Craig G. Francis

Changes in Small Business Lending

As this year progresses, we are seeing more changes and movement in the small business lending field. Some of it is questionable, but there are positive signs out there. We are by no means out of the woods yet, and there are still many rocks ahead, but perhaps the financial waters are becoming a little less choppy.

In the previous 12 months about 59% of those businesses surveyed had applied for funding, with 57% actually receiving money

First of all, a report in Investment News cites a new study by Greenwich Associates, the financial services research and analysis company. According to the study, it appears that lending may be returning to pre-Recession levels - at least by some measurements. The report is based on the analysis of over 500 businesses with total annual sales in the $1 to $10 million dollar range. According to Greenwich, in the previous 12 months about 59% of those businesses surveyed had applied for funding, with 57% actually receiving money - which is close to what they say are “historic” levels. Greenwich explains that this improvement in small business financing numbers follows on the earlier return of near-normal lending to stronger middle market companies. The improvement was due in part because of smaller lenders moving in after major banks cut back on their lending to small businesses. This was followed by the big banks moving back in to the field after paying off large chunks of their TARP money. As I have pointed out many times, banks are in the business of lending money, so sooner or later they would have to return to that mission. Many questions remain regarding the big banks’ real commitment to small businesses, but again, any movement forward is an improvement.

On another lending front, the Small Business Lending Fund continues to straggle along. That is the $30 billion fund that the Small Business Jobs Act created last fall, with the idea of making it more attractive for community banks to lend to small businesses. Alas, in the best practices of the Federal Government, the details have been agonizingly slow in coming. An article in Finance & Commerce reports that the fund, which was first outlined by President Obama back in January, 2010, still does not have all of its regulations in place. According to the report, it took over three months for the rules applying to C-Corp banks to be finalized, and the rules for S-Corp banks are still unfinished. For a program that was supposed to stimulate lending to those small businesses that traditionally pull the country out of down economic times, this is not a confidence booster. As the article points out, many banks in Minnesota have chosen not to pursue funds through the program, and this is echoed in many other parts of the country. Another reason mentioned, and one I saw back when this was put in place, is the concern many community banks have about letting Washington have any more hold over how they do business. When the government comes to your door with money in hand, be very careful about what is in the other hand.

CFO.com reports that the first sale of notes backed by a pool of SBA-guaranteed loans was recently completed by Newtek Business Services

Finally, it seems that there is a new game in town when it comes to asset-backed securities. CFO.com reports that the first sale of notes backed by a pool of SBA-guaranteed loans was recently completed by Newtek Business Services. The $16 million deal provided $24 million in backing as insurance against the sort of collapse we saw with mortgage-backed securities. The big change here is that Newtek used the unguaranteed portion of loans in the securities, rather than the SBA-guaranteed portion. This is a new wrinkle that will bear some watching to make sure it does not lead to trouble.

It will take some time to sort out just what this all means, but one thing that we do know is that money is out there for the right businesses. The trick is showing lenders that your business is one of those “right” businesses for them to work with. This means knowing how to present and package your company, as well as knowing which lenders to approach. There is a science to creating a successful SBA loan application package, and with over 30 years in the industry I have the experience and the contacts to help you get the right package in front of the right lender.

There is, however, something you need to understand - while the major banks in the US, the ones you hear in commercials, claim to be lending $10 billion, or more, to small businesses, the reality is that they are lending to the largest end of the small business spectrum. This spectrum includes the middle market of businesses with sales ranging from $10 million to $100 million. This might be their definition of small business, but it generally does not include the small firms that we most commonly associate with our spectrum of businesses. That means the best bet is either working with a smattering of small community banks or a combination of big and small banks to see which has an open door and a credit culture that will accommodate your situation. If you prefer to work on your business instead of banging on a bunch of bank doors, let me know. I will probably know which banks are most likely to give you the approval you are seeking. Contact me and we can discuss your situation and needs in greater detail.

