Category:

Banking

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Alternative Startup Funding Options

June 16, 2011, Banking, Financial Concerns, Raising Money, Venture Capital
http://www.schoolforstartups.com/alternative-startup-funding-options/

This morning’s Wall Street Journal included a great article about peer-to-peer loans to get your business up and running. Entrepreneurs who have had trouble obtaining loans from banks and other lending services are finding that peer-to-peer websites offer the loans they need. And the terms can be quite appealing to investors as well. Since the risk is spread over a number of investors, these investors have the chance for a nice return on their money with mitigated risk.

You can read the full article here.

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How to Accept Credit Cards on your iPhone

November 15, 2010, Banking, Financial Concerns
http://www.schoolforstartups.com/how-to-accept-credit-cards-on-your-iphone/

My wife is a musician and she just released her fourth studio album. She often plays concerts and has a table set up to sell cds and other merchandise. As fewer and fewer people now carry cash, we were running into the problem of people wanting to purchase her material but not having enough cash to do so.

We needed the ability to take credit card. So I started researching different options and I think I found the best solution on the market.

The solution I found has no start-up costs. There is no bulky credit card reader that costs $100+.  You don’t need a merchant account or a payment gateway.  All you need is a bank account.  And you can use this solution on your iPhone!

Imagine being able to take credit card payments on your iPhone!  This could drastically improve the way you collect payments as a small business.

The solution is called Square and you can find the website at: https://squareup.com/

All you need to do is install the Square application on your iPhone.  The app will take you through the process of setting up an account.  After your account is set up, Square will send you the small credit card reading device that plugs into the headphone jack of your iPhone.

You can access your Square account on the internet and connect your bank account to Square.  Then, every time you accept a payment, Square will take their cut (comprable to what PayPal charges) and then they will deposit the money right in your bank account.  That’s it!

Here is how the payment process works:

Type in the amount of the transaction.  You can type in a note or take a photo of the actual product for record keeping.




You are then taken to a page asking for the type of payment to be made – cash or credit:




After that, you are taken to the page where you swipe the credit card using the small Square card reader that plugs into your iPhone’s headphone jack:




The next screen is very cool – the person who just made the purchase can now sign their signature using their fingertip on your iPhone:




Next, you can enter the purchaser’s email address and they will receive a receipt for their purchase.  You will also receive an email to let you know the amount and item purchased.

This solution works over WiFi or 3G coverage.  My only complaint was that it took about a month to receive the square card reader after signing up within the app.  Otherwise, this is the cheapest solution on the market, it’s easy to use, and it creates an instant wow factor with those who want to purchase from you.

Square just made it a lot easier for you as a small business owner or entrepreneur to accept payments for your new business.

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Beware of Business Credit Cards

May 11, 2010, Banking, Bootstrapping, Financial Concerns
http://www.schoolforstartups.com/beware-of-business-credit-cards/

On February 22 of this year, Congress passed and President Obama signed major changes to the consumer protection laws, called CARD (Credit Card Accountability, Responsibility and Disclosure Act).  Among other changes, it prohibits raising rates on old balances and other interest spikes.  However, the law does NOT apply to small business credit cards.  Yet another reason to be very aware of these types of credit instruments.

Business credit cards, unlike corporate cards, are backed by the card holder, meaning you are personally responsible.  I got in the hole about $250,000 back in 98 or so, and I can attest to the extreme efforts AmEx will go to to get their money!  I doubt I will ever be able to get another AmEx card.  Business cards account for 15% of the credit card market, but currently the laws remain rather disjointed.  The law did direct the Fed to make changes to the way small business cards are handled, but that additional reform stalled in the House.  The National Small Business Association is pushing to add changes to the next jobs bill.  The banking lobby is fighting these reforms, saying that business cards carry an inherently higher risk, and should therefore have a high rate.

Bank of America and Capital One announced they would voluntarily treat business cards the same as consumer credit cards, but this could change easily, especially if credit remains super-tight.  I just got a small loan, and it was like pulling my own teeth. Beware of your credit!!

