In spite of the fact that 55 percent of the bankers said the credit quality of potential borrowers has increased in the past six months, these banks also reported that they declined 72 percent of cash flow-based loans, 90 percent of real estate-based loans, and 46.7 percent of collateral-based loans. The quality of cash flow and earnings were cited as the top two reasons that loans were declined, followed by weakening industries and current debt loads.

Therefore, it appears that the banks are more risk-averse, which also seems to be indicated because almost 39 percent of the bankers said they had tightened up their loan agreements’ financial covenants in the last six months.

It is no wonder why the number one concern for the surveyed businesses is access to capital, coming in even higher than their concern regarding the economy. Although 71 percent of the businesses believe that additional capital would allow them to grow revenues, the key question remains �Will the banks provide the capital to lead us out of the recession or will they wait to make more capital available only when the economy is clearly in recovery?�

As part of the Recovery Act enacted on Feb. 17, 2009, SBA received $375 million to increase the SBA guarantee on 7(a) loans to 90 percent and to reduce borrower fees on most 7(a) and 504 loans. Due to demand from small businesses for available credit, the original $375 million provided under the ARRA for these loans was exhausted in November. Since then, additional funds have been provided for short-term extensions, and those funds also have been exhausted.

For more Information, go to:

SBA Press Release May 26, 2010

So many borrowers began to look to local banks to pick up the slack, but smaller banks are constrained by their exposure in their existing loan portfolio, closer oversight by bank regulators, and their uncertainty regarding the economy. Therefore, many small businesses have struggled to find adequate financing.

The federal government launched several TARP initiatives aimed at restoring health to the financial institutions. While officials have stated that they believe that providing cheap capital to the banks will lead to increase lending, the Panel is skeptical that government officials have the grounds on which to make such an assumption. After all, the largest Tarp recipients did not lend more: quite the contrary they reduced their portfolios.

The Panel recommends that the federal government:

• Establish a rigorous data collection system or survey that examines small business finance in the aftermath of the credit crunch and going forward.
• Require, as part of any future capital infusion program, reporting obligations that would make it easier to evaluate whether the support provided by the program actually has the capacity to achieve the hoped-for results.
• As part of its consideration of small business lending, evaluate whether a capital infusion program is likely to have the effect of increasing lending, and is therefore worth pursuing.
• Consider specifying minimum standards for underwriting loans in order to be sure that the incentives embedded in any program do not spur imprudent lending; and
• If the incentive programs are to be pursued, evaluate whether they can be implemented quickly effectively.

For further information, go to http://cop.senate.gov/documents/cop-051310-report.pdf.

Lenders want to see that your business will generate enough cash from operations to pay the expenses and the debt service of your business. They look at the number of days it takes you to collect your receivables to see how proficient are your credit and collection policies. They look at the number of days you take to pay your suppliers to determine that you are maintaining good relationships with them and taking advantage of their willingness to provide credit. They assess how fast your inventory sells in to measure the risk of the inventory. They compare your sales level to your total assets, receivables, inventory, and fixed assets to determine your operating efficiency. These techniques with a review your cash flow enable the lender to assess the long-term ability of the business to pay its expenses and service its debt from operations.

However, the past is not always an accurate predictor of the future. In spite of the use of historical evidence to foresee the future, lenders are sometimes wrong in their forecasts. Therefore, the lender looks for a secondary source of repayment. That usually means that assets must be sold in order to repay the debt. The banker will review your financial position to determine your short-term and long-term solvency. They compare your assets to your liabilities in order to measure how much equity exists in these assets. They are concerned with the market equity, the liquidation equity, collection cost, and how long it takes to be repaid. The need for a secondary repayment source is why lenders ask for collateral. Collateral on a loan gives the lender a more timely legal recourse in the event of default.

Lenders use the business financial statements to investigate the probability of repayment. They also use them to compare your business?s operations to other businesses in the same industry. They compare your financial performance to others in order to gain information regarding your management skills. Do you run your business efficiently and effectively? How liquid are you? How much do you have at risk versus your creditors? Industry comparisons give an indication of the quality of the business and its management. Loans are repaid by good managers of financially successful businesses. The lender will assist with the capital necessary for your success, provided they believe in the potential economic success of the business and your ability to make it happen.

Vase One Floral Design Studio, LLC is a Tampa, Florida based establishment which was launched on November 9, 2009. Proprietor Rhonda Pittman invested $15K from personal savings to finance start-up expenses. Understanding her market segment: Ms. Pittman immediately began to brand her enterprise as a custom floral design studio specializing in the art of distinction. She and her staff take pride in providing exquisite customer service. They cater to the floral needs of weddings; sorrowful events; life occasions; and interior design. Daily deliveries as well as corporate and residential installation accounts are available.

