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Mother_Daughter_Business_body.jpgby Erin O’Donnell.

When Kit Seay retired, she thought she’d tour the country in an old camper. Instead, she found herself running a pie business with her daughter—and loving it.

Seay and her daughter, Amanda Wadsworth Bates, started Tiny Pies three years ago in Austin, Texas. Seay was retired from a career in state government and working as a sorority housemother. Wadsworth Bates was working unhappily in real estate. The mother/daughter duo had always baked together, but hadn’t considered doing it for a living until Wadsworth Bates’ son asked for a pie he could pack in his lunch.

After a few months of testing recipes, Tiny Pies was born. Their handheld pies come in signature and regional flavors, such as strawberry rhubarb and the family’s pecan pie recipe. The business was focused on catering and wholesale until last month, when Tiny Pies opened its first storefront.

Mother-daughter firms are a different type of family business. The women who run them say their businesses directly benefit from their unique bond. An estimated 2.3 million such companies are operating in the U.S., according to the National Association for Mothers and Daughters in Business (NAMDB), and their ranks are growing.

“There’s no competition between us. There’s no ego involved. There’s no lack of trust,” Seay says of the work arrangement with her daughter. “I never give a second thought to anything she says or does.”


Tiny Pies is typical of many mother-daughter businesses that NAMDB founder Jamie Kizer sees. The daughters tend to be in their 30s, with mothers in their 50s or 60s, often retired from a previous career. The younger generation wants more work-life balance, Kizer says, and the older generation is in a position to help them with that.

“In my generation, we worked, and our children were latchkey kids,” says Kizer, who lives in York, Pennsylvania. “We don’t want our daughters to be in that situation. We want to give them flexibility with their own business or self employment.”

Kizer has run a dozen businesses, from an art gallery to a teen magazine. After her daughter Jordan graduated college, she decided they should open a clothing store together. But they quickly found they didn’t work well together.

“I had to make the decision that this business is not worth jeopardizing our relationship,” Kizer says. “My daughter had to be very brave to speak up and say, ‘This is your dream, it isn’t mine.’”

When Kizer had trouble finding resources for their situation, she decided to coach other mother-daughter entrepreneurs through their challenges. It’s an intense bond, and that can be both a strength and a weakness.

Handling conflict

Alexandria Keener never dreamed she would open her own retail store, much less partner with her mother, Deborah Daugherty, to do it. In 2012 they launched My Girlfriend’s Wardrobe, a consignment clothing shop in York, Pennsylvania, as a website. A brick-and-mortar store followed last year.

Keener says she and her mother have always been close, but working together puts them on equal footing. They both have strong opinions on things such as how the shop windows should look or which outfits they should spotlight.

“One of us is always right, and it’s never the other person,” Keener says. “Sometimes I yell at my mom, and she knows I’m just frustrated about a whole bunch of other things. And she’ll do the same to me. But if you did that to an employee, they’d be out the door.”

They are learning to divide the labor. Keener says they share the retail operations, with only one other part-time employee. Daugherty, who also works full time with special needs teens, takes the lead on tasks like accounting. Keener handles the website and marketing. And Daugherty is able to step in when Keener can’t be there, because she’s also a full-time student at the Harrisburg University of Science and Technology. She’ll graduate in May with a degree in new media design and production.

At Tiny Pies, Wadsworth Bates and Seay say they discovered they have complementary strengths. Wadsworth Bates takes care of sales, marketing, and business development, while Seay oversees what’s happening in the kitchen. They now have a staff of 11.

Wadsworth Bates says it’s important for mother-daughter entrepreneurs to separate business and family. Starting a new business is inherently stressful, but they’ve learned not to bring conflicts home.

“If we get crosswise over a work issue, we can still go to dinner, and she can still hang out with the kids,” Wadsworth Bates says. “It’s not changing that side of our relationship.” 

Communicate openly and often

Communication skills are important in any business. But successful mother-daughter teams say it’s critical to their survival.

Kizer cautions them not to make assumptions and to check their expectations. Dedicate time to learning how to communicate in an emotionally healthy way, she says. “My motto is, ‘let’s put it all out on the table and clean it up later.’”

