Archive for December, 2012

Sandy Victims Aren’t Taking Loans

Thursday, December 27th, 2012

In the wake of Hurricane Sandy, New York and New Jersey businesses are doing everything they can to recover from damaged buildings and ruined inventory. One thing they aren’t doing though, according to the Wall Street Journal, is taking advantage of the U.S. Small Business Administration’s “disaster loans.”

These loans are at a fixed rate of 4% and are up to $2M in funds that affected businesses likely wouldn’t be able to qualify for otherwise. But the rate of approval is down after Sandy (22%) compared to after Hurricane Irene (30%) and Hurricane Katrina (53%).

The low number of accepted loan applications might be explained by the long and difficult application and acceptance process, or the fact that small businesses cannot afford more debt on their balance sheet. Credit terms are harsher than they were when Katrina hit, so small businesses also might assume they do not qualify and won’t apply.

This article goes to show that bank loans are sometimes an unattractive option to small businesses, who don’t want to go through the long application process and wait for funds when they need them desperately now. They are seeking alternative options that won’t create more debt and have a faster disbursement process.

For the full article, see Disaster Loan Rate Is Lower After Sandy

Medical Billing and Coding Industry Predicted to Boom by 2020

Wednesday, December 26th, 2012

While some industries are stagnant or losing steam in the slowly rebuilding economy, one industry is predicted to grow faster than any other- medical billing and health information.

The Bureau of Labor Statistics projects that job growth in that sector will increase faster than any other occupation at 21 percent by 2020. Salaries for these positions are also expected to increase by over 20 percent over the next five years to match as well; all in all, great prospects for a growing field.

Any explosion in growth is necessarily followed by expansion. Expansion in staff or facilities requires cash on hand, which can be a problem for outsourced medical coding and billing services waiting weeks for payment from clients. Invoice factoring is one financing option that affords this industry flexibility, and the ability to pay obligations in a timely manner. As the industry grows exponentially, so will the cash needs of medical billing and coding businesses- and that is where factoring can help.

For the full article, see A Whopping 21% Increase in Medical Billing and Coding Jobs Salary

How Important is Funding for Start-Ups?

Thursday, December 20th, 2012

While many start-ups can get off the ground with little to no external financing, sometimes it can make the difference between success and failure. According to entrepreneur Kevin Ready, there are several good reasons to to raise funds through external entities:

Marketing: Even if you make the best product ever, it doesn’t matter if no one ever sees it or knows about it. A marketing budget can get your product or service visible where it otherwise would not be.

Speed to Market: The time window for your product to be viable is a short one- the longer you take, the more time your competitors have to take market share away.

Visibility: A high profile investor brings credibility and can make people take notice of your product, and you will have more access to talent, advisors, money, etc.

Less Personal Risk: You don’t want to have to drain your bank account getting your business off the ground. External funding lessens the hazard for you and will allow you to take risks without risking your personal finances.

Cushion: More money in the bank means more of a cushion in case of hard times or uncontrollable external factors.

There are many types of financing available- a start-up company must weigh the pros and cons of external financing, evaluate the financing options, and then decide which form is best for its needs.

For the original post, see Do Startups Need Funding Anymore?

Crowdfunding Rules Up in the Air

Tuesday, December 18th, 2012

When the bank turns down a loan request from a small or medium sized business or start-up, where can they turn for financing? Many alternative funding options are available, but one that is gaining attention and notoriety lately is equity crowdfunding.

Crowdfunding refers to “unsophisticated” investors buying shares of a company online, and was only recently made legal under Congress’s JOBS Act. Under the JOBS Act businesses would be able to raise up to $1 million each year online, without having to register with the SEC.

While this source of financing looks promising for start-ups, the rules have not been officially set by the SEC or Finra. Businesses seeking crowdfunding are frustrated by the delays, but securities trade groups warn that crowdfunding without proper rules and oversight could result in amateur investors getting duped out of money.

The SEC is supposed to make a decision in January, but due to the Agency Chairman stepping down last Friday, the process will likely be delayed even more.

For the full article, see Stalled Crowdfunding Rules Leave Business Plans on Ice

Small Business Confidence Takes a Plunge

Thursday, December 13th, 2012

Unlike most others, small business owners aren’t looking forward to what the New Year will bring. According to a recent survey from the National Federation of Independent Businesses (NFIB), the Small Business Optimism Index dropped severely in November.