My first encounter with the SBDC was for a counseling session with Certified Business Analyst, Ms. Learline Shorty, said Rhonda. She was very informative and provided excellent resources. She encouraged me to attend free workshops offered by Hillsborough County?s Small Business Information Center (SBIC); one of SBDC?s collaborative partners. Learline was very professional and whole-heartily dedicated in providing me with excellent information, resources and guidance. Learline also taught some of the workshops I attended. Overall, the SBDC has contributed tremendously in my growing knowledge of the many aspects of business by providing free one on one confidential counseling and workshops based on entrepreneurial principles.?

Ms. Pittman went on to voice that she has taken a total of 56 credit hours in workshops at the SBIC. The topics ranged from Smart Start Your Business to Bookkeeping Essentials: to SBA Financing for your Business to a Five Part Business Plan Series. She feels confident that her business will benefit from the financial advice she received from Learline and through the attendance of the workshops.

?Now that my business is up and running says Ms. Pittman I can really hone into my short term goal to become a well recognized and established custom floral design and event studio in the Tampa Bay area.? When asked if she would recommend the SBDC to other business owners, Ms. Pittman replied ?yes.I have become a customer of the Vase One establishment states Learline Shorty (Ms. Pittman?s SBDC Certified Business Analyst). The arrangements I have ordered portray Rhonda?s creative, style and sense of color coordination. The decorum of Vase One is simply fabulous. The environment is warm and inviting. When you enter Rhonda?s business the colors and design of her branding kind of reach out to touch you. The interior design of Vase One is like no other florist I have encountered. You definitely get the WOW factor, and her company?s Web site is very professional. Rhonda has done a phenomenal job on branding her business. Her dcor, business cards, Web site and marketing materials are consistent in projecting the intended cultural image. I am thrilled with joy for Rhonda?s accomplishments.?

You can embrace the experience of purchasing a customized floral arrangement and receiving fantastic customer service by visiting Vase One Floral Design Studio, LLC at 7402 N. 56^TH Street, Suite 906, Tampa, FL 33617 (Corporate Square Office Park). Voice Number : 813.443.4617 Fax Number: 813.443.4618; Web site: www.vaseonestudio.com; Email: info@vaseonestudio.com or Rhonda@vaseonestudio.com.

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Private investors seek business investments with a good opportunity for growth. These decisions are based on their perceptions of the degree of risk compared to the likely rate of return on their investment.  In addition to the significantly better odds for getting the money, private investors have many advantages over venture capitalists. Some additional advantages are:

1. The private investor is using his own money. Since others are not questioning his judgment, he often invests in riskier deals or in more deals based on his intuition and experience.
2. The private investor is usually interested in the smaller deals. A venture capitalist may be only interested in deals over $500,000. Over half of all angel investments are under $50,000. Usually, more than one angel will participate in the financing of deals over $100,000.
3. More than 60% of the investments made by private investors are in start-ups. Only 15% of venture capitalist investments are in start-up businesses.
4. It is easier to sell to private investors. Venture capitalist must perform due diligence. Today, most private investors require a business plan be submitted to them. However, they frequently make their decision based on their prior experience and intuition.
5. Angels make decisions in weeks, not the months needed by venture capitalists.
6. The private investor is easier to contact. Few intermediaries exist and they are local. One million angels are easier to find than the 5,000 traditional venture capitalists. It has been estimated that one angel exists for every 250 adults. Therefore, a city of 250,000 would have about 1,000 angels and maybe no venture capitalist.

Private investors look for certain characteristics when investing in a company. This is especially true when the angel is not a good friend, or relative. Some areas that are of the major concern to the private investor are:

1. The idea must be a viable business concept. Private investors use their intuition and experience to look for products or services with a clearly defined market.   However, a well-prepared business plan will improve your chances of convincing a private investor that this idea is economically viable.
2. Private investors usually require at least a 30%-40% annual return on their money, because the private investor is usually interested in finding a long term income opportunity. The venture capitalist usually requires a 50% return on their portfolio. Since less than 20% of their deals are successful, the venture capital firm is usually looking to make a 500% to 800% return from their successful deals in order to carry the failures. Also, they are only interested in deals with a defined exit strategy such as joint venture, buyout, or the company going public.
3. Private investors like to invest in companies that they can see and in familiar markets. Therefore, they usually invest in local companies within twenty minutes of where they live.
4. The private investor?s primary concerns are management integrity and     commitment. They are not as concerned about career experience as venture capitalists.
5. Angels like the prestige of owning a piece of a business. Therefore, image is important. People like to be around celebrities. Consider having a sports figure or other celebrity involved with your business in order to attract other investors.
6. Angels enjoy the excitement of something new or different. Their hot buttons are not just the financial rewards, but may include a sense of civic or social responsibility.