Craig G. Francis is the owner of Francis Financial and The SBA Loan Store. He has been a top producer of SBA Loans since 1981, and has worked with Dun & Bradstreet and Bank of Commerce. Craig Francis has the expertise to steer clients through the often confusing rules and regulations associated with SBA Loans, having helped over 2,000 businesses acquire over a billion dollars in loans. He can be contacted through CraigGFrancis.com, SBALoanStore.com, on LinkedIn, or at 888-666-9722.

Good News for SBA - for Now

We did get a little bit of good news out of Washington, with the agreement by Congress and the White House on a budget for the remainder of the 2011 fiscal year (which ends in September). And not just the fact that there was an agreement. According to a report in the New York Times, the SBA budget for the rest of the year will not take any major hits, in spite of earlier talk. As with the rest of the federal government, the SBA will face a 0.2 percent cut in discretionary spending. What it won’t have to deal with - yet - are bigger cuts in special programs. But that is likely to change for the 2012 budget.

The earlier version of the budget, passed by the House in February, actually did cut about $25 million dollars from the SBA for salaries and expenses, which would have affected counseling grants and some other functions. However, the final agreement returned the SBA budget to $433 million. It also keeps the separate loan guarantee fund at $236 million. This is good news for small businesses that are currently in the process of applying for SBA-guaranteed loans.

On the other hand, the 2012 budget promises to be reduced from the current level, no matter who comes out with the stronger argument. The Republican-led House, in a budget outline presented by Congressman Paul Ryan, would call for a $100 million reduction in the SBA appropriation level. President Obama’s proposal would cut only $28 million from current levels.

Since the SBA looks to have less money next year, now is the time to look into applying for a guaranteed loan. If you are looking to expand your business or, even better, if you are looking to purchase commercial real estate, contact me to evaluate your current situation. With over thirty years in the lending industry, I have the experience and contacts that can help give the right borrower the edge needed to get an application approved.

Craig G. Francis is the owner of Francis Financial and The SBA Loan Store. He has been a top producer of SBA Loans since 1981, and has worked with Dun & Bradstreet and Bank of Commerce. Craig Francis has the expertise to steer clients through the often confusing rules and regulations associated with SBA Loans, having helped over 2,000 businesses acquire over a billion dollars in loans. He can be contacted through CraigGFrancis.com, SBALoanStore.com, on LinkedIn, or at 888-666-9722.

Good News for Commercial Real Estate Owners

Last year, as part of the Small Business Jobs Act, Congress authorized implementation of a program that would allow some owners of owner-occupied commercial real estate (CRE) to refinance with an SBA 504 loan. When that program began in February, 2011, only CRE with maturing mortgages or balloon payments due before December 31, 2012, was eligible for consideration. That is all about to change.

 
In a press release on Tuesday, March 29, the Small Business Administration announced that by April 6, with publication of the changes in the Federal Register, the program will accept CRE with  maturation or balloon dates beyond December 31, 2012. The goal is to provide small businesses with a way “ to secure more stable, long-term financing” in order to avoid potential foreclosures that would further damage the struggling economy. The money businesses save with lower financing rates could be used to cover day-to-day expenses, and could make the difference between survival and failure.

The program is not eligible to all small businesses. The CRE must be owner occupied with the debt  incurred less than two years before applying. In addition, the business must have been in existence more than two years and payments on the debt must be up to date for the past 12 months. Businesses can refinance up to 90% of appraised value or 100% of the outstanding loan, whichever is less, and money received through the program can only be used for expenses normally eligible through 504 loans.

The program will only run through September 27, 2012, or until all the money has been allocated. The Small Business Jobs Act authorized the SBA to approve up to $7.5 billion each year in 2011 and 2012, and expectations are that it will go quickly. You can read the complete press release here. If you are interested in applying and would like advice and guidance, you can contact me at 888-666-9722 and we can set up a time to discuss your business’ particular situation.

