Tag Archive | capital

What’s the magic number for cash in a small business? Here are strategies to figure that out.

(This post originally appeared on Philly.com)

Ask any small-business owner and you’ll be told that having plenty of cash in the bank is probably the most important indicator of our financial health. But managing cash flow continues to be one of the biggest issues we face.

Almost two-thirds of small-business owners are “regularly stressed or have anxiety due to cash-flow concerns,” according to a recent survey of more than 500 entrepreneurs from small-business lender Kabbage. More than a quarter of them said that they have gone as long as six months without receiving a paycheck.

Six months without a paycheck seems pretty bad to me. But does it have to be that way? Read More…

How Did Spike Lee Convince Michael Jordan to Help Fund His Malcolm X Film?

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(This post originally appeared on Entrepreneur)

Malcolm X, the masterpiece biographical film about the African-American activist — which in my opinion) should’ve won the Academy Award for Best Picture after it was released in 1992 — was almost never made because its director and co-writer Spike Lee ran out of money months before he could complete production.

“It was a very rough time,” Lee told Bill Simmons in a recent podcast discussion. “I got paid $1 million to make the film and I put that entire salary into the movie. I just didn’t have any more money.”

The studio, Warner Brothers, had cut off funding and Lee was being forced to make cuts to staff, expenditures and the overall running time of the film, all of which was a huge problem for the artist, who had his vision of what the product should be and didn’t want to change what he was doing. Read More…

African American businesses grew 400% – but they still need investment

(This post originally appeared on The Guardian)

2018 was a great year for African American small businesses.

According to a recent survey of more than 2,700 small businesses conducted near the end of last year by small business financing company Guidant Financial and online credit marketplace LendingClub Corporation, African American businesses grew by more than 400% in 2018 as compared to 2017. The pleasant surprise? That growth is being fueled by women.

The survey found that 38% of African American businesses are female-owned which is significantly higher than the 23% average among all other business owners. I guess it’s no surprise that, according to the survey, African American small businesses are not only growing their market share but opening up more health, beauty and fitness businesses than ever before. Read More…

This CEO Has A 2,000-Year-Old Trick to Improve Your Cash Flow

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(This post originally appeared on Inc.)

Thousands of years ago, when Rome was at the zenith of its power, small businesses had the opportunity to sell their goods — organic beef, craft beer, hand-stitched clothing — to the affluent and growing middle class populations in faraway places.

Today not much has changed. Well, except for the fact that craft beer has definitely got to be much better. But new generations of small business owners still sell their goods — organic beef, craft beer, hand-stitched clothing — to customers far away and they face similar challenges.

Whether you were doing this stuff in Augustan Rome or Trumpian America the business still involves a good deal of capital invested and risk. Today, as then, some entrepreneurs elect to take that risk on themselves. Others choose to hire outside firms to help shoulder that risk.

Enter the middleman. That’s the firm that says “Look, I’ll take the risk. I’ll buy and collect the receivable that’s owed to you. You’ll get your money now and I’ll take a fee for my services.” Some call this factoring. I call it financing. And in many cases it’s just good business. You do what you do best, and you let the financial people do what they do best. Everyone shares and everyone wins.

Eyal Lifshitz agrees. He’s the CEO of BlueVine, a company he started about six years ago after a stint in a venture capital firm in Israel. BlueVine, according to its website, has delivered more than $1 billion in financing to over 10,000 small businesses.

The role of the factoring firm hasn’t changed much over the past few thousand years. But their value has. The reason: changing attitudes and, most importantly, technology. I asked Lifshitz about this — and other things — in the below interview, which has been edited for length.

Q: Factoring is not the world’s oldest profession. But it’s pretty old. Why the interest?

My father and grandfather were both small business owners. I grew up watching my father, who owned a small physical therapy clinic in New York, struggle with cash flow issues due to long payment cycles. In factoring I saw a significant opportunity for disruption through technological innovation such as the availability of online and new machine learning methods. That gave me the idea to launch BlueVine, and to make the switch from being a venture capital investor to entrepreneur.

Q: Can you explain BlueVine’s value prop and what it’s doing differently from all the other factoring firms today?

We actually offer two products (factoring and a credit line). For invoice factoring, which was our first offering, we provide a truly digital experience which historically was offline, paper-based and known to be slow and clunky. With our platform, you don’t need to fax invoices or send any paper documents. All you need to do is take 5 minutes to apply online and upload your invoices or connect your accounting software. You can get funds in as fast as 24 hours. Additionally, a business owner can decide which invoice to submit for funding with a click of a button, unlike with many traditional factoring companies that require you to fund all of your invoices. We also offer invoice factoring credit lines of up to $5 million, which is ideal for businesses that are growing rapidly.