Although private investors are a million strong, no comprehensive list is available. Imagine that you had just won the lottery. Would you place your name on a list of winners? If you did you would be overwhelmed by all the people asking you for money. Thus, the task of finding private investors is difficult, but not impossible. Some of the places to discover them are:

1. You should check with friends and relatives first. They may want to help because they want you to succeed. They might even agree to lend you their assets in order for you to obtain bank financing. Senior citizens often pledge their certificates of deposit on loans to relatives and friends. They continue to receive their interest checks from the bank as long as you make your payments. They might be willing to loan you the money because they want a higher return than the bank pays.
2. Professionals with discretionary capital often invest in businesses or may refer you to their clients. Examples are doctors, dentists, lawyers, accountants, architects, and consultants. You can find lists of these professionals in the Yellow Pages and the membership directories of the many professional associations.
3. Any existing or potential suppliers may be a source for capital. Their ulterior motive is to tie your business to their service or product.
4. Customers may provide investment capital. This is more likely if the customer depends on your product or service in order to produce his product or service.
5. A similar company in another market may be willing to invest in your business. Each business helps the other by sharing in information and even investing in each other.
6. Employees can be investors. Matter of fact, certain tax advantages exist should you utilize this method of raising capital.
7. Successful entrepreneurs and managers may have capital to invest. They often look to invest in the similar industries to their own industry.

When trying to find money, you should contact the people whom you know first. Call them for an appointment. Take them your business plan and make a professional oral presentation. There are four extremely effective methods to find, contact, and persuade strangers to invest in your business:

1. You can place a classified ad in the Sunday Business Opportunities section of    your newspaper. This method is quick, cheap, simple to write, and produces results.
2. You may dial for dollars. You must develop a good list and be extremely persuasive on the telephone. Although the rejection rate is high, you can find interested prospects.
3. You can contact a business broker to sell part, not all, of your business. In his files are inquiries from numerous interested individuals who did not buy a   business. They might be interest in buying part of your business. You may have to convince the broker that it is worth his effort, but he probably handles ten serious inquiries for every deal done. You can find a list of business brokers in the Yellow Pages.
4. You can advertise your company in investor magazines and newsletters. These ads described the company, but there is no formal solicitation for capital.  However, investors know to contact you when they are interested in your  company. Prior to any formal solicitation program, be sure to get expert legal advice. This activity is very complicated and highly regulated.
5. Go to the association meetings for your industry or trade group. Use these meetings not only as a networking opportunity but also casually mention that you are looking for money. Try to get leads and/or interested investors from the attendees.
6. Ask someone with money to invest to critique your business plan for you before you send it to potential investors. After reading the plan, they will express any interest they have in the deal. If they aren?t interested, they can give you constructive feed back without having to actually turn you down. Be sure to ask them for names of any of their contacts who might be interested.

When seeking private investors do not overlook individuals who may be short on cash, but long on credit and/or collateral availability. It is worth something to you to get the capital from whatever source. The ability to influence the decision in your favor may be critical.

Remember to ask everyone whom you deal with on a business basis: employees, associates, suppliers, customers, landlords, etc. After your business is a success, you will have many people say that they would have invested in your business. Give them that opportunity when you really need their money. Your ability to form and take advantage of alliances is critical to your long-term success.

The answer to these questions is that there is a kernel of truth in what you have been told; enough of it is true so that the source does not risk serious legal liability. However, read and listen closely to their words. Although they give the impression that these business grants are available in great abundance and are yours for the asking, the whole truth is that they have many restrictions. In the last six years, I have assisted 2,115 clients in finding money for their businesses. Only 22 (1%) of those clients received a business grant and almost all of them received their grants from a state of Florida program that is available only to the disabled and Native Americans. In my nine years of business counseling, I am not aware of anyone who ever received a business grant from any source they directly identified upon buying a book, watching an infomercial, or paying a grant consultant. So, what are the common myths and realities? Are there any grants available for your business?

Grants for Minorities, Veterans, and Women Owned Businesses

One of our most frequently asked questions is ?where are the grants for minorities, veterans, and women to start a business??  A common myth is – if you are a member of one of these groups, then free money to start a business is out there for you. All you have to do is ask for it! What is the reality? The kernel of truth is that as a member of one of these groups you are not excluded from grant consideration. Scattered across the United States, there are a few grant programs that give small amounts of money (usually less than $2,000) to members of one of these groups who wish to start a business. However, these programs always have many other restrictions. Why, because no organization, including the federal government, has enough money to fund the potentially large of requests. Based upon the 2000 census, over 150 million adults are a member of one of these groups. A recent infomercial claimed that ?any member of one of these groups can get a $9,000 grant to start a business. If true, then 1.3 trillion dollars would potentially be needed to fund grants to members of these groups. That amount is approximately 60% of the federal 2004 budget or about the same as the combined budgets for Social Security, Medicare, Medicaid, and the Department of Defense.