Craig G. Francis is the owner of Francis Financial and The SBA Loan Store. He has been a top producer of SBA Loans since 1981, and has worked with Dun & Bradstreet and Bank of Commerce. Craig Francis has the expertise to steer clients through the often confusing rules and regulations associated with SBA Loans, having helped over 2,000 businesses acquire over a billion dollars in loans. He can be contacted through CraigGFrancis.com, SBALoanStore.com, on LinkedIn, or at 888-666-9722.

Treasury Conference Looks at Lending Issues

Tuesday the Treasury Department hosted a conference with much of the focus on business funding issues. U.S. Treasury Secretary Timothy Geithner and Small Business Administration Administrator Karen Mills both spoke at the meeting that included entrepreneurs, venture capitalists, and government administrators. In a replay of what has been said many times already, both Geithner and Mills touched on the difficulties small businesses have had accessing funding since the beginning of the Recession.

Two articles in the Wall Street Journal touched on different aspects of the conference. In “Opinions Abound at Capital-Access Forum,” author Emily Maltby relates the discussion on how to improve funding for so-called “gazelle” firms (“those top-performing companies that take off rapidly and provide jobs”). One problem, as detailed by representatives of smaller venture capital companies, is the tendency for institutional investors to go with larger VC firms, when they invest at all. The challenge, according to Mills, is finding ways to encourage these companies to get “back in the game.”

Jeffrey Sparschott’s article (“Small Businesses Need Funds to Compete -Geithner”) touches on this same issue as he reports on Geithner’s concern that "The financial crisis caused a great deal of damage to the capacity of innovators to access capital.” It is important, he says, that “innovative companies” have access to the funding they need in order to help deal with the lingering economic malaise.

One important element that is brought up in the Maltby article is the concern voiced by a number of participants on government involvement in getting lending back on track. From over-regulation to unintended consequences, government involvement in business is always troubling. Several participants specifically pointed out problems with SEC regulations being “outdated” in light of recent developments in online funding platforms. Others called for “solid and more-predictable government policy” from Washington.

Some of what the Treasury meeting brought up will be beneficial, if businesses are allowed to put ideas into practice with limited government involvement. However, seeing that this was sponsored by the Treasury, it’s likely that Washington will have its fingers in as much as possible. And we have seen what happens when government becomes involved. My concern is that with taxes, regulations, health costs, lack of capital and an anti business environment in the White House as mill stones around the neck of real job-creating  business people, these “gazelles” will be about effective as the 'green jobs' and 'clean energy jobs' in pulling us our of this mire.

For now, the best plan for business owners and new entrepreneurs is to work with someone who can help them get all of the details in order before applying for funding. The requirements the banks and other lenders have put in place since 2008 can be onerous, but they are not impossible to work through. I have been in the loan industry for over three decades and have worked with all types of lenders. You can sign up for two complementary reports and I will contact you to set up a time to discuss your business needs.

Craig G. Francis is the owner of Francis Financial and The SBA Loan Store. He has been a top producer of SBA Loans since 1981, and has worked with Dun & Bradstreet and Bank of Commerce. Craig Francis has the expertise to steer clients through the often confusing rules and regulations associated with SBA Loans, having helped over 2,000 businesses acquire over a billion dollars in loans. He can be contacted through CraigGFrancis.com, SBALoanStore.com, on LinkedIn, or at 888-666-9722.

President Obama Launches Startup America Partnership

In an effort to jump-start American business and entrepreneurship, President Obama joined with Steve Case, co-founder of AOL, and Carl Schramm, President and CEO of the  Ewing Marion Kauffman Foundation, to announce the Startup America Partnership at a press conference on January 31. The goal behind the Partnership is to help promote the White House’s Startup America Initiative that seeks to encourage entrepreneurship and achieve “sustainable growth and quality jobs.” The initiative is part of President Obama’s efforts to rebuild American business and compete in the Global Marketplace.

As a private, non-profit organization, the Startup America Partnership is funded by the Ewing Marion Kauffman Foundation and the Case Foundation. The Partnership is also supported by a wide array of companies and educational groups including Facebook, HP, Intel, The Blackstone Charitable Foundation, the Charles Stewart Mott Foundation, and the Network for Teaching Entrepreneurship. Among the goals of the Partnership are increasing education and mentorship programs for entrepreneurs, providing more funding for startups, and removing regulatory and other barriers to business creation.

