Are Things Getting Better?

[Allectus]

Good news today for small business owners as President Barack Obama freed billions of dollars to help the nation's small businesses.

I am a big fan of the SBA and of course, small business success, but I recommend we tread cautiously with this renewed liberation of credit.

For those of you who know me or have been following my comments over the years, I advocate that business not use loans to operate.

It’s great that we now have the opportunity to fund growth in our businesses, but the working capital we think is in an SBA loan is actually in our business.

I have made a career of developing operational accounting methodologies that allow business to re-engineer itself, thus generating necessary working capital, where I imagine the SBA not liking my advocating no loans, but it is for the best.

Be very careful with business loans.

[Logan]

I agree with you regarding loans, although there can be times that it is beneficial for a business to have a line of credit for purchasing, etc. I don't think it will impact me personally, but many businesses do use credit. Indirectly, it may have an impact but I'm also staying debt free regardless of this.

[Biz Optimizer]

I am new to the forum - so please tell me if this is in bad form - but I disagree....and know from experience the average business person doesn't have the financial bacground to decipher this. Hopefully debate - or presenting both sides is good?!

Where would we be if everyone had adopted "no debt" years ago? I think it is safe to say that we would have left a large percentage of compounded growth, jobs, and lifesaving innovation behind. It would be a different world with poorer people.

I agree the average business can pull much more working capital from internal efficiencies and they should - but, no loans? Better to accept all the risk yourself? I believe, like anything, they can be good or bad.

But I would find it hard to believe that anyone could argue against the leverage provided by a plan that leverages the returns and risk of 8% bank money to drive a 30% return project. Especially if you have somewhere else you could earn 25% on the cash you would have had to invest if you funded it yourself? Or the safety of keeping your funds out of risk.

Compare that to the far lower return if it were equity - or the extreme limitations imposed by sustainable growth from cash flows - especially on today's small businesses' tiny margins.

There is a risk of debt - there is also the risk most business owners take because they do run on generalities - all or nothing. I would like to see more businesses find someone that can show them the pros and cons for a specific case and make up their own mind All credit, or nothing seems bad on both ends.

[bizcreditfan123]

I am not sure I agree 100% with this post. Especially where start ups are concerned. It may not be feasible for them to get going without start up loans not to mention where building strong business credit is concerned. Sometimes this is the only way for them to get rolling.

[Logan]

Much of the focus and chatter is on small business loans, but I was reading an article today about the Business Benefits of the Stimulus Act within this legislation - many are related to tax deductions available. Is that something many are missing?

I am new to the forum - so please tell me if this is in bad form - but I disagree....and know from experience the average business person doesn't have the financial bacground to decipher this. Hopefully debate - or presenting both sides is good?!

Feel free to disagree as much as you want! No one bites here, and if they do we bite back. Really, the communication not only helps others understand your different perspective, but also provides an opportunity for those reading to learn along as we discuss.

[Biz Optimizer]

Originally Posted by Logan

Much of the focus and chatter is on small business loans, but I was reading an article today about the Business Benefits of the Stimulus Act within this legislation - many are related to tax deductions available. Is that something many are missing?

Feel free to disagree as much as you want! No one bites here, and if they do we bite back. Really, the communication not only helps others understand your different perspective, but also provides an opportunity for those reading to learn along as we discuss.

First - Thanks - good to know debate is good. It is how I learn.
Second - YES, if you hold up a white piece of paper with a small black dot in the middle - PEOPLE will focus on the dot. I did. I'm guilty (smile)!

Does anyone else get the idea that they are spinning dials that they REALLY don't know the result of? If they understood, would they put in tax breaks to stimulate spending and investment - then try to penalize (regulate and tax) the profit? I can't follow the logic - kinda like my small businesses!

Would that we had a political party whose actions reinforced the words. Didn't we have an overabundance of money in the stocks just a year ago - now we stimulate with more cash? I am VERY afraid of the inflation to come!

Also wish that the spent money went to put those who've been out of work the longest back to work - don't think that is the government contractors. But hey, I am a tall guy - what do I know! Oxygen is thin up here!

