[VIDEO] What I've learned about inventory in successful small businesses...

I discuss some of the things I've learned about the inventory levels in successful small businesses over the years that are particularly important if you're going to buy one.

Enjoy

Interesting Bloomberg article on small business loan 'market makers'

Bloomberg Businessweek reports that new entrepreneurial firms are entering the under-served small business lending market and earning returns up to 50%!.  That's what I've been trying to tell everyone in my book, Invest Local.  

You can make these types of investments yourself and pocket big returns if you open your eyes to the opportunities around you.

The article poses the question, "should small business lenders be regulated?"  It doesn't matter if they should or shouldn't.  Regulation could kill these intermediary 'market makers' but I don't believe they'll never be able to intervene in one-to-one relationships between a local lender and a local small business.  Interesting article....

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Expensive Small Business Lenders Are Unregulated. Should They Be?

By Patrick Clark  July 25, 2014

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Photograph by Brendan Smialowski/AFP via Getty Images

Former Small Business Administration Administrator Karen Mills

The Main Street credit gap has become such a well-accepted fact that whole waves of startups have launched, often armed with impressive-sounding technology, to improve small business owners’ access to capital. Many of those new firms, including OnDeck, which has loaned small businesses more than $1 billion since 2007, and Kabbage, which loaned more than $200 million last year, are largely unregulated.

Critics calling for regulation of alternative lenders have pointed to high borrowing costs, which often top 50 percent on an annualized basis, and lack of transparency, especially among the brokers many lenders rely on to bring in business. On the other hand, “there are some who say the marketplace is solving the problem,” said Karen Mills, former head of the Small Business Administration, in a recent interview. “You have innovators and entrepreneurs coming in, and you don’t want to get in the way of this too soon.”

Mills wouldn’t take a firm stand on whether the new lenders should be regulated. But she knows Main Street’s borrowing woes well. Her tenure as head of the Small Business Administration began in the dark months following the financial crisis and roughly coincided with a 20 percent decrease in small business loans. This week she published a detailed account (PDF) of the current state of bank lending to small business, hinting at the role the government might play in helping Main Street companies access credit.

Some of the conditions that slowed small business lending are temporary, writes Mills. In the aftermath of the crisis, consumer spending slowed, dampening merchants’ revenue, and real estate prices plummeted, limiting the value of their collateral. To fix their own financial problems and satisfy regulators, banks became more conservative about approving loans.

Other obstacles are more likely to last: Main Street is made up of diverse businesses, including long-haul truckers, nightclubs, and Etsy retailers, to name a few, making it hard to create uniform underwriting standards. Meanwhile, the pool of community banks—a traditional source of small business financing—has diminished to fewer than 7,000 from more than 14,000 in the 1980s.

As alternative lenders seek to fill that gap, the debate over regulation is likely to heat up. Among the federal agencies that might take a more active role in regulating online small business lending, Mills says the Consumer Financial Protection Bureau is the most likely candidate. That’s because Dodd-Frank charged the CFPB with collecting data on small business loans to “facilitate enforcement of fair lending laws.” As Mills points out, the agency has a full plate writing and implementing rules to govern the consumer credit market.

For the moment, it seems unlikely that Main Street lending regulation is coming any time soon. [Full Story with Links here...]

[VIDEO STORY] The only unsecured business loan I've ever done

I tell the story of an unsecured business loan I made to a pizzeria and the steps I took to ensure that I would get paid.

Not for the novice local investor.

Learn more by reading my book.  Buy a copy here: https://gum.co/quoB

[VIDEO STORY] Muffin Lady Goes Bust (a franchise tale of woe!)

I'll put up this great little story for the weekend.

I tell the story about a woman who ran her business poorly and how the franchise company took advantage of the situation in a big way to get a new operator and profit in a big way at the expense of the woman and the bank.

Enjoy!

I reference an earlier post about head leases that you can find here: [VIDEO] Leases, head leases, master leases (franchises)

[VIDEO] Buying equipment with a loan vs. leasing for small businesses (not a tax discussion)

I discuss why I prefer equipment leasing over borrowing to buy equipment for a small business.

Also a great example of when terms are more important than price.

[VIDEO] What can happen to commercial real estate when the economy changes

I ran into a real 'eye-opener' which demonstrates clearly what I had expressed in an earlier blog post about what can happen when a business owns real estate and why its not always the best option for many businesses.

Check out what has happened to commercial real estate in this seaside town when their pulp mill was removed.

To see my original post about businesses owning real estate, click here: [VIDEO] Should businesses own real estate?

The Advice That I'd Give New Entrepreneurs

I was asked by my friend and business coach Marc Mawhinney to provide a guest post for www.marcmawhinney.com. Marc works with entrepreneurs and those who are starting their entrepreneurial journey.  Here is what I put together it appeared last week:

The Advice That I’d Give New Entrepreneurs

Posted by Dave Barnett on Aug 26, 2014 in Entrepreneurship, Guest Post 

I’ve owned 5 businesses. I regularly work with business owners to improve their systems and processes. I’ve also had a career as someone who helped people buy and sell businesses and I can tell you that I’ve learned a lot from all the successful (and not so) entrepreneurs that I’ve met over the years. When asked to come and do a guest blog post for Marc about what to remember when starting a business, here’s what comes to mind:

Cash Flow: The purpose of a business is to make money. It should do this every month, right from the start. Do not encumber your young enterprise with obligations it can’t meet like costly overhead at the beginning. Use outsourcing and rent/borrow as much as you can to keep monthly commitments to a minimum. ‘Burn rates’ are for Internet businesses that have been capitalized with millions of dollars from venture capitalists.

Vendor trade credit: Most people think about making the sale and not how they’re going to be paid. The awful truth is that when you’re new, you may find customers that your competitors don’t want because they are terrible at paying on time. What are the normal payment terms in your industry? Should you be extending trade credit to your customers? What is reasonable and how will you enforce the credit terms? A bad debt can kill a new business. Accepting credit cards to eliminate receivables can be a smart move for new companies.

Over-estimating sales penetration: Did you hear the joke about the entrepreneur who said he was being conservative about estimating that he could capture 1% of a billion-dollar industry? I see this all the time. That’s not how you estimate sales. Your sales projections should be based on these questions: how many calls are going to be made each day? How many sales appointments will this result in? How many of these appointments will lead to a sale? How long will it take to deliver the service/product? How long will it take to get paid? As you can see, sales are a function of how many clients you can touch and sell to, not how big a market is.