At SBALoanStore.com, we will be closely following the efforts of the Partnership. This could be a major step towards improving the business climate in the country. If you would like more details on the Partnership you can read the Startup America Press Release.

Craig G. Francis is the owner of Francis Financial and The SBA Loan Store. He has been a top producer of SBA Loans since 1981, and has worked with Dun & Bradstreet and Bank of Commerce. Craig Francis has the expertise to steer clients through the often confusing rules and regulations associated with SBA Loans, having helped over 2,000 businesses acquire over a billion dollars in loans. He can be contacted through CraigGFrancis.com, SBALoanStore.com, on LinkedIn, or at 888-666-9722.

What Businesses Really Want

In an interestingly titled piece in Bloomberg (“Obama Charm Offensive Must Convince Small Businesses of Economic Vitality”), author Ian Katz opens with comments on what President Obama needs to do to help convince businesses to begin hiring again. He explains how the President needs to convince companies to part with some of the cash they are “sitting on” and use it to increase the country’s employment numbers. But what is most telling about this story is that he actually spends the great majority of it talking about how one company in particular, Hope Global, has weathered the Recession and why it probably won’t be hiring American workers any time soon.

Hope Global, a Rhode Island-based manufacturer, produces such varied products as laces for Timberland boots and cargo nets for SUVs. Owner Cheryl Merchant explains that for her company to start hiring any time soon there has to be real positive movement in the economy.  “I’m not putting in people believing it’s going to happen. It’s got to happen first,” she told author Katz. What she has done is to restore some of the cuts the company had to make during the worst of the downturn.

This illustrates one of the major problems with the economy in this Recession - companies are not hiring until the economy improves, but the economy is not going to substantially improve until more people are working. It is difficult at best for consumers to purchase those products companies like Hope Global are selling when they don’t have sufficient income due to unemployment or underemployment. President Obama is big on the “Hope and Change”  that got him elected, but slogans don’t change the economy.  Ask a business owner what they think about "Hope and Change” of any sort, presidential or not, when making plans to hire people and buy new equipment and factories. They don't HOPE the economy will CHANGE. They need solid and certain data to back up their plans for growth. Business owners have to make real choices in the real world. They have no safety net since their entire net worth is tied up in the business. Mistakes can be fatal, and when the government shows up saying “We are here to help” the business owner should be cautious to a fault.

So if businesses are caught in the no jobs/no sales cycle, is there anything else that can be done to help? Simply put, the government needs to get out of the way of small businesses and let them at least try to make some headway. The two-year extension of the Bush-era tax rates was a start, but it needs to be at least 5-7 years and preferably permanent. Two years is not long enough for business owners to feel confident about taking chances; they need a long-term or permanent sense of security regarding taxes. Eliminating Obamacare and its draconian regulations would also benefit small businesses by removing multiple layers of requirements that threaten to strangle companies. Finally, cutting the layers of paperwork that governments require for any steps would free up business owners to do what they do best - create jobs and improve the economy.

Do I expect any of this to happen soon? Of course not, but the more we speak up about what needs to happen the better chance some of it might go through. Until anything changes, business owners will continue to struggle with rules, regulations, and requirements that do more to hinder economic growth than they do to improve our situation. If you are a business owner who is working to expand, first I salute your tenacity and spirit. Second I offer two complementary reports that can help you in your efforts. I am available through the links below if you have questions about funding your business plans.

Craig G. Francis is the owner of Francis Financial and The SBA Loan Store. He has been a top producer of SBA Loans since 1981, and has worked with Dun & Bradstreet and Bank of Commerce. Craig Francis has the expertise to steer clients through the often confusing rules and regulations associated with SBA Loans, having helped over 2,000 businesses acquire over a billion dollars in loans. He can be contacted through CraigGFrancis.com, SBALoanStore.com, on LinkedIn, or at 888-666-9722.

