In most recent times these folks have lost nearly $100 billion - do you think they are actively seeking new loans right now? Probably not - if you are a customer tread lightly and bring a solid bit of collateral (not mortgages, sorry) to the table.
It's a goofy lending world out there, but for the folks under $21MM in Revenue at least you have the SBA to consider.
Monday, June 29, 2009
Monday, May 25, 2009
Dissent on Your Board - Plan on it
The new SEC policies cited in Fair Game this weekend show that in public company situations it's good to have dissenters on your board. The article refers to a study by the IRRC Institute that shows if a company has dissenting board members (submitted say by a rich guy or a hedge fund) then both short term and long term shareholder returns are substantially higher. Great for public company situations, and the SEC is going to make it easier now, but how can this apply to a small company/ private situation?
Well, surely you are not going to sit a foe on your board, but they shouldn't all be yes men either. Outside advisers, from the ranks of attorneys, accountants, and bankers, not to mention customers (if you are a supplier) can be a great resource for alternative strategies, contrary ideas.
Make a point of having a broad representation on your board and you will find the advise can lead to better business outcomes for your company. Your pocketbook and your employees will thank you for it.
Well, surely you are not going to sit a foe on your board, but they shouldn't all be yes men either. Outside advisers, from the ranks of attorneys, accountants, and bankers, not to mention customers (if you are a supplier) can be a great resource for alternative strategies, contrary ideas.
Make a point of having a broad representation on your board and you will find the advise can lead to better business outcomes for your company. Your pocketbook and your employees will thank you for it.
Monday, April 27, 2009
Shortage of Doctors - No Kidding?
When I saw the title of this NYTimes piece I thought, yep that's what happens in a free market for a scarce resource. The free market moves resources to where the demand is greatest, keeping all satisfied at the market price. When you limit supply, as doctors have been for years by the AMA regime, resources continue to follow demand, but not all will get what they need, and pricing differences will drive the solution, highest prices (in the cities mostly, or the Mayo Clinic) will get the docs. Economics 101 and a really bad way to allocate a public resource. Fix that Obama, a hard nut to crack.
Tuesday, April 7, 2009
Speak with Your Investors, It's Tough Out There
We are in a rough time for all small businesses, but especially for relatively new or start-up businesses. The medical device market is one of them. In this excellent New York Times article the writer describes an innovative company that is suffering from current market conditions.
I went through a similar situation early in this decade when the company went from 120 people to less than 80 after a new round of money from investors. That was just after the bottom fell out from the Tech bubble (remember April 2001 - kind of gets lost because of 9/11 that year, but it was bad for the market for sure). New products get the first shaft, for sure.
In addition, professional investors are again starting to focus on under-performing companies, witness a little fight/fray going on in the Chicago suburbs as described in a recent article by Greg Burns in the Chicago Tribune. The dispute revolves around a hedge fund manager who holds a small company's stock, and it disappointed with the market performance relative its peers and focuses the complaint on overhead and related costs in the corporate suite.
These are nervous times my friends, keep hold of your cash and find ways to survive. Keep in close contact with your investors (keep those friends close, and enemies closer), make them feel special, else they might pounce and end your run.
I went through a similar situation early in this decade when the company went from 120 people to less than 80 after a new round of money from investors. That was just after the bottom fell out from the Tech bubble (remember April 2001 - kind of gets lost because of 9/11 that year, but it was bad for the market for sure). New products get the first shaft, for sure.
In addition, professional investors are again starting to focus on under-performing companies, witness a little fight/fray going on in the Chicago suburbs as described in a recent article by Greg Burns in the Chicago Tribune. The dispute revolves around a hedge fund manager who holds a small company's stock, and it disappointed with the market performance relative its peers and focuses the complaint on overhead and related costs in the corporate suite.
These are nervous times my friends, keep hold of your cash and find ways to survive. Keep in close contact with your investors (keep those friends close, and enemies closer), make them feel special, else they might pounce and end your run.
Sunday, April 5, 2009
Baseball for Small Business and a Sports Business event
Since opening day is just around the corner, Wait it's today!, I wanted to post a little reference to a nice article currently on Inc. magazine's site about small businesses that are servicing big league baseball teams. The article focuses on businesses providing everything from protection netting to biodiesel recycling at Turner Field, the home of the Braves. It's just nice to know that the all American sport provides a great number of jobs to small businesses. It is the American way after all.
I also wanted to give a shout out to my local business school club which is hosting a stellar panel discussion among renowned sports business executives in Chicago on April 23rd. The Ross Alumni Club of Chicago, local home of the graduates of the University of Michigan Business School, is hosting it's 6th annual Spring Conference, a dinner discussion around the topic of Sports Business; for the love (or profit?) of the game; with open online registration (with full details) currently ongoing. It's open to grads and friends (e.g. the general public) as long as tickets are available, get yours now for this exciting event!
