Hey it’s Leap Year; What’s that about?

This being February 29—Leap Day—today is costing you an extra day’s interest if you’re repaying a debt. On the bright side, it’s earning you a tiny bit more on your bank deposits.

Whom do we have to thank—or curse—for this extra day every four years? Julius Caesar and his lover, Cleopatra.

In 48 BC, Julius Caesar was in Alexandria, Egypt, absorbing the culture and science—and decadence—of Cleopatra’s capital. There he learned from an old sage named Acoreus about Egypt’s calendar, which had a leap year.

At the time, the Roman calendar did not. Like most ancient calendars, it was based on the phases of the moon, which in one cycle takes about 29.5 days. But 12 months of 29.5 days doesn’t equal the true length of the year as measured by the orbit of the Earth around the sun. It’s off by 11 days, so anniversaries, holidays, and entire seasons drift backward on lunar calendars.

The ancient Egyptians had realized this and created a calendar 365.25 days long—with the fraction averaged in by adding an extra day every four years.

When Caesar returned to Rome, he created a 365-day calendar with a quadrennial leap year, adding the extra day in February.

A minor hassle for some, perhaps, but certainly better than the alternative faced by the Romans. Back in 45 BC, for instance, their lunar calendar had drifted backward by 80 days—nearly three months. Spring had become winter, and autumn came in the summer months.

To correct this, Caesar decreed that 45 BC would be 445 days long. Think about the extra interest on 80 extra days! No wonder they called it the “Year of Confusion.”

David Duncan Ewing wrote the National Selection column for Portfolio.com from 2007 to 2009. He’s an award-winning journalist and author of several books, including “Experimental Man: What one man’s body reveals about his future, your health, and our toxic world.”

Read more: http://www.portfolio.com/views/blogs/daily-brief/2012/02/29/how-julius-caesar-affected-your-finances-on-leap-day#ixzz1nmH5S5t9


On the side of the angels

New ways of lending to small businesses

Feb 25th 2012 | from the print edition, The Economist

IF THERE IS one bit of finance where people agree on the need for more innovation, it is in lending to small business. Policymakers are desperate to get more credit flowing to this vital engine of economic growth. Banks claim that lending is muted because demand is subdued, but that is not the only problem. Small and medium-sized enterprises (SMEs) are harder credit risks to assess than large ones, so they attract higher capital charges and are often the first to lose their funding in a downturn.

A host of new firms have sprung up with solutions. Some are seeking to fill the gap left by the banks, rather than overhaul the way that lending is done. Shawbrook is a new, specialised lender to small firms in Britain, where the dominance of a handful of big banks makes the choice for SMEs particularly limited. Owen Woodley, Shawbrook’s boss, says that it can get its credit analysis done faster than the established institutions.

Other firms are trying to reinvent small-business financing by providing virtual marketplaces where investors and SMEs can come together. In the world of equity capital the pacesetter is a British firm called Crowdcube, which uses the idea of “crowdfunding” to enable lots of investors to buy up small stakes in start-up firms.

Picking winners among entrepreneurs is notoriously difficult. Venture capitalists’ answer is intensive screening by a small team of dedicated investors, followed by hands-on involvement in the business. The Crowdcube model, which is due to come to America if crowdfunding legislation passes, depends on the ability of thousands of members to ferret out the best ideas. The general public cannot match the expertise and commitment of dedicated “angel” investors if a firm gets funded, admits Darren Westlake, Crowdcube’s founder. But it helps to have lots of investors acting as advocates for a start-up firm.

The same peer-to-peer model lies behind Funding Circle, another British start-up which launched in 2010 to facilitate lending to small businesses for periods of one to three years. Businesses go through an underwriting process before they get on to the company’s website, where lenders, predominantly individuals, can bid on the rate at which they are prepared to lend. The average loan is £40,000 ($63,000), the rates are competitive and firms get hold of the money within about two weeks. Samir Desai, a co-founder, dismisses the argument that lending to small firms requires bankers to make personal credit assessments: “SMEs want low costs, a quick process and a transparent fee structure, not a relationship.” Lenders are encouraged to spread their risk among at least 20 borrowers.