Hurricane Sandy and the re-election of President Obama were the two big factors that went in to the drop, and the results show that the election had a far greater impact than Sandy even with the widespread damage hurting the economy. Small business owners expect worse conditions in the coming year than they have now because, according to NFIB chief economist Bill Dunkelberg, “Washington does not have the needs of small businesses in mind.” This refers to rising health care costs, new regulations, and the looming fiscal cliff worrying business owners.

Small businesses often get the brunt of problems in a down economy- and unfortunately business owners are not confident about the ways in which the government is trying to revive it.

For the full article, see  Small Business Optimism Collapses After ‘Something Bad Happened In November’

Factoring vs. Debt Collection

Monday, December 10th, 2012

Almost every business has money tied up in accounts receivable. For those with adequate capital supply, it’s not such a big deal to wait 30 to 90 days for payment. For some businesses, however, cash flow is intermittent and irregular and waiting is not possible. Two viable options for getting money from accounts receivable that haven’t yet been paid are factoring and debt collection. Factoring is the process by which a factoring company purchases unpaid receivables for cash less a discount, while debt collection is where a third party agency collects old unpaid debts from customers.

There are several major differences between factoring and debt collection:

  • The purpose of factoring is to improve cash flow, while the purpose of debt collection is to recover old debt.
  • The process of factoring is simple and short and usually results in cash the next business day, while the process of debt collection is often long and involves a delicate balance between aggressive policies and alienating customers.
  • The age of invoices is also different, as factoring involves current invoices while debt collection deals with those 60 days or older.
  • The fees charged by factoring companies usually run from 3-7%, while debt collection agencies can run from 25-30%.

It is up to individual companies to weigh the options and decide which method is best for their needs. Small to medium sized companies that have seasonal demand or irregular customer payments would benefit more from factoring, while bigger companies would be more likely to use debt collection.

For the full article, see Factoring Vs. Collections: Which is Better for your Unpaid Invoices?

HCA’s Parallon Acquires Healthcare Staffing Firm

Friday, December 7th, 2012

Parallon Business Solutions, subsidiary of healthcare service provider HCA, recently bought a Texas based healthcare staffing agency to supplement their workforce management offerings. Their new acquisition (Martin,Fletcher) will add physician staffing to the existing pool of 7,000 health professionals. Parallon will now be able to fill temporary and full time physicians to client hospitals and elsewhere, in addition to nurses and allied staff such as dieticians and physical therapists.

This acquisition comes as no surprise in light of recent trends towards staffing, especially in the healthcare industry. Health care as we know it is changing, due in part to the Affordable Care Act and also the coming nationwide shortages of health professionals. By buying Martin, Fletcher, Parallon is simply seeking to stay ahead of the curve by forecasting the need for temporary health care workers to fill shortages.

For the full article, see HCA’s Parallon Buys Texas Company

Bank Lending Down for Small Businesses in the UK

Thursday, December 6th, 2012

The trend of small businesses turning away from bank lending is not limited to the US- it’s worldwide. According to a recent survey, UK small-to-medium enterprises (SMEs) are at a record low for bank funding, just like their American counterparts. These results most likely come from a combination of the poor European business climate and the assumption that banks will not approve loan requests anyway. Success rates for small businesses trying to secure loans stand at about 42%. Banks in the UK were also rated low in communicating other sources of funding to denied applicants.

This survey helped show that banks are a tough source of financing for SMEs all over the world. Applications are time intensive, credit checks are necessary, and the approval process takes weeks. After approval, which is not likely in the first place, disbursement of funds can take anywhere from 30-90 days. For some small businesses in certain industries, waiting that long for cash is not feasible. Alternative financing, including factoring, is becoming more mainstream and popular as banks continue to turn away SMEs.

For the full article, see Small businesses turn their backs on banks

Local Economies Matter to Small Business

Tuesday, December 4th, 2012

Small businesses depend on small economies. A new 2012 Bank of America survey highlights the importance of local economies to small businesses; for the majority of respondents (63%), their customers come primarily from the local community.  This is one reason that small businesses remain optimistic about the future even though national economy is struggling. This makes sense, as 75% of respondents said the local economy plays a significant role in their business as opposed to 59% citing the national economy.  Here are some other highlights from the study:

  • 54% of respondents anticipate their revenue will increase over the next 12 months
  • 31% said they planned on hiring more employees, whole 56% anticipate their staffing needs will remain consistent
  • 40% say that customer loyalty comes “because they are local.”
  • 70% of SBOs believe they have enough capital to run their business
  • 78% do not intend to apply for a business loan
  • Only 29% described themselves as “very savvy” when it comes to financial matters

For the full article, see Why a Local Economy’s Strength is Critical to Small Business Success