I also wanted to give a shout out to my local business school club which is hosting a stellar panel discussion among renowned sports business executives in Chicago on April 23rd. The Ross Alumni Club of Chicago, local home of the graduates of the University of Michigan Business School, is hosting it's 6th annual Spring Conference, a dinner discussion around the topic of Sports Business; for the love (or profit?) of the game; with open online registration (with full details) currently ongoing. It's open to grads and friends (e.g. the general public) as long as tickets are available, get yours now for this exciting event!
Monday, March 23, 2009
More Detail on the SBA revamp
Though it doesn't affect demand for borrowers products, the new SBA flexibility can help a small business survive these challenging times. More news on the program and it's effects today from the Chicago Tribune.
Wednesday, March 18, 2009
SBA Loans are Open Again!!
As Melanie Lindner writes in Forbes, the SBA loan market is being freed up by the Obama administration's injection of $15 billion for purchases in the secondary market. This market works like the mortgage market and has been frozen for several months now. By freeing this secondary market banks will have new capacity to originate new loans.
Even better for borrowers, through the end of 2009 the SBA is waving origination fees (not sure about the bankers, I'm sure they'll still want their fees), and upping the percentage the government guarantees from 75% to 90%, making these loans much more attractive to lenders.
So it's now time to go to your banker and ask, what amount and terms can I get now to sustain and grow my business?
Even better for borrowers, through the end of 2009 the SBA is waving origination fees (not sure about the bankers, I'm sure they'll still want their fees), and upping the percentage the government guarantees from 75% to 90%, making these loans much more attractive to lenders.
So it's now time to go to your banker and ask, what amount and terms can I get now to sustain and grow my business?
Sunday, March 1, 2009
Healthcare in America, will it get Fixed?
From President Obama's latest speech, "We can no longer afford to put health care reform on hold." Good news for who? Bad news for who? Hard to be sure at this point, but we can't hope to go on with the double digit rise of the cost of health care.
As noted by Robert Frank in an artcle from February 2007 (when we weren't so wrapped up in the Economy and it's problems that we could rationally discuss health care issues), he noted that "...we spend more than twice as much on health care, on average, as the 21 countries in which life expectancy exceeds ours. American costs are so high in part because the reliance on private insurance multiplies administrative expenses, currently about 31 percent of total outlays." A certain target for the reformers will be this dubious spending on administrative costs in the system, not on customer care directly.
I am aware of a doctor group, and it's not an unusual situation for the industry, that has over 3 times as many administrative staff as doctors, mostly dealing with receivables. These receivables are a big headache, getting payed by the hundreds of insurance companies with different paperwork, dictates, and procedures, not to mention the complexities of Medicare, is a nightmare.
If the administrative costs are to be addressed, the big losers will be health care insurers, Aetna, the Blues, etc as described in today's article by Reed Abelson in the NY Times. The winners will be consumers, doctors, the companies who insure their workers, and the public in general from lower healthcare prices. This is something to anticipate and be prepared for, the later more so if you are on the insurers side.
As noted by Robert Frank in an artcle from February 2007 (when we weren't so wrapped up in the Economy and it's problems that we could rationally discuss health care issues), he noted that "...we spend more than twice as much on health care, on average, as the 21 countries in which life expectancy exceeds ours. American costs are so high in part because the reliance on private insurance multiplies administrative expenses, currently about 31 percent of total outlays." A certain target for the reformers will be this dubious spending on administrative costs in the system, not on customer care directly.
I am aware of a doctor group, and it's not an unusual situation for the industry, that has over 3 times as many administrative staff as doctors, mostly dealing with receivables. These receivables are a big headache, getting payed by the hundreds of insurance companies with different paperwork, dictates, and procedures, not to mention the complexities of Medicare, is a nightmare.
If the administrative costs are to be addressed, the big losers will be health care insurers, Aetna, the Blues, etc as described in today's article by Reed Abelson in the NY Times. The winners will be consumers, doctors, the companies who insure their workers, and the public in general from lower healthcare prices. This is something to anticipate and be prepared for, the later more so if you are on the insurers side.
Wednesday, February 18, 2009
Stimulate Demand and Supply will Follow
Everyone wants their piece of the pie, the pie being the $787 billion stimulus plan. But the cries from small business for more of the pie have gone on deaf ears, according to their mouthpieces at the NFIB and SBEC.
Of course direct assistance is preferable, but haven't we finally gotten past the days of trickle-down Reganomics? Remember the Lafer curve? Is a payroll tax holiday really an effective stimulus? I think not, it will surely keep the lights on a bit longer for struggling small businesses. But isn't the free market supposed to weed out the week suppliers?