2010 - A Year in Review, Part 3

Recently my friend and business colleague David Kamatoy approached me for an interview on my top stories for 2010. It seemed like a good way to close out the year and prepare for, hopefully, bigger and better things in 2011, so of course I agreed. David is posting the interview in three parts on his blog, DavidKamatoy.com, and I am reposting them here. You can follow David on his blog and on Twitter or Facebook.

In Part 1 of our conversation I talked about the top small business stories of 2010, and in Part 2 I opined on the economy. Today - my thoughts on politics and a look ahead at 2011.

David Kamatoy: Last year was a banner year for political speculation, with the rise of the Tea Party, the seemingly unending contentions in Congress, and the results of the midterm elections. Out of everything that happened in Washington and across the political landscape, what three events would you rate the most important?

Craig G. Francis: The midterm elections were certainly a major story. The House is in the hands of some allegedly mature people who've committed themselves to repudiation of the worst of the last two years. It is going to take years and a full change-out of the present political culture to realize these able politicians’ best hopes. And that is if they can keep their heads in the middle of the Beltway mentality. Few politicians can resist drinking the Kool Aid of power.

We do not have much wiggle room or time given the fact that our national debt is approaching $15 trillion dollars and growing by $1.2 trillion a year.  If our national debt exceeds our GDP we will face a Greece-like debt burden that will change everything we know today. Interest rates will skyrocket. Loans will be prohibitively expensive. Tax revenues will plunge. Business sales and profit margins will evaporate and unemployment will rocket upwards. We will yearn for the days of financial malaise that characterized the Carter presidency. At least we had Reagan to help us out of that mess.

Inflation could easily hit 10-15% as we print increasingly devalued FIAT CURRENCY with Quantitative Easing II, IV and V, while  inflating  ourselves into insolvency. EVERY country in the history of mankind that debased their currency created the double barreled blast of inflation and economic ruin. Google that and see what comes up.

Even with the changes in the House of Representatives we are not in safe waters. Congress and the president have not done anything in the last 2 years to help with the job situation or programs to allow business owners some certainty in the years ahead. The best we can expect from a divided government is gridlock. In these fiscally uncertain times, this is not a healthy situation.

The Tea Party is a growing force in the political landscape but the changes needed to make inroads to fiscal responsibility will require draconian  measures. This will require a complete change of power in the House, Senate and Presidency plus a fiscally responsible cadre of citizen politicians at the state and local level.

If this scares you, so be it. I'm also scared by what I see and am not confident that the Tea Party candidates can reverse our present course in short order. My business and financial well being is as much on the line as anyone else’s. It will take enormous courage and will to make progress in this present time of troubles.

David Kamatoy: Now that we have survived 2010, most of us are looking ahead to 2011 with at least a modicum of hope. Where do you see things going in the new year? How much of an impact will the Republican majority in the House have on the direction of the government and the economy? And do you think the economy will make as much of a recovery as the President seems to believe?

Craig G. Francis: You posed the question with the wording “survived 2010.” Yes, we survived. And we will survive the economic problems that will certainly occur without stringent and harsh measures needed to get our fiscal ship back on course. We will survive into the future. We are not going to die and eat worms, but it will be bleak. But survival is not the optimum strategy, since entrepreneurs are by their nature optimistic, nearly at a myopic level. And we need optimism from the small business owners community.

So here is what I  have to say to business owners anywhere who are reading this.

I think we are in for a long period of economic stagnation with little hope for business owners, either budding or established. I am NOT optimistic, and this is due directly to the  government policies of the last 4 years and longer. We hired these jackwagons and they have given us what we have now. Unless we are willing to remove them from office, we will get exactly what they are providing us today and that is outlined in previous discussions.

David Kamatoy: So to sum it up, what do you say to small business owners and entrepreneurs on the climate in general in the new year?

Craig G. Francis: Well, David, here is what I expect.

