Small business loans outstanding by commercial banks increased by 5.5 percent between June 2003 and June 2004, according to a study released today by the Office of Advocacy of the U.S. Small Business Administration. A summary of the study can be found here, the introduction with links to specific state information can be found here, and the full 106 page report can be found here.
“Increased access to credit is essential for the survival and growth of American small business,” said Dr. Chad Moutray, Chief Economist for the Office of Advocacy. “The information contained in this report helps small business owners find banks providing that access, and it helps banks understand how they compare to their competitors in commitment to small business lending.”
As one of my business partners used to remind me, “There is a bank on every corner.” This type of data helps entrepreneurs get a road map of small business lending by banks.
The report, Small Business and Micro Business Lending in the United States, for Data Years 2003-2004, includes rankings of the top state lenders for loans under $1 million (small business) and $100,000 (micro business), based on the Reports of Condition and Income (Call Report) and Community Reinvestment Act (CRA) data. Four sets of tables rank large Bank Holding Companies (BHC) and commercial banks nationally and by state. Findings also include:
– Small business loans outstanding (loans under $1 million) totaled $522 billion as of June 2004, an increase of $27 billion or 5.5 percent between June 2003 and June 2004. This compared with an increase of 2.3 percent during the previous period, according to the Call Report data.
– Large multi-billion-dollar banks made 67 percent of micro business loans in the year ending June 30, 2004 compared to 64 percent in 2003. This increased share appears related to the increased promotion of small business credit cards.
Inc 500
The Inc 500 list of fastest growing private companies is now available. While an interesting read, keep in mind that this list is made up of self-nominated companies. Most entrepreneurs I have worked with tend to shy away from this list unless they need it to help them with publicity for raising capital.
Small Business Owners Remain Bullish
The latest survey of small businesses is out from the NFIB, and it continues to show a bullish and optimistic attitude. Not surprising given the fact that a whopping 77% reported higher profits. So what are they spending all of their new found gains on? Growth!
Small businesses are hiring more employees. One in five small businesses expanded their employment in October. In fact, business is so good for small businesses that they are beginning to experience difficulty in hiring. Eight out of ten (79%) small business owners reported that they found “few or no qualified workers for the positions they were trying to fill.” And one in ten now say that finding qualified workers is their number one business problem. The only two industries not reporting strong employment were agriculture and retail.
Small business owners reported that they are continuing to make capital expenditures for their businesses in October, including equipment (46%), vehicles (24%), and facilities (13%). Overall, they also increased their inventories in October.
The entrepreneurial economy just keeps gaining steam, in spite of hurricanes and higher gas prices. It is also moving ahead in spite of the apparent wishes of many politicians and journalists who seem to be hoping for a downturn. For example, the Boston Globe had a headline yesterday at their website “State economy slogs on despite rising energy prices”. Slogging?? The story is full of hand-wringing about higher energy prices and how it will surely bring an end to the economic expansion. They seem to be oblivious to the fact that much of the energy price increase was a temporary blip that has already significantly subsided.
The politicians in Washington continue to do everything they can to dampen the economy, including shelving plans to expand our energy base in the US.
But, the entrepreneurial economic expansion ignores all of this and just keeps rolling along. Entrepreneurs are truly remarkable people.
Pet Tales
Americans have taken pet ownership to new heights in the past few years. And where there is money and there is a need, there is opportunity.
Entrepreneur.com highlights some of the businesses that are taking advantage of the current trend of Americans to spoil their pets. The pet products are now the seventh largest segment of retailing.
Just look at the numbers spurring this continuous growth. Pet spending has more than doubled in the past 11 years–from $17 billion in 1994 to a projected $35.9 billion by the end of this year, according to statistics from the APPMA. Fueling this trend are empty nesters lavishing attention and money on their pets, young adults who are having children later and currently put their time and energy into their animals, and a pet industry that has become more sophisticated at consumer marketing….
Just as a couple of examples, you can see local stories written about this trend in the Coloradoan, the Philadelphian Inquirer, and the Charlotte Business Journal.
I wrote a few months back about our search for a new kennel for our dog, Keb. I was amazed at how many options would have cost us more per night than we typically spend on a hotel when we travel!
This little guy is cute, but he is not worth over $100 a day for a private room with a raised bed and television, and special chilled doggie treats at bed time.
Could This be the End??
People ask me two questions about being a blogger. First, how long does it day each day. And second, how long do you think you’ll keep blogging?
The answer to second question may find its answer in the newest technology fad that is about to sweep the Internet: the VLOG. Vlogging is a video version of blogging.
When the silent movies became “talkies” many of the movie stars could not make the transition. Although they were great in silent movies, they just did not come across as well when their voices were added in.
Could I suffer a similar fate as a blogger? Could technology pass me by yet again?
I sit each morning from about 5:00 a.m. to about 6:30 or 7:00 (the answer to question number one) on my back screened porch in sweat pants and a tee shirt with my mug of coffee writing this blog. I am not sure how well that would translate onto video!!
Here Comes the Entrepreneurial Generation!
The last great period when entrepreneurs transformed the American economy was in the late 1800s. In fact, most of the 1997 Fortune 200 were already among the largest corporations by 1917 and almost all of these companies started as entrepreneurial ventures. These businesses helped to shape the American economy, society and culture for the next century.
The 1970s was the beginning of the end of this economic era. The large corporations formed in the last great entrepreneurial era in America were no longer creating new jobs in significant numbers. Total employment by the Fortune 500 companies has dropped from 20% of US workforce in 1980, to about 7% in the late 1990s. In fact, the Fortune 500 has actually lost over 5 million jobs during the past 20 years.