With consumers representing 2/3's of economic demand in the economy, should not the biggest stimulus go that group. And in the bill it does, the biggest single item ($116 billion) is for a tax cut for individuals. People are not spending as much as they were, and won't until they feel better about the economy and their prospects. The direct stimulus to consumers will temporarily prop-up their spending until the job engine restarts. This is what the small business community needs, even if they can't see it right now. Fix the demand side and supply will follow, Economics 101.
Of course direct assistance is preferable, but haven't we finally gotten past the days of trickle-down Reganomics? Remember the Lafer curve? Is a payroll tax holiday really an effective stimulus? I think not, it will surely keep the lights on a bit longer for struggling small businesses. But isn't the free market supposed to weed out the week suppliers?
With consumers representing 2/3's of economic demand in the economy, should not the biggest stimulus go that group. And in the bill it does, the biggest single item ($116 billion) is for a tax cut for individuals. People are not spending as much as they were, and won't until they feel better about the economy and their prospects. The direct stimulus to consumers will temporarily prop-up their spending until the job engine restarts. This is what the small business community needs, even if they can't see it right now. Fix the demand side and supply will follow, Economics 101.
Tuesday, January 13, 2009
Sorry About that Inventory, Prices Must Come Down
As George Reisman notes in a recent column, falling prices are not the cause of deflation, they are the solution to it.
Reisman defines deflation as the lowering of DEMAND for goods - this lower demand drives prices lower so that equilibrium is reached.
The losers in a deflationary environment are asset holders. People with fixed assets (like houses) and even liquid assets (like stock market investments which are held long term), as well as companies with large finished goods inventory; all have seen a large decline in the value of these assets over the course of 2008.
Reisman rightly implies that holding off on clearing the market is not the solution. This is what happened during the 30's in America, and Japan in the 90's. In the former case money tightened thus driving prices higher, not lower as they needed to go to clear the market. In Japan, the money supply was opened wide, but institutional restrictions held prices artificially high.
In our current situation, the Fed has opened the money supply widely putting short term interest rates close to zero. By pumping lots of liquidity into the market they hope to stimulate demand. As well, prices are falling in the housing market, and no restraints on falling prices have yet arrived (e.g. beware price controls, remember them from the Nixon era?).
The market must be allowed to clear to get the economy moving again, however the looseness the Fed is now encouraging and enforcing through it's various powers, will most likely result in rampant inflation sometime around late 2009 - 2010 so beware.
Reisman defines deflation as the lowering of DEMAND for goods - this lower demand drives prices lower so that equilibrium is reached.
The losers in a deflationary environment are asset holders. People with fixed assets (like houses) and even liquid assets (like stock market investments which are held long term), as well as companies with large finished goods inventory; all have seen a large decline in the value of these assets over the course of 2008.
Reisman rightly implies that holding off on clearing the market is not the solution. This is what happened during the 30's in America, and Japan in the 90's. In the former case money tightened thus driving prices higher, not lower as they needed to go to clear the market. In Japan, the money supply was opened wide, but institutional restrictions held prices artificially high.
In our current situation, the Fed has opened the money supply widely putting short term interest rates close to zero. By pumping lots of liquidity into the market they hope to stimulate demand. As well, prices are falling in the housing market, and no restraints on falling prices have yet arrived (e.g. beware price controls, remember them from the Nixon era?).
The market must be allowed to clear to get the economy moving again, however the looseness the Fed is now encouraging and enforcing through it's various powers, will most likely result in rampant inflation sometime around late 2009 - 2010 so beware.
Monday, January 5, 2009
Why Delay the Repeal of the Tax Cuts for the Rich Indeed
Robert Frank made a measured argument in a recent New York Times Economic View column opining that cuts enjoyed by the rich from ancient times (the original Bush tax cuts, and due to expire in 2010) should be repealed now, and instead given to the middle class and poor. Indeed we could expect "..the immediate effect would be an increase in total spending roughly equal to the additional revenue from repealing the (tax) cuts."
This argument is compelling given the relative need for increased cpmsumer spending across the board. The redistribution will be used for needs, not savings. Although we need to encourage saving more in the long run, right now we need the spending.
America needs a spending recovery to get us out of this recession, not a few rich dudes hoarding tax cuts in their holdings for heirs. Listening Obama??
This argument is compelling given the relative need for increased cpmsumer spending across the board. The redistribution will be used for needs, not savings. Although we need to encourage saving more in the long run, right now we need the spending.
America needs a spending recovery to get us out of this recession, not a few rich dudes hoarding tax cuts in their holdings for heirs. Listening Obama??
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