Q: Factoring has literally been around for thousands of years. How has it changed? What role has technology served?

At BlueVine, we use advanced technology to improve the onboarding and funding experience for small business customers. Instead of waiting weeks to get approved for financing like with traditional factoring companies, business owners who use BlueVine can get approved for funds in a matter of days. We’re using technology to process hundreds of data points in a matter of minutes to allow customers to finance invoices in almost real time, and have invested in AI to streamline our back office processes. Additionally, we have built an intuitive online dashboard which makes it easy for small business owners to pick and choose which invoice to submit for funding. 

Q:  What do you think is the biggest misconception people have about your business and how are you addressing it?

More and more small business owners are discovering online business lending. In fact, roughly a third of non-employer firms turned to online lenders for financing, according to a 2018 Federal Reserve report. Most people don’t know online lending has gotten to be so common. Despite this, many small business owners still think that the only option they have for financing is their bank. At BlueVine, we’re on a mission to educate business owners and the market about the benefits of online lending and how this relatively new industry not only addresses important business financing needs that traditional banks have not been able to address but also dramatically improves how customers get financing.

Q: One big issue that I would have using a factoring service like BlueVine is trust. How can I trust you with my customers?

We make sure to treat your customers with the utmost care and respect, and it shows in our numbers. We have also built relationships with the accounts payable departments of hundreds of our clients’ customers including Fortune 1000 companies like Walgreens, Verizon, Best Buy who are now very familiar with BlueVine’s process.

Q: Is it just firms with cash flow challenges that can benefit from BlueVine’s services? My company — a 10 person tech firm — doesn’t have these issues. We have about 50-60 open invoices at a time and collection problems do not happen very often. Is there a role that BlueVine could play?

First off, I need to clarify that factoring is not about collections. It’s about allowing you to access capital through your unpaid invoices. It’s a smart option for businesses that sell products or services to other businesses and that typically wrestle with cash flow gaps due to unpaid invoices and long payment cycles. it can also help businesses get convenient access to funds for short-term or emergency needs, from covering payroll to fixing a broken piece of equipment. Many of our clients use factoring to grow their business. Clients often use BlueVine to fund marketing expenses or hire more staff. 

What small businesses can do while waiting for SBA loans to be approved after the shutdown

(This post originally appeared on Philly.com)

For five weeks, thousands of small-business owners were forced to wait on much needed financing because the process for approving their Small Business Administration-backed loan applications was interrupted during the federal government’s partial shutdown.

Now that the government has reopened for business, many are expecting to see a quick resumption in loan processing. If that’s you, don’t get your hopes up.

Unfortunately, many experts estimate that the SBA will need weeks, if not months, to clear the backlog from the shutdown. Then there’s the looming threat of another shutdown if there’s no spending deal by Feb. 15, less than three weeks away. All of this means that the small-business owners, especially those needing working capital or equipment financing, need to have a backup plan.

The good news? There are options. Read More…

Financing is improving for female-led startups – but there’s a long way to go

(This post originally appeared on The Guardian)

Do female entrepreneurs face discrimination when trying to raise money from venture capitalists? Many justifiably think so. But according to a new study, that attitude may be changing – at least for investments in the very early stages.

The study, which was conducted by researchers at the University of British Columbia and Stanford University, found that when making cold investment pitches to venture capitalists, female entrepreneurs were getting more favorable responses than their male counterparts.

The researchers sent out more than 80,000 pitch emails that introduced “promising but fictitious” startups to 28,000 venture capitalists and angel investors. The pitches that came from entrepreneurs who had obviously female names received a 6% higher rate of interested replies than men. Read More…

Will banks be cautious in 2019? Small businesses thinking of getting loans may want to act now

(This post originally appeared on Philly.com)

If you want more evidence of how strong the economy is, then here’s proof: there were no bank failures in 2018, according to the Federal Deposit Insurance Corporation, or FDIC. That’s a first since 2006, and only the third time since FDIC’s founding in 1933.

“The Great Recession/housing bust/financial crisis related failures are behind us,” writes economist and blogger Bill McBride of Calculated Risk.

It’s not just the strong economy that’s being credited. Recent tax reform and legislation introduced after the 2009 recession have helped to improve the safety of the banking system while still leaving room for the industry to grow.

Even with the stock market volatility, banks continue to be in a strong financial position. “Frankly, recent market movements have not given us any reason to be concerned,” Federal Deposit Insurance Corporation Chairman Jelena McWilliams told Reuters earlier this month. “Actually, [banks] are superbly well capitalized at this point in time.” Read More…