Over the past decade or so, the emergence of a new entrepreneurial economy in America has begun. There has been significant growth in entrepreneurial start-ups and small businesses now are the engine of this economy. The number of small businesses has grown steadily: 4.5 million small businesses in 1955, to 18 million by the late 1980s, to 23 million today. New business formation has grown from about 200,000 per year in mid 1900s to over 3.5 million per year in the early twenty-first century.
Here are some other facts about today’s small businesses:
– Survival rates are now over 50%; with education and training this increases to 80-90%
– They make up 50% of GDP
– 5-6 million small business have employees
– 99% of employers are small businesses
– Over 50% of workforce now is employed in small businesses
– 45% of total payroll comes from small businesses
These businesses have become the engines of job creation for the US. In fact, entrepreneurs and small business owners are responsible for 77% of new jobs created in past twenty years.
The emerging entrepreneurial economy is going to succeed or fail in large part as a result of the efforts of my children’s generation. This generation has many names. They are known as Generation Y, the Echo Boomers, and the Millennials. They are also known more and more as the Entrepreneurial or “E” Generation. They are the children of the Baby Boomers and were born between 1977 and 2002.
Stephanie Armour wrote a story profiling this generation that was picked up around the country in the past couple of days. She cites studies of this generation that gives some insight into how they think and what values they hold:
– They are more financially savvy than most previous generations, especially for their young age. 37% already are thinking and planning for retirement. I see this in the students I work with. They are not just looking at an entrepreneurial career as a way of making an income. Nor do they take a short-term view in their business plans. They are thinking about how to build value and wealth in their businesses over many years to come.
– Work-life balance really matters to them. They have seen my generation, the Baby Boomers, get so much wrong. We have tended to be a materialistic generation, measuring success in life in terms of the square footage of our homes. We Boomers have not been very good at building families, subjecting the E Generation to record divorce rates. It is sobering to hear my students talk about how they will not make the same mistakes. They plan their businesses first around family, and second around income and wealth.
– They are likely to be serial entrepreneurs, starting many businesses over their careers.
– They are creative and imaginative. They can see opportunity everywhere.
So what kind of society and culture will this generation build for America? They tend to be very distrustful of government and of large corporations, to the point that I would say they have a very strong liberitarian streak. They have strong values, which for many are based on a very strong faith. They believe that they can build a better economy and help restore our culture.
Let’s hope we give them a chance. My generation, the Baby Boomers, has taken America on a drift toward larger and larger government, with more and more socialistic characteristics. We have come to believe that government is the answer no matter what the question.
For the E Generation to have its chance, we need to get government out of the way. We need to get it out of the way of the economy, as this has been proven the world around to be a key for entrepreneurial growth. And we need to get the government out of the way of culture. This generation has a strong sense of values that can help restore our culture. As my students like to say, they are ready to “take it back” from the large corporations and government that have tried to strip morality out of our culture.
NFIB Announces New CEO
The NFIB (National Federation of Independent Business) Board of Directors has selected Todd A. Stottlemyer as the new president and CEO of the National Federation of Independent Business, Chairman Thomas Musser announced today.
Stottlemyer, currently CEO of Apogen Technologies Inc., an information technology services and solutions company in northern Virginia, will assume the leadership of America’s largest small-business advocacy group on Feb. 15, 2006.
Carnival of the Capitalists
Carnival of the Capitalists is hosted at Part-time Pundit this week.
Collecting Receivables
So do you want to be your customer’s banker? That is exactly what you become when you extend them credit on sales. Collecting these accounts receivable is critical to healthy cash flow, and yet many entrepreneurs simply send out the invoices and wait…..and wait……and wait…….
From Forbes.com:
Hounding delinquent customers is touchy work. On the one hand, you need the cash flow to fund your daily business operations; on the other, you don’t want to seem like an overbearing ogre, especially if you know the debtors personally. Receivables are essentially unsecured loans, so a debtor is indeed what a late payer is.
The longer you wait to collect, the less likely you will be to ever get your money. And remember, it is your money.
One of the very first real “systems” that entrepreneurs who extends credit to customers need to put is place is one that allows them to track and collect accounts receivables. Here are a few things to keep in mind:
– Set up your accounting software to get an accounts receivable report. Review the report at least once a month. At first you may need to review it once a week as you get things under control.
– Set up a contact schedule. At a minimum you should send out a second invoice after 30 days. After that, you should begin regular telephone contacts — every two weeks shows urgency without antagonizing clients — to get updates on payments.
– Don’t start out as a hard guy. Give the customer the benefit of the doubt. Be prepared to work with them on payment plans if necessary. Make sure to stay on top of any agreements to make certain that this is not just a stalling tactic by your customer.
– Don’t wait too long to take action on deadbeats. Your attorney can prepare a standard letter if you have large accounts receivable. Collection agencies may need to become a strategy at some point, as well.
– Remember that sometimes you need to fire a customer. Too many times I see entrepreneurs sit back passively and watch an account grow and grow, getting older and older. They are afraid to act. But, if they do not pay, they are no good to you anyway. Sales don’t matter if there is no cash!
– Watch your payer mix. The best rule of thumb is to never let any one customer represent a larger percent of your total sales than your average profit margin. That way if you need to fire a customer, you can still pay your bills.
Some Weeks are Better than Others…..
I went bowling with a few of my neighbors this past weekend. One of them is an entrepreneur who owns a couple of retail stores. Here’s his summary of his week:
“Owning a business is like owning a boat. The day you buy your boat is a happy day. The day you sell your boat is the happiest day.”
Some weeks are better than others……