There is another way of speeding up the underwriting process: taking a bet not on an SME itself but on its debtors. The Receivables Exchange, launched in New Orleans in 2007, enables investors to buy up invoices, or fractions of them, owed to small businesses. The idea is similar to factoring, whereby firms sell off all their invoices at a discount to improve their cashflow. But the idea behind The Receivables Exchange—and MarketInvoice, a British equivalent—is to break receivables down into small, tradable units so that buyers can make judgments on individual debtors and diversify their holdings. “We provide electron-level transparency,” says Nic Perkin, a co-founder of The Receivables Exchange. Transactions are somewhat less minuscule, approaching a rate of $1 billion a year

Joined the Steve Henry Radio Show on Saturday 2/25

Guests: Mark Engle & Candace Wiest

Published February 25, 2012 | By Steve Henry
Small Business Assistance is What We’re All About!

If your business is feeling a bit under the weather don’t despair.

This Saturday, live in the KTAR studios, I welcome two of Arizona’s finest small business repair facilities. They need no formal introduction (their credentials would take way too much space).

We’ll discuss anything small business from A-Z that’s only available in AZ. Mark Engle from Maricopa’s SBDC whose primary mission is that with an entrepreneurial spirit, the AZSBDC Network provides high impact, quality counseling services and training to help small business owners achieve their goals, thereby strengthening the Arizona economy. We greatly value our stakeholders, supporters and small business community resource partners and work with them to improve our communities by facilitating small business and entrepreneurial initiative and success.

Joining Steve also in studio will be Canadace Wiest from West Valley National Bank. Who as CEO and President of the

only locally owned bank west of I-17, she is at the epicenter of change.

“Many of our shareholders and directors of West Valley National Bank are legacy Arizonans,” she notes. “In fact, some of our investors are fourth and fifth generation Arizona families who were true Western pioneers.”

It is this sense of history that guides her organization’s lending practices and support of the tremendous growth opportunity found in the West Valley. “In the spirit of the pioneers who settled this part of the state, we are lenders from Arizona making loans in Arizona.”

Email your questions or phone them in to 855-STEVE-55 or Steve@TheSteveHenryShow.com. I have room for the first 30 so keep them short and to the point.

Please Click on the Link Below to Listen to the Entire Show.

Podcast: Play in new window | Download | Embed

My first video posting (ugh!!!)

What is the Maricopa SBDC?  http://youtu.be/Tx-4JZ_Nzio

Why Small Business Needs a Real Estate Comeback


Written By

Published February 21, 2012


Read more: http://smallbusiness.foxbusiness.com/finance-accounting/2012/02/21/why-small-business-needs-real-estate-comeback/#ixzz1n7HaZ97c

Small businesses looking to secure a loan may be holding their breath until  the real estate market makes a comeback. According to a recent study, the real  estate overhang continues to limit access to capital for small businesses, and  hinder their ability to grow.

Small Business, Credit Access ,and a Lingering Recession is the third-  annual credit study from the National Federation of Independent Business’ (NFIB)  Research Foundation. This year it found 92% of small businesses own some form of  real estate, and many lost significant amounts of collateral during the housing  crisis.

According to the study, there were more attempts by business owners to secure  credit in 2011, with 57% applying for credit from a financial institution, up 9%  from 2010. However, the amount of small businesses accessing credit did not  increase over the past three years, with between 1.6 and 1.7 million of 5.8  million small employers getting credit over the past three years. The study  surveyed 850 small businesses.

William Dennis, NFIB senior research fellow and report author, said the study  shows real estate has simply “reeked havoc” on small business owners’ balance  sheets.

“They haven’t been able to borrow even if they needed to,” Dennis said. “Some  don’t want to, but when you see everything go down the tubes or take a real hit,  you aren’t eager to go out and invest.”

Demand for credit lines also rose by one-third over 2010’s numbers, the study  found, while demands for line renewals and loans remained flat. Dennis said this  shift was unexpected.

“I’m not sure if this is a shift in the way they want to do business, but it  may also suggest the type of borrowing they want to do is a bit smaller,” he  said. “A line is more flexible, and they’re not committing themselves to a big  project.”

Real estate attorney Matt Englett, partner at K.E.L. Attorneys, said the  study demonstrates just how impactful the housing bubble was, on everyone.

“Many people have suffered in some way because of the downturn, and their  credit has suffered,” he said. “This won’t change until the lending guidelines  change. People don’t understand the magnitude of the market downturn, and how  far reaching it is.”

Very simply, this has ruined small business owners’ ability to secure loans,  he said.

Ray Keating, chief economist for the Small Business & Entrepreneurship  Council, said the study made it clear that there are bigger issues at work here  for businesses, aside from access to credit.  The study said “growing  political and economic uncertainty and the protracted problem of poor sales”  dwarf getting rejected by financial institutions for credit access.

“Political and economic uncertainty has been huge,” he said. “It’s just the  general state of the economy—those are certainly the biggies right now.”

