Banks Have Money To Lend!

In case you've been asleep the past couple of years, major changes have happened in the banking industry. Big names, like Merrill Lynch and Wachovia, were rolled into Bank of America and Wells Fargo, respectively. Citigroup became tied to the federal government. Some small regional banks still exhibit some signs of weakness, and more changes lie ahead as the banking industry battles government regulations.


Today Bank of America and Wells Fargo report $3.1 billion in earnings and Citigroup $2.7 billion, up significantly in the 2nd quarter of 2010 compared to the same period in 2009, according to a September 15th USA Today article in the Money section.


The problem for business owners, we've found, is that bank loan volumes are down, close to 15 million workers remain jobless, and the perception is that banks are very tight about loaning money. They appear to be continuing to stockpile their excess reserves rather than lend it. Paul Ashworth, senior US economist with Capital Economics, reported current bank reserves are $1.03 trillion, up $171.7 billion in the past year.


Ashworth wrote: "...banks could make new loans worth roughly $3.5 trillion..." but "...are very cautious about increasing the supply of their new loans."


On the positive side, banks are reporting that, for the first time since 2006, they are "making more credit available to small businesses."

What fails to be reported is that banks are more strictly regulated. In most cases, they are required to have a comprehensive business plan from a potential loan applicant before they can consider that commercial loan. Many banks are avoiding start-up businesses, leaving budding entrepreneurs to fend for themselves. The focus is on helping existing business owners expand their operation or add new product lines.

Banks want to lend money and help get our economy moving again, so it is vital that business owners bring in professional business planners to review and update existing business plans or create a new, market-based and viable operating plan to obtain funding.

Halloween may be getting closer, but the business planning process and securing financing is far from scary with professional assistance from a firm such as Fluidity Business Planning Group.

Business Plan Basics

When you take time to think about a plan for your business, you realize there are three main reasons to have one:

1. To launch a new business;
2. To manage and grow an existing business; and,
3. To value and pass on or sell your business.

These are the basic reasons, and each is obviously more involved than creating a document that sits in a forgotten file somewhere in the office. A business plan is a valuable tool in creating and operating a profitable commercial enterprise.

It starts when you have an idea for a product or service you believe people need and will want to purchase. You plan to deliver a quality product or service at a fair and reasonable cost in the most economical way to generate profits. Basic business. Employing professionals helps you with considerations you may have missed, such as sales tax issues if you do business in several states, licensing and permit requirements, or the logistics of delivering your product to market.

Your start-up business plan can also be of value when you need start-up capital and approach a bank, credit union, or other lending institution.

A viable business plan then helps you continue to make adjustments as the business begins to grow, such as adding personnel, expanding an existing location, or finding a new supplier for raw materials. It also indicates you have a game plan and are following it, which is critical when it comes to bank loan reviews or the need for additional financing.

A business plan is constantly changing. Need products require more thought and planning. Changing services should be planned to enhance your customer relationship while minimizing costs. Your plan is part management tool, part fluid process - both with a focus on growing your business.

And, at some point, you may consider selling your business. If you have credible market research, reliable forecasts and accurate financial records, the potential buyers can pick up where you have the business and take it from there.

Management Drives Growth Potential

It is hard to identify a "growth" industry in America today. Perhaps in providing more band width, but even with the innovations that Apple has brought to the technology market, the tech industry has reached what some might consider a saturation point. Theodore Levitt once wrote that he didn't believe there was such a thing as a growth industry. He felt there were only companies organized and operated to create and capitalize on growth opportunities.

Levitt identified four conditions that usually guarantee a cycle of "bountiful expansion and undetected decay:"

1. Belief that growth is assured by an expanding and ever more affluent population;
2. Belief that there is no competitive substitute for the industry's major product;
3. Too much faith in mass production and the advantages of rapidly declining unit costs as output rises; and,
4. Preoccupation with a product that lends itself to carefully controlled scientific experimentation, improvement, and manufacturing cost reduction.

In every case Levitt studied, the reason growth was threatened, slowed, or stopped was not because the market was saturated. It was due to a failure of management!

Opportunities exist today. It is managerial imaginativeness and audacity that will make the right people great. Steve Jobs and his ingenuity with the iPad, iPhone, iTunes, and everything else Apple is doing has transformed the way we communicate and get information.

What we need in this country is the will of companies to survive and, more than that, to satisfy the public with their inventiveness and skill. To survive, the growth companies will have to plot the obsolescence of what now produces their livelihood.

Make sense?

Levitt's comments and advice are 50 years old! His article on "Marketing Myopia" appeared in the July/August 1960 edition of the Harvard Business Review.

It's Time For Business Rock Stars

Small companies have provided as much as two-thirds (2/3) of all the new jobs in our economy. It's been that way for a long time. Free enterprise is ingrained in our society. In today's economic environment, however, fewer small companies are starting. That is keeping our economy from pulling out of its tail spin.

Our country needs entrepreneurs to step up, develop a business plan (which is where we come in), obtain financing, and get our economy moving in the right direction again ... despite what the government is doing to help. Waiting for the government to help is like watching molasses flow.

Entrepreneurs can once again become folk heroes, or rock stars in today's lingo.

The attractions of the enterprenerial life are many, according to an article in Forbes by Thomas P. Murphy:

1. Independence
2. Money
3. Respect
4. and that greatest of human satisfactions, doing it your own way.

Why aren't more people doing it?

Starting a business comes with hazards, such as the current belief that banks are not giving out business loans, which is not true. They are more heavily regulated and must have a business plan to consider your loan application.

On the down side, entrepreneurs can go bankupt, according to Murphy. That has nothing to do with Murphy's Law. They can wreck their health, their marriage, and their reputation.

On the up side, if there is one distinguishing feature among entepreneurs it is their energy level and capacity and willingness to work hard. Age is less a factor in today's high tech world. Steven Jobs was 22 when he founded Apple Computer.

The best time to become an entrepreneur is when you want to become one!

The key motivator, according to Murphy, is not about making money. Money is the way the score is kept, not the game. Entrepreneurs tend to be egocentric and driven people. They are hard to love and hard to live with. What they really ask from the world is respect. They are the backbone of a nation's economy.

Are you ready to be an entrepreneur?