Tuesday, March 25, 2014

Looking for a loan? Five benefits of working with an SBDC advisor before you apply.

We hope you are aware of the various services offered by the SBDC in Spokane, Washington state and across the nation.  SBDC Advisors offer confidential, no-fee business advising services for small business owners in most industries from detailed financial analysis and preparing a loan package to marketing and personnel issues.

Working with an SBDC advisor can help better prepare business owners in putting together a loan application, buying or selling a business or expanding an existing business.  Advisors can also review start-up business plans, walk a business owner through cash flow projections or conduct a basic (non-certified) business valuation. 

Here are five advantages business owners reap from working with a professional business advisor:

1.  Education.
Our goal is to prepare clients for any possible questions the loan officer may pose and ensure that you have everything together before you meet with a loan officer to put forth a complete application.  We also are aware of regional resources available that may assist clients such as classes, conferences and other events.

Ratio analysis sample
2.  Cash Flow Projections and Assumptions
Advisors work one-on-one to go through assumptions, cash flow projections and financial statements.   We work with the clients using a variety of tools and spreadsheets that show assumptions, 3 year cash flow, income statement, balance sheet and ratios.  We use estimates from the clients based on actual figures if available.  We do not provide the data for the financials. 

3.  Global Financial Analysis
In many cases, a business owner may not fully understand the balance sheet or ratios. Performing a global analysis can take a closer look at A/R, Inventory turns, and other key ratios that factor in to a loan proposal.  

4.  Preparation
Business advisors may spend hours with a client to thoroughly review a business plan, work together on assumptions and cash flow projections, and more to help them prepare to meet with their lender.  We provide a checklist of items they should start gathering such as a personal financial statement or tax returns and we also explain the various SBA and other loan programs.

5.  Objective Third Party Review
In some cases, business customers are not ready or prepared to apply for a loan.  SBDC advisors work with clients to assess business readiness, educate them on the loan process and requirements and work with them to present a well structured and complete loan package that fits with a bank's criteria.  

It is a win-win for advisors and business owners.  Clients get the benefit of our tools and experience in putting loan packages together and we want to see our clients succeed, grow and be fully prepared to present the best loan application that they can put forward.  

Want to sell your idea? Two cents' worth of advice before you proceed.

Want to sell your idea?  What is an idea worth?  If it sounds too good to be true, it probably is.  Please be very cautious of product promotion companies that offer to take your idea to market, file for a provisional patent, locate interested buyers or get your product into a trade show.  The representatives for these companies can be very persuasive and aggressive, and there is usually an urgency to getting you to sign up or send funds.

An inventor with a new and unique idea/product/service needs to approach this the same way they would start any business.  Here are four recommendations if you are exploring ways to sell or patent your idea:

1.  Do a business plan.

Writing a business plan can help with many planning questions on how to take your idea to market.  Such as:
  • Who will buy your product? Is there even a market? 
  • What competition is out there?
  • How much does it cost to make?  Get to market?
  • How will you make money?
  • Should you patent your idea?  

2.  Meet with an IP attorney.  

You may think it is too expensive, but in the long run, you could save thousands by meeting with an IP attorney before you sign a contract with an Invent-assistance company. For example, in one typical contract, the company will bind you to a percentage of profits for the life of the patent or product. Another recent example is a company pressuring an inventor to send $20,000 to ensure a spot in an upcoming trade show.  $20,000!

One old myth is that you can write down your idea, sign and date it and then mail it to yourself and it provides a level of protection similar to a provisional patent.  This is no longer the case.

Not ready for an attorney yet? Here's a cool site that has a free Risk Quiz to determine your IP risk.

3.  Read the reviews and complaints.  

The Federal Trade Commission (FTC) has pages of complaints filed against invention promotion companies. You can also review Ripoff Reports, online complaints, ConsumerAfffairs.com, and others.  Do not go strictly off a Better Business Bureau report. Check lists of reputable resources and read about scam prevention on the USPTO website.

According to the Minnesota Inventor's Congress (MIC), invention marketing scammers bilk over $200 million a year out of hopeful inventors.