[Anita]

Originally Posted by Logan

Much of the focus and chatter is on small business loans, but I was reading an article today about the Business Benefits of the Stimulus Act within this legislation - many are related to tax deductions available. Is that something many are missing?

1) The provisions of the main stimulus package from back in February are fairly limited when it comes to small businesses specifically -- mainly some tax credits and deductions. But they can be quite valuable, so don't overlook them. For instance, you can invest in computers, peripherals and software and deduct it all in the first year, up to a quarter of a million dollars. That effectively means the government is subsidizing your IT purchases!

2) There's a lot of stimulus spending on various industries: transportation, construction, greentech, and so on. However, it will be years before that money trickles down to small businesses. All that industry spending is about long-term investment in the country. So don't hold your breath.

3) Then on March 16, President Obama announced a new part of the plan, which involved freeing up SBA loans. The SBA loan provisions lower or eliminate some fees and make it easier for banks to give SBA loans. These provisions are positive as far as they go. The only thing is, SBA loans account for significantly less than 10% of all small business lending. So the impact will be limited to the small number of businesses that seek or qualify for SBA loans.

But I suggest small businesspeople take advantage of whatever Stimulus provisions they can, and then go back to their regularly scheduled programming (i.e., focus on getting sales, and use this time to get more efficient and profitable internally).

[ktaylor310]

However, it will be years before that money trickles down to small businesses. All that industry spending is about long-term investment in the country. So don't hold your breath.

True. I wasn't sure how I felt about the new incentives, but they did motivate me to look further into a small 7a or MicroLoan to help upgrade my business equipment & software so I can remain competitive. I believed from what I read that the SBA was relaxing some of their credit criteria to work with businesses that have suffered from the recession, housing market crash, etc.

What I found is that the majority of lenders are only making loans for real estate purchases and development in rural and low income areas and little or no accomodation has been made for credit issues. After hitting road block after road block I was completely UNMOTIVATED to pursue an SBA loan.

I'm not unmotivated in general though and will work even harder to save enough cash to buy the upgrades outright in phases. That feels good! I agree with Logan that now is the time reduce debt, not add to it, if possible. If I'm not biting, I wonder how many others are not either.

I blogged my experience with the SBA loan process in three parts if you are interested at http://www.kimiweb.com/blog/

[Allectus]

What does getting better mean?

Getting better means that the global economy is actually stabilizing itself to where it should be.

Sure, the world is in a recession but note that this recession is really an adjustment to reality.

The reality is that we will live in a world without so much credit just as we did in the ‘70s.

As we close this first quarter of the worst global economic performance in history, we must take into account some of the brighter notes of news related to this scrambled economic environment.

Some news of note has been the best four-week performance by the Dow despite continued negative employment data.

This last week, the Dow closed above 8,000 while reports show US jobless rate at 25-year high of 8.5 percent.

The last time the Dow rose for four consecutive weeks was between September and October of 2007 -- when the index reached its record above 14,000.

A couple of weeks ago President Barack Obama freed billions of dollars to help the nation's small businesses, where we will now have a little breathing room in managing our businesses.

Over the last couple of weeks bank accounting rules have been eased as well as there being a commitment from the world's finance leaders to keep propping up the global economy.

This last Friday’s March unemployment report was the last big hurdle in determining how well things might seem to be.

Is the worst over? No one is sure just yet, but so far so good.

Does this mean that those of us who have lost our jobs will get back to work soon?

Not really.

We must recognize that the industries that caused this economic meltdown are the industries that are pushing unemployment numbers up.

We must also recognize that those industries that are tied to consumer disposable spending are also as affected, where there is little chance for displaced workers gaining employment in those specific areas.

When we look at our businesses, we must take into account how we are going to manage our business in this new economy, this new opportunity to better our business practices.

Reviewing operations, processes and business structure is of paramount importance now that we have been given a second chance.

Our approach via our proven Operational Accounting methodologies will secure business’ ability to manage the changing economy and secure operations into the future.

This economy has adjusted itself where we now have an opportunity to better our business.

[mobilephone7]

hope everything goes well!