Some business owners will accept what I say and not start or grow their business.  And that is probably wise since they should not bet their farm on a "land of Oz” optimism of improving business environments. They will not have the financial OR emotional resources to deal with the rough parts that they will inevitably face in the next 5 years. Stay the course and wait for the right time to start your business or expand the company with debt and new employees.

Some business owners, card-carrying members of the starry-eyed school of entrepreneurial optimism, will tell me I am full of beans.  And I hope I am wrong in my prognostications. I take no pleasure in saying what I have outlined already. I have an overabundance of optimism because I have run my business successful and profitably through the best and worst of economic times from 1981 to the present day. And I have NOT given up hope. But I will not delude myself into thinking it is going to be easy. It is going to be a hell of a slog

I spend most of my days studying and reading the economic tea leaves and I am not left with an abundance of confidence that we can work our way out of this fine mess without measures so severe they will make the Great Depression look like a cake walk.

But I am also a Reaganite sort of business owner and think and hope our best days are ahead of us. We have always worked our way out of our self-made messes and moved onwards and upwards.  So I say to the optimistic entrepreneurs among us, “Slog on and take those challenges.”  No one said it would be easy. It won't be. It is never easy for the business owner. But it is worth it!

David Kamatoy: Craig, thank you for your time and your insights. Best wishes to you in 2011.

Craig G. Francis: Thank you, David, and the same to you.

Craig G. Francis is the owner of Francis Financial andThe SBA Loan Store. He has been a top producer of SBA Loans since 1981, and has worked with Dun & Bradstreet and Bank of Commerce. Craig Francis has the expertise to steer clients through the often confusing rules and regulations associated with SBA Loans, having helped over 2,000 businesses acquire over a billion dollars in loans. He can be contacted through CraigGFrancis.com, SBALoanStore.com, on LinkedIn, or at 888-666-9722

2010 - A Year in Review, Part 2

Recently my friend and business colleague David Kamatoy approached me for an interview on my top stories for 2010. It seemed like a good way to close out the year and prepare for, hopefully, bigger and better things in 2011, so of course I agreed. David will be posting the interview in three parts on his blog, DavidKamatoy.com, and I will be reposting them here. You can follow David on his blog and on Twitter or Facebook. Today - my thoughts on the economy.

David Kamatoy: The economy, of course, was a major source of stories during 2010. I realize that many of those stories cross over into both small business and politics, but what three stories do you see as having the greatest impact this past year?

Craig G. Francis: If these responses provide small cheer there is reason for this. I have a 35-year perspective to draw from.  If a budding entrepreneur thinks the waters are getting warmer because the stock market is up and SBA loans are increasing, they may be in for a shock. The statistics that point to rapid recovery are not here.

First of all, political will and economic quick fixes emanating from D.C. notwithstanding, the economy will take AT LEAST 5 years to absorb the excess population of unemployeds as well as provide jobs for the population growth in this country.  This time line is realistic if we do not bankrupt the country with deficit spending.  And if China does not stop buying our debt unless rates double or triple.  The economy is driven by the consumers and they are not healthy despite the small orgy of Christmas 2010 spending.  Aside from state and federal hiring, nothing will increase employment rates in short order.

Some of the stats that tell me we are at least 3 and possibly 5 years from recovery are as follows:

• The Savings and loan failure of the mid 1980's cost the government about $150,000,000,000 in bailout funds
• The economic recession of the early 1990's coupled with the failure of nearly 1,000 banks cost the government about $500,000,000,000 in bailout funds
• This Great Recession is responsible for the collapse of Wall Street, the failure of over 300 banks to date and $4,000,000,000,000 in bailout funds spent to date.

Seems like the cost of bailing us out has increased by several orders of magnitude.

Second of all, the inventory of foreclosed homes, those with underwater loan-to-values and those whose owners will default this year, is at an unprecedented level. The clearing of inventory will require another 20-30% drop in prices as banks and consumers rid themselves of this residential dead weight. The consumer-driven economic boom from 1998 to 2006 stemmed from the 15% annual price rise in homes. This boom in prices made consumers feel wealthy and they spent that wealth. The subsequent contraction in home prices made consumers who still had  jobs feel poorer, and that has crushed the economy. Approximately $15 trillion in personal and corporate net worth evaporated in the last 4 years. This is about 20% of the entire net worth of this country. Adios Dinero.