4.  Do your homework.  

If it sounds too good to be true,
it probably is!
Read about the invention process, visit the USPTO website, join a local inventors group or tap into resources by other reputable inventor's associations like the Minnesota Inventor's Congress.  Find out about prototypes and test if your invention is really viable.  Prepare a detailed market assessment.

One helpful resource is to download the Inventor's Toolkit from the Minnesota Inventor's Congress.  This guide is loaded with information for inventors.  Download for free, simple registration required.  Make sure to read: Spotting Sweet Sounding Promises of Fraudulent Invention Promotion Firms.  The MIC is a Non-Profit Organization, 501(c)(3), dedicated to serving inventors across the U.S., not just in Minnesota.

Planning ahead before you run out and spend your life savings to develop a prototype or initial product only to find out that they do not sell could save you time, money and heartbreak down the road.

Want to Learn More About Owning a Franchise? Workshop May 2nd.

SPOKANE, Wash.— Spokane’s Small Business Development Center is offering a free  “Career Alternatives in Franchise Ownership” class from 8:00 – 10:00 a.m. on May 2nd  at the Spokane WSU SBDC, 665 N Riverpoint Blvd, Suite 201.
This workshop is designed to help you decide whether franchise ownership is right for you. You'll learn how to safely select, evaluate, finance and succeed in a franchise business, as well as gain insight into top industry sectors likely to perform well now and over the next few years. Presented by Charlie Magee of FranNet.

Register online by at http://wsbdc.org/training-calendar or email cdoyl@wsu.edu. Phone 509-358-7890.

Tuesday, March 18, 2014

Lender Matters: What Business Owners wish for in a Banker

Lender Matters, Spokane Small Business Development Center Banker E-newsletter
By:  Alan Stanford, Certified Business Advisor.

In what will become a regular feature in this newsletter, SBDC Advisors from around the State of Washington have collaborated to share their thoughts and comments received from small business owners about common issues facing small businesses today.  

Taxes, healthcare, and the condition of local economies appear near the top of every business owner’s list, but one issue seems to be drawing the most comments from SBDC clients ….the challenges (and often hesitation) of applying for a business loan. Our colleagues provided some valuable feedback; we found their comments interesting and a bit surprising so we thought we would share some of them with you.

Does trust matter?
We have taken these comments to heart to better prepare ourselves for assisting business owners and aspiring entrepreneurs understand their businesses and raise the capital needed to operate efficiently and profitably.  In 2013, the SBDC network in Washington State assisted over 3,000 business clients raise over $36 million in new capital.  Can that amount go higher?  Absolutely it can.   

So what is the primary thing that small business owners are looking for in a lender?   

A Business Relationship.  Not a relationship where the goal is a cross-sell ratio, or one where the owner is always called by name, but a relationship that is built on four key elements:
  • trust
  • expectations 
  • communication
  • consistency
It is interesting to note that SBDC client comments were not directed at any one specific bank, credit union, or capital fund in any one specific part of the State; they seemed to reflect the general condition of lender-borrower relationships and the attempts by both parties to come to an agreement on a definition.  

The two elements of a business relationship that came to our attention most often were “building Trust” and “meeting Expectations”.  In this issue we will present two of these elements as described to us by our business clients.  

Trust has been defined as “achieving a level of confidence to rely on a persons' (or entity’s) integrity, ability, strength, honesty, and effectiveness”.  You would think that banks, credit unions, and economic development groups being so heavily regulated and administered that Trust is the perceived protocol.  

Here is what our business clients are saying:
Why won't they just
give me the money?
  • “The loan officer does not seem to have a genuine interest in my business or have the experience to know and understand what I do.”
  • “The lender does not seem to have the resources or tools available to service me; for that matter, front line staff are not trained or prepared to answer my questions.”
  • “I want a lender who cares enough to take the time to explain what the business could do better to get approval on a loan this time or even the next time around.”
  • “The loan officer liked what they saw in my loan application package and thought it would not be a problem to do something.  Three weeks later they told me the application had been declined for a number of reasons.”
How do we assist lenders and build trust with potential borrowers?  Many of the clients we work with are seeking their first loan or are expanding their business for the first time.   As a result, we need to do a better job of preparing clients to meet with lenders and present a loan request.   We need to make sure lenders understand the business, the market, the industry, and the loan request whether they are reviewing a business plan or a loan request summary.  