Also, what small businesses may perceive as tighter lending standards may not  be viewed in the same light by the banks themselves, Keating said.  The  survey found a disconnect between lenders and small business owners, with  lenders thinking credit standards have not changed over the past year, while  business owners feel the market tightened in 2011.

“The credit standards, whether they have changed or not, banks seem to think  they have eased,” he said. “Small businesses are seeing these as tighter  standards, but banks are saying, ‘This is just the reality of the economy and  business at this point.'”

Read more: http://smallbusiness.foxbusiness.com/finance-accounting/2012/02/21/why-small-business-needs-real-estate-comeback/#ixzz1n7H92AtL

Low Hanging Fruit for Better Margins

Contributed by Bill Conerly

Do small businesses have a lot of low-hanging fruit? You bet they do. Owners and managers ask me about the economy, then I ask about their business, and I’m often stunned by the opportunities being missed. So I asked some sharp consultants about the most common low hanging fruit. This article is about their advice regarding profit margins. Later this week I’ll post their comments about sales.

“Obsessing about revenues instead of margins” was Victor Diercksen’s response. Victor is a senior guy at eSoftware Professionals, a company which helps businesses use sophisticated software. That brought back a couple of memories of my own work. One client is a job shop in which customers describe their needs, an estimator bids the project, the work is performed and money is collected. This missing step: comparing actual costs with the estimated costs used to bid the project. Imagine a basketball player practicing free throws, but never seeing or hearing whether the ball went through the hoop. The company’s estimators never received feedback on their performance. As a result, the company won the contracts that it underbid. A further result: lower profit margins.

With that story in mind, I strolled through the trade show when I was speaking to another industry comprised of job shops. I stopped by the table of a vendor selling cost accounting software. I asked the guy how many of the companies in the industry were using any kind of software to help them track costs by project. He told me that about 50 percent were tracking their costs, and the rest were running blind.

Margins are also emphasized by Lonnie Sciambi, who calls himself “The Entrepreneur’s Yoda” : “For a start-up, revenue is critical. For an ongoing small business revenue is still critical, but determining how to wring more margin out of that revenue becomes equally so.” He advises determining the three to five numbers that really drive a business, then track them on a weekly or monthly basis.

Before we turn to the sales opportunities, let’s turn to one more element of operations: procedures. Tash Hughes, a writer from Melbourne, Australia, told me that one low hanging fruit was , “not having procedures and methods that can be followed easily by others – if one person has the skills and is unable to do the job, the business is in trouble; if a new person starts, a lot of training time is required; the resale value of the business is limited as no one can duplicate current practices; writing and reviewing processes can highlight areas for improvements.”

That brings to mind another consulting story. A real estate company wanted me to evaluate the long-term growth potential for three different metropolitan areas. The executive I was working with believed that he could do the evaluation himself, but he didn’t want to spend hours and hours getting the data. So he asked me not only to evaluate the three metropolitan areas, but to also document thoroughly the data sources so that on future projects, his assistant could gather the data. I did that and discovered an interesting result: I was using that data documentation myself. I usually grab data on the fly, sometimes stumbling around a bit.  (“Where do I get the regional location coefficients?” Is it BLS or BEA?) Now I turn to the binder with my data documentation and move more quickly. Yep, written procedures can be an efficiency tool, which means better profit margins.

How to Finance Your Start-Up Without Tapping Home Equity


With home values still depressed—and likely to remain so in the coming year—many people who plan to start businesses won’t be able to leverage their personal properties to raise capital they need.

There are several alternatives, however, some newer than others.

Some 39% of business owners with less than $5 million in annual revenues said a bank loan would be the best way to raise capital in 2012, according to a survey of 2,851 owners of small businesses conducted by Pepperdine University in early January. Other top prospects were personal savings (36%), friends and family (19%), and credit cards (17%), according to the survey.

By contrast, only 11% said home equity would be the best capital source.

Despite significant funding challenges, including depressed home prices and a tight overall credit market, entrepreneurship rates have risen from 2006 through 2010, according to the Ewing Marion Kauffman Foundation, a small-business research group in Kansas City, Mo.

The foundation has an annual Index of Entrepreneurial Activity but hasn’t yet measured the rate of new business creation during 2011, it says.

Here’s a look at some of your choices:

Peer Lending

A small but fast-growing segment of business owners have tapped relatively new capital sources that operate through websites.

Peer-to-peer loan sites, such as Prosper.com and LendingClub.com, allow lending directly between individuals. Interest rates depend on the borrower’s credit history. Only 4% of business owners surveyed in the Pepperdine study say this would be the most promising method of securing funds this year.