Most of the books, tapes, CDs, and infomercials on finding free money use the Catalogue of Federal Domestic Assistance as their source material. This catalogue is over 1500 pages and includes all domestic spending programs, not just grant programs. So, the authors condense the information and then sell it to you. However, that catalogue is available on-line for free at www.cfda.gov. Even this on-line version is extremely cumbersome to navigate and is difficult to understand. That is why the federal government recently created an on-line federal grant search engine. This grant search engine is available for free at www.grants.gov.

Currently, we are not aware of any local or state grants for members of these groups. However, occasionally local women and/or minority organizations may sponsor grants for individuals in specific circumstances. For example, a few years ago the Women?s Resource Center in Sarasota had a grant program for recently divorced moms with young kids who wanted to work at home. In that instance, they would consider, if needy, providing a grant up to $1,000 to help them get started. Although we are not aware of any local or state organizations that provide these grants today, you might consider asking the local women, minority, and/or veteran organizations. If you find any organizations that do provide these type grants, please let us know so we can make the information available to our other clients.

Grants for the Disabled and Native Americans

Common knowledge says that there is free money available for the disabled and/or Native Americans to start or expand a business. The reality is that although some Indian tribes do have grant programs, they are usually reserved for tribal members living on a reservation. In addition, almost all of the grant programs for the disabled go to assistance providers rather than to a business. However, the state of Florida does have a business grant program for the disabled and/or Native Americans to start or expand their business. As mentioned in the introduction to this article, the USF SBDC has had a number of its clients receive one of these grants. The state?s primary purpose for these grants is to help the disabled and Native Americans become self sufficient and thereby get off of public assistance. For information, contact a counselor at your local office of the Division of Vocational Rehabilitation, Department of Education. You can find the location of the local office in the telephone directory or through www.myflorida.com.

Research and Development Grants

The federal government does require its agencies to make research and development grants available to small businesses. Two of these programs are the Small Business Innovative Research (SBIR) grant program and the Small Business Technology Transfer Research (STTR) grant program.

The SBIR is a highly competitive grant program. It provides research and development funds for the commercialization of high-tech products. To be eligible the small business must be: American-owned and independently operated, a for-profit business with less than 500 employees and the principal researcher must be employed by business. Each year ten federal departments and agencies are required to reserve a portion of their R&D grants for small business. These grants award up to $100,000 for approx. 6 months to support the exploration of the feasibility and merit of the technology. In the next phase, grants are awarded up to $750,000 for up to 2 years to perform the R&D and evaluate the commercialization potential of the technology.

The STTR program is very similar to the SBIR program except that the principal researcher is employed by a non-profit research institution rather than the business. Other differences are the first phase grant of up to $100,000 may be for up to one year instead of six months and the second phase grants are up to $500,000 instead of $750,000.

You can find a list of Requests for Proposals at the website of each federal agency. A link to those agencies that issue small business grants can be found at the Small Business Administration?s website, www.sba.gov. For a list of the federal departments and agencies that provide SBIR/STTR grants and for additional information, refer to the SBA website at www.sba.gov/sbir. However, you will probably find it easier to find a federal government grant for which your business may qualify at the www.grants.gov website.

Foundation Grants

Yahoo has an on-line directory of foundations that provide grants. Although these grants usually go to not-for-profit organizations for philanthropic work, sometimes they do go to for-profit businesses. For further information on these and the type of work they support, go to: http://dir.yahoo.com/society_and_culture/issues_and_causes/philanthropy/organizations/grant_making_foundations.

Other Grant Resources

A free on-line list of business grants from non-government sources can be found at the Idea Café Grant Center. This is a bulletin board at a website for business owners. They ask their members to post any grants that they hear about on the bulletin board. You do have to register but there are no fees. Their address is www.businessownersideacafe.com.

There are many fee-based on-line search engines such as www.grantselect.com that claim to match your needs to a possible grant source. There database includes many different types of grants, some of which are available to small businesses. However, be very careful and spend your money wisely. Rarely do small businesses find grants through one of these matching services due to the reasons previously discussed.

Conclusion

When searching for business grants, you start out with one basic question. Who cares about what I am doing so much that they will give me ?free? money? In order to get one of these grants, your business venture must provide the solution to some major problem or need identified by government and/or foundations.