At the same time, clients need to understand the loan request, why they are applying, and how to use loan if approved.  We have found that first-time borrowers and even companies that have been around for a while need a refresher on applying for a loan, knowing what types of loans are available, how to use credit, and understanding the language of finances.  

SBDC Advisors spend a great deal of time educating business clients about finances and how to apply for a business loan in hopes of bridging gaps with lenders. 

How long will it take?
If we take all the assumptions out of the equation on both sides, there is more room for trust to be built and a relationship to start.

Expectations can be defined as “what is considered the most likely to happen. An expectation, which is a belief that is centered on the future, may or may not be realistic. A less advantageous result gives rise to the emotion of disappointment. If something happens that is not at all expected it is a surprise.”  

Do potential borrowers always know what to expect when they apply for a loan?  Based on the comments we received, there is some opportunity for improvement here.
  • “I should have asked how long the loan approval process was.  I submitted what I thought was a complete application and heard back from the lender three weeks later that they needed more information.”
  • “I was never told what the lender’s minimum capital and collateral requirements were.”
  • “My loan application was declined, but I never found out what the strengths and weaknesses were.  I guess a decline will always be a decline.”
  • “Why can’t they just give me the money?”
The SBDC has taken these comments to heart and we strive to assist our clients understand the loan process and the overall experience of applying for a business loan.  SBDC Advisors reach out to local lenders to identify the steps, the language, and the time frames they will follow when our clients are referred to a specific lender.  

This information is being used to put together an outline of questions for our clients to ask when meeting with a lender for the first time.  The more clients are aware of the expectations of the lender the more complete their application presentation will be and the experience has more of an opportunity to be a positive one. 


Monday, March 17, 2014

Lender Matters: Five Advantages from Working with an SBDC Advisor

We are starting a series of articles for lenders, as indicated by "Lender Matters".  If you are receiving this newsletter, you are likely aware of the services offered by the Small Business Development Center (SBDC).  We offer confidential, no-fee business advising services for small business owners in most industries from detailed financial analysis and preparing a loan package to marketing and personnel issues.

Working with an SBDC advisor can help better prepare your business customers in putting together a loan application, buying or selling a business or expanding an existing business.  We can also review start-up business plans and walk a business owner through cash flow projections.  It is our practice to always direct any banker referrals back to the source.

Here are five advantages for bankers and your business clients from working with a business advisor:

1.  Education.
Business advisors spend a lot of time educating business owners on the lending process, bank requirements and SBA loan programs.  Our goal is to prepare clients for any possible questions the loan officer may pose.  We also are aware of regional resources available that may assist clients such as classes, conferences and other events.

Ratio analysis sample
2.  Cash Flow Projections and Assumptions
Advisors may spend hours with a client fleshing out detailed assumptions and cash flow projections that they provide.  We work with the clients using a variety of tools and spreadsheets that show assumptions, 3 year cash flow, income statement, balance sheet and ratios.  

3.  Global Financial Analysis
In many cases, a business owner may not fully understand the balance sheet or ratios. Performing a global analysis can take a closer look at A/R, Inventory turns, and other key ratios that factor in to a loan proposal.  

4.  Preparation
Business advisors may spend hours with a client to thoroughly review a business plan, work together on assumptions and cash flow projections, and more to help them prepare to meet with their lender.  We provide a checklist of items they should start gathering such as a personal financial statement or tax returns and we also explain the various SBA and other loan programs.

5.  Objective Third Party Review
In some cases, your business customers are not ready or prepared to apply for a loan.  SBDC advisors work with clients to assess business readiness, educate them on the loan process and requirements and work with them to present a well structured and complete loan package that fits with a bank's criteria.  


It is a win-win for advisors, bankers and most importantly, the business owner.  We all want to see our clients succeed, grow and get their loans paid off so they can grow (and borrow) some more!