Crowdfunding, available on Kickstarter.com, IndieGoGo.com and other such sites, links fundraisers to a large pool of small-dollar contributors. The sites charge fees for the service, typically less than 10% of the capital raised.

Last September, Sung-Yoon Kang got a $5,000 loan through Prosper.com at a 27% interest rate and his wife, Dawn Kang, got a $3,000 loan from LendingClub.com at a 7.9% interest rate. The couple turned to peer lending after realizing they wouldn’t qualify for a traditional bank loan.

The Kangs, who don’t own a home, used the funds to purchase a food truck. They hope to launch the business Ka’Chi Inc., of West Chester, Pa., in the near future.

Asset-Based Credit

Asset-based lending and factoring got attention when banks slashed credit lines in the 2008 financial collapse. Total asset-based credit commitments grew 5% in the last year, according to a November 2011 survey by the Commercial Finance Association. This type of financing has been dominated by the retail and garments industries, but has spread to other business sectors that have accounts receivable or other assets, according to Brian Cove, chief operating officer at the association, a New York-based trade group.

Asset-based lenders extend loans that are backed by marketable securities, equipment, inventory, accounts receivable and other business assets.

Factors operate on a similar model, purchasing accounts receivables from a business in exchange for an advanced funding amount for each invoice. The Pepperdine study shows 5% of business owners believe factoring is the best way to raise capital.

Interest on the loans can top 20%. Rohit Arora, chief executive of Biz2Credit, a small-business lending broker based in New York, says he believes the interest rates and other related costs may come down as a result of increased competition among lenders.

David Godwin turned to factoring when he started ContinuityX Inc. last year. Within four months of launching, the technology services company, based in Metamora, Ill., had secured a $500,000 credit line from Forest Capital LLC, allowing Mr. Godwin to hire 14 employees and purchase new equipment.

“It jump-started our business,” says Mr. Godwin, who did not use his home equity but did tap personal savings and friends and family to cover other initial costs.

SBA loans

Many young start-ups face significant barriers securing bank financing because they don’t have a substantial track record of growth. But there are small signs that the credit crunch is easing, as lending standards become more flexible and as some borrowers become more willing and able to take on debt, according to recent data including one January survey of senior loan officers by the Federal Reserve.

Outstanding loans to small businesses have fallen each quarter since 2009, according to the most recent data from the Federal Deposit Insurance Corporation, in an analysis of loans of less than $1 million. They totaled slightly less than $600 billion at the end of September 2011, 5% less than the year earlier.

One role of the U.S. Small Business Administration is to help banks make loans to riskier small businesses, while offering better terms such as a longer payback period. SBA loans are provided by traditional lenders, but a portion of each loan is backed by the government in the case the business owner defaults. Still, SBA loan recipients must adhere to the underwriting standards of the bank, which may include using personal property as collateral.

SBA lending hit a record in the government’s last fiscal year. But the jump was, in part, attributed to the larger loan amounts the agency agreed to back. Since October 2010, SBA lenders have been able to offer loans as large at $5 million, which are more profitable than the smaller loans start-ups typically request. (See this October 2011 story.)

In general, smaller firms have more success with these loans once they are established and ready for expansion capital.

Angel Investors

Some small businesses have had success seeking angel financing – a segment that’s showing a revival of sorts. Most angel investors, of course, will wind up with an equity stake in your firm.

Some 39% of the $8.9 billion in total angel investments in the first half of 2011 went into seed and start-up ventures, up from 26% of $8.5 billion in total investments over the same period a year earlier, according to the University of New Hampshire’s Center for Venture Research.

It can be tricky to weed out the tire-kickers, says Paul Kedrosky, senior fellow at the Kauffman Foundation. Many individuals are angels “in name only” and not likely to make investments as eagerly as professional investors, he notes.

Individual angels are increasingly coming together to invest as groups. That spreads risk among the group’s members. But it could create headaches for business owners who have to deal with a number of angels rather than just one or two investors.

Personal Credit and Savings

More than 70% of small businesses were launched using personal savings or assets, according to Elizabeth A. Duke, a governor on the Federal Reserve Board, who, last April, disclosed preliminary data from the Federal Reserve’s upcoming Survey of Consumer Finances.

Personal credit cards, as well as friends and family have grown in popularity during the downturn, and will likely remain an important avenue for entrepreneurs even after the economy rebounds.

Some entrepreneurs obtain business credit cards, which carry fluctuating—and often higher—interest rates while lacking consumer card protections. Delinquencies on business cards can also damage your personal credit score.