.

A number of legislative efforts to extend consumer protections to small businesses have withered since the cards were first excluded from federal consumer protections over four decades ago.

“We have got to assist (small businesses) to make sure deceptive practices by credit card companies are not keeping them from going and hiring more people,” said U.S. Representative Nita Lowey, a Democrat from New York who sponsored legislation last March to extend CARD Act protections to small businesses.

Small business owners have little chance of getting relief from the Consumer Financial Protection Bureau, which was created as part of the 2010 Dodd-Frank financial oversight law, because business credit cards are not technically consumer products.

Financial industry representatives say small business owners do not need the same protections that consumers do.

“The law is built on the assumption that people in business have a certain minimum sophistication and competence,” said Nessa Feddis, vice president and senior counsel at the American Bankers Association, who added that extending the CARD Act to cover small businesses could further contract credit.

CAN YOU SPARE A DIME?

Credit cards are the most common form of credit for small businesses, according to the National Federation of Independent Businesses. Seventy-nine percent of small businesses use them. That is 3 percentage points more than in 2010, and 5 percentage points greater than in 2009.

The cards tend to carry higher interest rates than personal credit cards, with the largest number of small businesses reporting interest rates in the 15 to 19 percent range, according to the National Small Business Association. That compares to an average of 12.36 percent for consumer cards, according to the Federal Reserve.

But business credit cards offer higher credit limits, are often easier to get than loans or lines of credit, and some offer special perks like an expense tracking tool for employee cards or rewards geared towards small businesses.

“There are possible advantages,” to business cards, said Josh Frank, a senior researcher at the Center for Responsible Lending, “but they have no value anywhere near what you lose in terms of lack of consumer protections.”

Mary Darling, who owns an Arizona-based surveying business, said even those advantages can disappear quickly. Her business, Darling Environmental & Surveying, relies on a handful of business credit cards that her employees use to cover big travel bills.

In early 2009, Darling said she got hit by a double whammy, despite never having missed a payment. American Express and Chase suddenly boosted her interest rates by up to 2.25 points to 13.99 percent and cut her credit limits by up to 75 percent.

Darling was in shock.

READ MORE at http://www.Reuters.com

The House voted 390-23 to pass the Jumpstart Our Business Startups Act, which would ease certain Securities and Exchange Commission rules that make initial public offerings expensive, and force many small companies to delay them. The Senate has not yet voted on a similar version of the bill they’re working on, though Senator Charles Schumer of New York told Bloomberg that passage “appears not to be a question of if, but when.”

The bill lets small businesses use direct mail or advertisements to market their securities to potential investors. (The SEC’s current “general solicitation” ban essentially limits start-ups to marketing to investors they already know.)

The bill, H.R. 3606, also allows investments of up to $10,000 per investor from crowdfunding sites. The total investment via crowdfunding websites would be capped at $1 million, or $2 million if companies release annual audited financial statements.

Other changes under the bill: SEC registration won’t be required of a company until it hits $50 million (the current threshold is $5 million). The shareholder registration requirement will be raised from 500 to 1,000 shareholders, and the number of shareholders allowed to invest in community banks will jump to 2,000 from its current level of 500.

The bill also helps small companies by giving them exemptions and phase-ins for complying with some SEC rules, including the requirement that an outside auditor certify the firm’s internal controls as sound. The exemption would apply to companies – referred to as “emerging growth companies” – with less than a billion dollars in gross revenue that go public. After five years, or if the company’s gross revenue exceeds $1 billion, it would then have to comply with all SEC deadlines and rules.

Said House Majority Leader Eric Cantor after the bill passed in the House: “This bill makes it easier for startup businesses to happen again in America. By having a win like this, I think we can demonstrate that [both political parties] really can work together.”

The House also approved a floor amendment that directs that SEC to conduct outreach – and offer information online – to let small and medium sized businesses know about these changes to the rules.
SOURCE:   OpenForum.com