When the US Government is $14,000,000,000,000 (yes, trillion) in debt and climbing,  while facing $200,000,000,000,000 in unfunded mandates of citizen expectations for Social security and medical care, we will not soon see a recovery to match our expectations of wealth created in the last 25 years.  The governments, both state and federal, are vast sucking black holes of fiscal ineptitude and bureaucratic sloth inexorably bankrupting the country and its citizens.  Sorry about the bad news Mrs Lincoln, but how was that play?

Finally, if you plan to start or build your business know this - in the last four rough patches from 1975 until 2006, it took about 2-3 years to recover.  In this Depression it will take at least 6-8 years to recover. And that is only if we do not have some sort of economic retracement due to an unforeseen event.  Proceed cautiously if starting your firm.  Take care in growth plans.  Be absolutely certain you do not start or outgrow your capital in uncertain times. Make sure your expansion capital is in place BEFORE you begin your business or expand operations. Do not expect ANY sort of bailout or helping hand from anyone, most particularly any government.  They are broke and spend most of our tax dollars feeding Sponge Bob and the Mooch class.

Even if your personal optimism, the hallmark of all entrepreneurs, is at high level, it  is easy to overlook the economic, regulatory and financial land mines that litter the field. Form alliances or confederations of like-minded people to make sure you have as much of the intelligence that will help you guide your business as possible. Get involved in local and regional politics and use the business owner resources and alliances you have forged to force changes at all levels of government.

In my last post I talk with David about politics in 2010 and what I see ahead for 2011.

Craig G. Francis is the owner of Francis Financial and The SBA Loan Store. He has been a top producer of SBA Loans since 1981, and has worked with Dun & Bradstreet and Bank of Commerce. Craig Francis has the expertise to steer clients through the often confusing rules and regulations associated with SBA Loans, having helped over 2,000 businesses acquire over a billion dollars in loans. He can be contacted through CraigGFrancis.com, SBALoanStore.com, on LinkedIn, or at 888-666-9722.

2010 - A Year in Review, Part 1

Recently my friend and business colleague David Kamatoy approached me for an interview on my top stories for 2010. It seemed like a good way to close out the year and prepare for, hopefully, bigger and better things in 2011, so of course I agreed. David will be posting the interview in three parts on his blog, DavidKamatoy.com, and I will be reposting them here. You can follow David on his blog and on Twitter or Facebook.

David Kamatoy: First, Craig, thank you for taking time at the beginning of the new year to talk to us.

Craig G. Francis: My pleasure, David.

David Kamatoy: To start off, Craig, what would you consider the top three small business stories from 2010, and why would you choose each of them?

Craig G. Francis: Well first, David, there was not a lot to cheer about in 2010. The economy, regulations and financial matters are still keeping small business down. The lack of consumer confidence is holding down business growth and profits. The state and federal governments are still running multi-trillion dollar deficits and we see more to come.

The business community is struggling to gain some traction in the minefield of uncertainty stemming from the lack of genuine concern for, and even active opposition to, the small business sector by the political elites. This is largely reflected in the jobs market. Unemployment is stalled at a high of 10% with another 7% who have given up. Small business creates jobs and retains them. So this measure of the businesses tells me that they are not healthy at this time.

Given these conditions, businesses can give a small cheer to the extension of lower taxes for individuals and small corporations. Even though the extension is only for 2 years, it allows the entrepreneurs to cope with one less problem and hope that the extensions will be made permanent by the new members of the Congress. This then may allow the business owners to make long-term plans and hire additional employees, while investing capital that has been sidelined during the first two uncertain years of the Obama Administration.