Consumer credit guru Dave Ramsey recommends only using debt cards, which forces you to only spend money that you already have.  This fits in very well with The Entrepreneur School strategy of low-risk entrepreneurship and bootstrapping.  Wise words to consider…….

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Latest GSU Economic Forecast

March 4, 2010, Banking, Economics, Financial Concerns
http://www.schoolforstartups.com/latest-gsu-economic-forecast/

Last week I attended the Quarterly Economic Forecasting Conference at Georgia State University in Atlanta. This is a pretty cool half-day forum for anyone interested in what is happening in the economy (which is practically everyone now). The Director, Dr. Rajeev Dhawan, always gives a thought-provoking and entertaining speech on where the economy is headed. He points out in layman’s terms tons of various factors that support his forecast and explains them well.

This last conference confirmed what I have been seeing lately with even my credit-worthy small business clients who are seeking loans and coming up dry. Credit in the entire banking system is still really tight. Because so many banks have huge amounts of bad debt, they can’t lend – their balance sheets either won’t let them or they are holding onto their cash so they have enough in case more bad loans pop up. This will be a long, slow process because the FDIC can’t close ALL bad banks at once – it just lacks manpower and adequate funding to do it quickly (the FDIC has a borrowing line from the Treasury but only with congressional approval, which of course means slow-going). So until this gets cleaned up, small (and large) businesses will have a hard time borrowing, financing new endeavors, and creating new jobs.

So how long will this last? According to Dr. Dhawan, the nation won’t see any job growth until the second half of 2010 and even that will be pretty weak. 2011 and 2012 will be a lot better but to recover all the jobs we’ve lost in the last several years will take much longer.

What does this mean for entrepreneurs like us? You’ll have more luck borrowing money for your small business from Grandma or Uncle Joe instead of a bank….at least for the next year.

To see the press release of his report, click here.

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Great Site for Help Getting a Loan

February 24, 2010, Banking, Financial Concerns
http://www.schoolforstartups.com/great-site-for-help-getting-a-loan/

I ran across a great site, that I wanted to share with you.  The site is devoted to help getting small business loans……  great stuff…..  some of the email from the founder below…

———

Hello, my name is Rick Glaser. I run a small blog that contains useful information on how to increase your chances of getting a small business loan. The blog is 100% non-promotional, and contains 1 advertisement which (tries to) cover hosting costs.

I am a strong supporter of small business, and will continue to write and educate people on how to acquire capital.

Thank you very much in advance, and I appreciate your time! If you have any questions feel free to call or email me. My site is www.startuploans.org

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2010 Entrepreneurship Outlook

January 5, 2010, Angels, Banking, Bootstrapping, General Thoughts, The Entrepreneur School, Total Entrepreneurial Activity, Venture Capital
http://www.schoolforstartups.com/2010-entrepreneurship-outlook/

2010 will be the Year of the Bootstrapper.  It will be the year of the Entrepreneur who can figure out how to do the most with the least.

2009 was a bad year for entrepreneurs.  Most predictions for 2010 show a slight improvement in conditions and funding, but still, a difficult time to start a business.  But we at The Entrepreneur School believe that now is as good a time as any to start your business.

The Wall Street Journal had a great article this morning covering the different funding avenues available for Start-ups:

Angel Investors
Angel funds fell by 30% in the 1st half of 2009.  Predictions are that Angel funds will stay flat in 2010.  An interesting fact about angel funds is that even though the total dollar amount invested has decreased, the number of start-ups funded has increased.  Fewer dollars for more entrepreneurs.  The bootstrappers will win.

Venture Capital
Average deal size in the 1st half of 2009 was $5.7 million compared to $7.5 million + average from 2005 – 2008.  Venture Capitalists are saving their money for companies in the late stages of development or are giving more funds to companies already in their current portfolios.  Bootstrappers will be a step ahead by not having to wait on the dwindling number of venture funds to come through and will also retain more of their company.

