Strictly Business: Q&A with Kay Mardon of the U.S. Small Business Administration
| Thursday, Sep 02 2010 10:00 AM
Last Updated Thursday, Sep 02 2010 10:00 AM
Images
Kay Mardon
The Greater Bakersfield Chamber of Commerce kicks off the first of a series of workshops for current and future small business owners at 11 a.m. Sept. 16. The first one is on small business financing. Later workshops will cover writing a business plan and government contracting. We talked to the Small Business Administration about what aspiring entrepreneurs need to know to get an idea off the ground in a weak economy.
Name: Kay Mardon
Title/Occupation: Lender relations specialist, U.S. Small Business Administration
Question: Is this a good time to start a business? Why or why not?
Answer: For a true entrepreneur, there is never a bad time to start a business. Just ask Microsoft, FedEx and Hewlett Packard, which all started during a recession. And while the nuances associated with a recession cannot be overlooked, the odds of having a business succeed improve tremendously if one has a workable business plan including good credit, an equity contribution, realistic pro forma and collateral.
Q: Has entrepreneurship slowed down since the recession or are people still starting new companies?
A: SBA and its numerous business development partners all agree that business counseling and training is up. With so many people out of work, starting a small business is one way to create a job even if it's part-time. But small business is not for everyone.
Q: Is there still a credit crunch, or have banks begun to loosen up the purse strings?
A: The lending institutions that SBA works with all want to make business loans to qualified entrepreneurs and small business owners. But to say that loan underwriting will return back to the levels of three or four years ago when loan approvals were based solely on one's FICO scores is probably something of the past. I think we all want lending institutions to make loans based on several factors, not just one's FICO score.
Q: Historically, home equity was a source of start-up capital, but half of the home loans in the Bakersfield area are upside down. What effect is that having on capital for start-ups?
A: There's certainly a correlation and it's no secret that a lot of start-ups were financed this way. But capital for start-ups does exist. You can improve your chances of obtaining this type of financing by seeking counseling from SBA and its partners.
Q: Is there any hope for venture capital if you aren't working in the high-tech arena?
A: Equity financing is far different than debt financing and the rules are different. Generally speaking, what you say is true. Equity financing tends to focus on high-tech industries due to their historical exponential high growth.
Q: How do you find private, or "angel" investors?
A: Angel investors are hard to find, but they do exist. Try a search on the web, try calling the local business school, or contact the Chamber.
Q: Who offers grants for small businesses, and how do you find the grant makers?
A: Generally speaking, there are no grants to start a small business. A lot of books get sold and they all refer to the government website (www.grants.gov) that at any one time has about 300 grant opportunities. The problem is that all of these grant opportunities require that the applicant be an institution of higher learning or a non-profit.
Q: Are there deals to be found in the commercial real estate market with vacancy rates so high?
A: One deal is for established small businesses that have been leasing and now wish to purchase their location instead of leasing, or wish to expand. It's our 504 program, which only requires a 10 percent to 20 percent downpayment, depending on the situation. There are several requirements that apply, but additional information can be obtained at http://www.sba.gov/financialassistance/borrowers/guaranteed/CDC504lp/index.html including the local provider in Bakersfield (Mid State CDC).
Q: Are suppliers extending credit any more, or do most insist on cash upfront?
A: Everything is negotiable.
Q: If you have an individual credit rating, but no track record for your business, will you be able to get a business loan?
A: The days are gone when one can obtain a business loan based solely on one's credit score. A lender will generally consider a business to be new if it has been operating for less than two years.
Q: If you have an idea with a low barrier to entry, how do you find funding without risking getting your idea stolen or tipping off a competitor?
A: Any counseling offered by SBA and its partners like Service Corps of Retired Executives (SCORE), Small Business Development Center (SBDC) or Women's Business Center (WBC) is strictly confidential.
Q: If you're not a homeowner, can you get a business loan without collateral?
A: It depends. If the loan amount is less than $25,000, then the loan can be unsecured. However, for loans with larger amounts, lenders typically require adequate collateral coverage.
Q: What kinds of ongoing training and support are available from the SBA for inexperienced small business owners?
A: The SBA's Fresno District Office offers free monthly workshops. Topics include sources of funding and SBA loan programs, writing a business plan, procurement and government contracting, to name a few. Contact the office directly at (800) 359-1833 option 6. But first try contacting one of our local counseling partners directly. There's SCORE at (661) 327-4421, SBDC in Bakersfield at (661) 861-7951, the SBDC at Frazier Park at (805) 667-8004 and the Women's Business Center in Bakersfield at (877) 831-9377.
