For many years I have been operating my business under the assumption that I was a "small business", as were the companies I worked with.
I couldn't understand why all of the "help" that was available to my clients hardly ever worked out.
From government grants and tax credits to loan.
It was either impossible to qualify, required fancy financial statements and/or piles of forms, applications and other assorted paperwork only to find out that we didn't meet the criteria.
Sure, I have had some successes with bank and SBA loans but for every success there were many rejections.
Sorry your client doesn't meet the bank's criteria...
I would ask, why then did the bank manager encourage my client to apply? More wasted time.
Do I charge my client for this time? I am running a business after all.
What about the time my client spent gathering the information.
Was this all for naught? After years of frustration I came to understand how the system worked.
Bankers are trying to assist small business owners by providing small business loans and procuring applications.
It's not their job to judge beforehand if a client is credit worthy or not.
That's the job of the underwriter.
What I saw was a pattern of rejections based on "inadequate cash flow", "low asset base", "low equity", etc...
Even though they had this information at the start of the process I learned that it didn't matter.
So rather than wasting my clients' time and money, it was better face the facts.
The truth was that the banks were only going to lend money to businesses that meet certain criteria.
Then why were they promoting small business loans? They do give out small business loans.
They don't give small business loans to MICRO BUSINESSES! That is the point.
It was a matter of identifying what type of entity you are before hand.
My clients were not small businesses, they were Micro Businesses.
What's the difference between a small business and a micro business? Size, revenue and structure.
For the most part The Small Business Administration defines a small business as having up to 500 employees.
The issue is one of identification or misidentification in this case.
Now that we have correctly identified the type of businesses we are, finding solutions are a lot easier.
We don't have to waste valuable time and energy on avenues that are really not available to us.
The fact is that the term Micro-enterprise is fairly new and is growing in strength and visibility.
There is a nationwide network of lenders that work with micro-businesses and we actually have an emerging voice in Washington with organizations such as The Association for Enterprise Opportunity.
According to 2008 employment and economic data from the US Census Bureau and US Department of Commerce: "• 88% of businesses in the United States employ fewer than 5 people, making them "micro-enterprises" • 18% of Americans were employed by micro-enterprises in 2008 • More Americans are turning to micro-enterprise: the number of micro-enterprises in the United States increased 2.
2% between 2006 to 2008" The way that I interpret this data is that most enterprises are micro-businesses but these entities do not represent a lot of buying power individually.
To put it another way, micro-businesses on their own do not represent enough profit for lenders to deal with us.
During the 1970's Dr.
Mohammad Yunus started experimenting with making small loans to women in Bangladesh.
The experiment led to the founding of Grameen Bank in 1983 and the Nobel Peace Prize for the Doctor in 2006.
If you are trying to obtain a small business loan without success it may just be that you are a micro business and need a micro loan.
There are avenues available to you if look in the right places.
Below are links to just a few of the growing micro-finance sources available today: Accion USA Grameen America