SBA Loans
Less than 45,000 SBA loans were approved from Sept ’08 – Sept ’09, which is 36% lower than the year before.  Right now, SBA loans only make up 1% of start-up lending.  This is expected to increase to 5 – 10% in the near future due to the government’s stimulus packages.

The end of the article describes how Babson College, which is one of the elite entrepreneurship universities in the world, estimates that the average entrepreneur needs $65,000 to get their business up and running.  In this economy, with savings accounts, nest eggs, and house values in disarray, it will be difficult for most entrepreneurs to come up with $65,000.

We at The Entrepreneur School teach ways to start businesses for much less than $65,000.  There are a number of businesses that can be started where Bootstrapping is considered for each aspect of the business.  One of Babson’s professors, Dr. Zacharakis states this in another way:

“Instead of capital infusions, there might be a lot more exchanges of services or trading favors.”

Take a look at the first set of entrepreneurship lessons at The Entrepreneur School.

All info and statistics for this blog post were gathered from The Wall Street Journal on Tuesday, January 5th, 2010.

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Are Your Bank Deposits Safe?

November 5, 2009, Banking
http://www.schoolforstartups.com/are-your-bank-deposits-safe/

NO, they are not!!  I was shocked to learn today that COMMERCIAL bank accounts are not insured like our personal accounts.  Was I last to learn this?   Did you know this?bank_img

The FDIC insures every person for $100,000.  Importantly, it is $100,000 per person, per bank.  NOT per account.  So if you have $142,000 in one bank, even if its in several accounts, the government will only insure you for the 100k.   So, you must divide your assets between several banks.  I knew all this.

But, I was shocked to learn that commercial accounts are not protected at all.  Again, I feel stupid.  Michael Shames-Yeakel of Chicago lost $27,000 that a hacker was able to steal from his business account.  Unique Industrial Products of Sugar Land, Texas lost $200,000 when their account was hacked and emptied.   A school district in western Pennsylvania had $700,000 disappear during winter holidays!

How does this happen and why aren’t the banks responsible?  Normally, it happens because the companies’ computers are hacked, not the banks’.   It happens quickly.  Hackers drive by your house or business place and using scanners available on eBay capture your IP address and router password.   After that, they use your own network or IP address  to steal from you.  Or, they trick business owners with fake websites, causing the owners to give account details.

What is the solution?  Constant vigilance of your account is a good start.  Never give any website your personal information.  Anti-virus and spyware software is an absolute must.  Or, move to a bank that sends text messages to your phone after every withdrawal.  (Citibank offers this service; BofA does not.)   Better yet, some bank accounts can be set up such that electronic transfers are not allowed.  Running a great business is all about these small details.  Your entrepreneurial of running your own business dream can be ruined by sloppy banking.

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i banker to a TAXI Driver?

September 27, 2009, Banking, Entrepreneurship Stories
http://www.schoolforstartups.com/i-banker-to-a-taxi-driver/
Eco-friendly transportation services

Eco-friendly transportation services

“I used to be a banker, what am I doing”

Seriously a great story. It’s not  a rag’s to riches story; but, one of more realistic aspirations and not ignoring the pain of the a recession.  Could you imagine a laid off investment banker who starts a company that may one day be driving his former colleagues and clients around?

Check out the video: WSJ on a Banker Who Became a Taxi Driver

Lisa Bannonn for the Wall Street Journal did a piece on Gil Schor who was an investment banker in New York City.  He was formally employed by Natixis CIB, a French investment bank.  He was in the business of building a portfolio of leveraged loans and asset back securities.  Well, we all know how that story ended.

So Gil takes his severance package and some savings, around 100k, and buys 3 environmentally friendly cars.  His vision: to create an environmentally taxi service.  The company: Green World Tax  at (http://www.greenworldtaxi.com) is based in Westchester, N.Y.

I like in the video he starts off with marketing.  He created cards to advertise for his business, printed them up, and then drove to different businesses and distributed them.  He did this by himself.

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