Local Groups Help Tri-Valley Small Business Get Access to Capital

Hacienda's mix of companies include many small businesses, which make up the economic foundation of America. While they do not get the attention of corporate giants such as Apple or venture-capital-funded billion-dollar unicorns, the national impact of small businesses is undeniable.

"Small businesses are the engine that drives the U.S. economy," noted then Security and Exchange Commissioner Luis A. Aguilar in 2014. "The statistics show that small businesses make up 99.7% of U.S. employer firms, 48.5% of private-sector employment, and 37% of high-tech employment. Small firms were responsible for 63% of net new jobs created between 1993 and mid-2013, or more than 14 million of the nearly 23 million net new jobs created during this period. There is no debate that the success of small businesses is essential to the sustained growth of our greater economy."

One key to small business success is access to capital. Company owners may want to grow their businesses by developing new product lines, adding services or employees, or acquiring real-estate. Each of these goals may require access to capital. But getting access to capital is no easy task.

Accessing necessary credit was the top issue small businesses faced last year, according to a survey published in early 2017 by the Federal Reserve banks. "That was especially true for outfits with less than $1 million in revenues; while 72% of larger companies were able to secure financing, only 45% of smaller firms could get the nod from a lender," reports Kiplinger magazine.

Funding Resources

Those statistics may be discouraging but Tri-Valley small business owners should take heart. Local organizations are available to help small business owners learn about and apply for funding opportunities. These groups include the East Bay Economic Development Alliance (EDA) and the Alameda County Small Business Development Center (SBDC).

The East Bay EDA provides a brief guide to a variety of financing options for small businesses in the area. The East Bay EDA's list of finance providers includes government programs, nonprofit institutions, commercial providers, and micro-lending entities. Its list of nonprofit institutions, for example, includes Pacific Community Ventures (PCV), which provides small business loans of $50,000 to $200,000 to Bay Area businesses "that are creating quality jobs in local communities."

According to PCV, it also specializes in "working with small business owners who've had a hard time accessing capital, like female and minority borrowers, and borrowers that may have been turned down for SBA or traditional bank loans." Small business owners working with PCV get access to quarterly meetings with a financial advisor as well as access to free expert small business advisors in a variety of areas, such as marketing, HR, and operations.

Additional funding options for startup businesses, according to the East Bay EDA, include "small loans, crowdfunding options, and government/nonprofit programs that bridge the gap or help guarantee a future bank loan." Tax exempt bonds are great options, notes the East Bay EDA, "because they often offer lower interest rates and longer repayment terms."

The Alameda County SBDC was awarded "Top Center" in the Northern California region in 2016 after the organization helped more than 500 entrepreneurs raise more than $30 million for their companies. Local small businesses can take advantage of free loan and equity investment advice, as well as other services, from the Alameda County SBDC, which works directly with qualifying companies to help them raise the capital they need.

Lee Lambert, Director of the Alameda County SBDC, says that the type of capital best-suited to an established is situational. The type industry a company is in and it's profit-and-loss situation determines what lenders or investors are the best fit. The Alameda County SBDC works with most types of companies, generally with up to 100 employees. The organization's typical clients are looking for $100,000 to $1 million, he says.

"The best reason to get funds is to expand your business, to buy equipment, to hire staff, to buy real estate," he says.

Funding Challenges

"Getting a small business loan isn't magic, but it does require meticulous preparation and an understanding of how bankers operate," according to Kiplinger . "Underwriting decisions are based on the five C's of credit-capital, collateral, conditions, creditworthiness, and cash flow-and borrowers must show strength in each."

Lambert agrees that getting access to capital depends on having an honest and understandable presentation for educating potential lenders. "The biggest issue for us if a company comes in is how do we best present them to lenders," he says. "Lenders don't have a lot of time and they're not really going to underwrite something they don't understand."

It is common for small businesses to have issues that need to be explained to make them eligible for loans. Examples might include an issue with ownership or any type of lien. Lambert says one of his recent clients was getting a loan to buy real estate. The day before the deal was meant to close, the lender discovered an unpaid company credit-card bill from 20 years before. Lambert's client had to scramble to resolve that issue so the deal could go through.

"Keeping good books and records is always important when you are dealing with third parties," Lambert says. "Sometimes businesses do it as a catch up; it's a lot easier if you start out that way." Showing over time that you are a good steward of other people's Lambert will be speaking on financing your business at the Livermore Small Business Fair on Thursday, October 26, between 9 am and noon at the Livermore Civic Center Library.

For more information about the Federal Reserve survey, visit www.newyorkfed.org/medialibrary/media/smallbusiness/2016/SBCS-Report-EmployerFirms-2016.pdf.

For more information about the Livermore Small Business Fair, go to www.livermorechamber.org/events/livermore-small-business-fair.

For more information about the East Bay EDA and access to capital resources, visit www.eastbayeda.org/business-services/Access-to-capital.page.

For more information about the Alameda County Small Business Development Center, visit www.acsbdc.org.

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