The second story is the slow opening of the lending spigots to the small business community.  Coming from a complete lock down of capital of this lending sector in the latter part of 2008, banks are starting to provide the needed capital for growth to the entrepreneurs of this country. The SBA fee reductions and higher guaranties for small businesses, that segment that represents the greatest portion of job creation, has proven to be a great help to the banks’ comfort level in lending to the small business sector.

The third story is the great potential for repudiation of some of the worst sections of Obamacare and the executive decisions that are diametrically opposed to business health.  This job-killing machine is being shown in all its destructive glory and even some of the most ardent fans of government health care are recoiling from this economic Hydra.  These sorts of regulations could easily add 20% to the cost of employees, making our businesses unprofitable and even unable to compete on the international level.

In the next post I talk to David about my top economic stories of 2010 and where I see things going in 2011.

Craig G. Francis is the owner of Francis Financial and The SBA Loan Store. He has been a top producer of SBA Loans since 1981, and has worked with Dun & Bradstreet and Bank of Commerce. Craig Francis has the expertise to steer clients through the often confusing rules and regulations associated with SBA Loans, having helped over 2,000 businesses acquire over a billion dollars in loans. He can be contacted through CraigGFrancis.com, SBALoanStore.com, on LinkedIn, or at 888-666-9722

Are Small Businesses Growing?

Are small businesses beginning to show growth again after the prolonged Recession? As with most questions, the answer depends on who you ask, how you ask it, and how you interpret the response. It also depends to some extent on how you qualify a “small” business.

A recent article in the Wall Street Journal (“Smaller Firms Still Hesitant to Hire”) would lead one to believe that small businesses are still struggling and, while doing some hiring, continue to hold off on expanding their work force. But a study done by business software and payroll company Intuit, and reported in SmallBusinessComputing.com (“Intuit Study: Small Businesses Are Hiring”), suggests just the opposite. So just where does the truth lie?

The Wall Street Journal article points out that smaller businesses (with 500 or fewer employees) did add 91,000 jobs in November, the most in one month in the last three years, but added that the rate was still smaller than during pre-recession years. Businesses are still taking a wait-and-see attitude to the overall direction of the economy, as can be seen by the fact that 2010 still shows only an average net monthly job gain of 35,000. This is in contrast to an average net monthly gain of 143,000 jobs in 2006 and 73,000 in 2007. Some of the reasons the Journal gives for continuing reluctance to hire are “pending tax legislation, the ongoing credit crunch, and changes that owners made during the recession to stay afloat.” Even those companies that showed growth this year are slow to hire because of questions about future decisions by Congress.

The Intuit report, in contrast, shows some good news on the hiring front. However there are some major differences in the sources of data. For one thing the Intuit Small Business Employment Index is based on data from companies that number only 20 or fewer employees. While the reported job growth of approximately 49,000 new hires sounds good, it is based on growth of 0.24% as reported by 59,000 companies that use Intuit’s business services. Even Intuit’s economist Susan Woodward admits that the companies using the service are growing faster than the average small business. The report also indicates that those small businesses are paying employees less on average than in October, with average monthly pay dropping from $2,600 to $2,592 in November.

What this seems to mean is that, while some businesses are moving forward and hiring some new employees, most companies are still sitting on the sidelines until they have a better idea of where the economy is going. The current haggling over the proposed deal between President Obama and Congress is not going to help this situation, even if legislation is passed in time to preserve the current tax rates. The economy is not going to turn around until businesses begin to hire in real numbers, and that is unlikely to happen while we continue to have the overall uncertainty about Washington’s direction regarding taxes in all forms. The time has come for politicians to get off their soapboxes and do what is needed to repair the economy, not try to make political points with narrow special interests.

Craig G. Francis is the owner of Francis Financial and The SBA Loan Store. He has been a top producer of SBA Loans since 1981, and has worked with Dun & Bradstreet and Bank of Commerce. Craig Francis has the expertise to steer clients through the often confusing rules and regulations associated with SBA Loans, having helped over 2,000 businesses acquire over a billion dollars in loans. He can be contacted throughCraigGFrancis.com, SBALoanStore.com, on LinkedIn, or at 888-666-9722.