Sandy and Stevie Lynn D’Andrea say they almost never stop talking about their company, Jewels for Hope. They run their handmade jewelry business from their home in Stamford, Connecticut. Ten percent of the firm’s net profits go to charities such as the American Cancer Society and Labs 4 Rescue.

Sandy D’Andrea started the company in 2009. She made jewelry to pass the time during her mother’s final months in hospice and gave pieces to the nurses in thanks. Eventually, D’Andrea opened a store on Stevie Lynn, a graduate of Fashion Institute of Technology, joined the company a year later to handle advertising and marketing.

“I taught my mom how to use Facebook, and she taught me how to make jewelry,” Stevie Lynn says.

Jewels for Hope has been featured in coveted celebrity gift bags for events such as the Oscars, the Emmys, and the Golden Globes. Meredith Vieira, whose husband has multiple sclerosis, has been photographed often wearing her Jewels for Hope bracelet, created to benefit the National MS Society. Other pieces have been worn by stylist Stacy London and actress Jennifer Love Hewitt.

Living and working together can blur the lines between business and family, Sandy D’Andrea says. She had to remind herself to respect Stevie Lynn as an equal in business even when her instinct was to advise her as a mother. They also make a conscious effort to put business aside and have fun, together and separately.

Stevie Lynn D’Andrea says, “I don’t think the business would have done so well if we weren’t working together. We both complete the unit.”

Leaving a legacy

For younger daughters like Keener, it can be an ongoing struggle to convince other people that she is an equal partner with her mother. Sometimes customers and vendors assume it is Daugherty’s shop, and 22-year-old Keener is her employee.

“Mom has taken the approach of telling them ‘it’s her store,’ because she thinks people won’t respect my decisions if she doesn’t,” Keener says.

Kizer says she values how mother-daughter businesses provide both women involved with financial independence, a creative outlet, empowerment, and mentorship. And it builds a legacy that, like any family business, can be passed on.

In the days before Tiny Pies’ grand opening, Wadsworth Bates says, she was struck by how meaningful it was to be opening a shop with her mother, in a space designed by her sister, an architect, and to have her teenage son proudly helping with last-minute preparations, too.

Wadsworth Bates says of working with her mother, “Our relationship is so much better than it would have been. This is a priceless experience.”

Clearing_Inventory_body.jpgby Iris Dorbian.

If you're a small business owner who sells clothes, electronics or other products, there’s a good chance that from time to time you might be left with excess or unsold inventory from the previous year. You could try to clear out these items with a special sale, of course. But suppose the items are seasonal—such as ski equipment—or customers are simply indifferent, having moved onto the latest gadget or trend. What are the most efficient and cost effective ways to clear out last year's inventory?

Donate surplus items to charity

Rather than simply dispose of last year's products, you could consider earmarking them for charity. For instance, if you are a small fashion retailer saddled with last season's styles, your local Salvation Army might be interested in picking up these items. Not only will you be clearing space for current merchandise, you’ll be performing a good deed while also getting a tax write-off on these donated clothes.

And if you're confused about which charities will accept your extra inventory as donations, you can always consult a company like Zealous Good, which helps connect businesses to local organizations in need.

Brittany Martin Graunke, founder and CEO of the three-year-old Chicago-based Zealous Good, says her company frequently works with small businesses. Most donate office equipment, furniture and supplies, she says, but others also offer up excess inventory.

"We like to think of it as a new and easy way to give back to your community while also being savvy about your business needs," she says, explaining her firm’s mission.

She does offer a few caveats:

"Never donate something you wouldn't give to a friend," she advises. “At the same time, use common sense as well. If it’s 2014 and you have thousands of 2013 calendars, there is likely no reason to donate these.” Also, don’t assume that a charity is going to be interested in everything you deem dispensable.


“Just because you're donating to a charity in need, doesn't mean they need everything,” says Graunke. For example, if you’re looking to donate excess sweatshirts, you might be surprised to learn that some shelters want only professional clothing or certain sizes. By determining in advance if a charity can actually benefit from your excess inventory, you'll save yourself the stress and frustration of giving a charity inventory they don't need, she adds.

Go paperless

If your excess inventory is in the form of old documents, some of which you have might have held onto longer than necessary, turn to technology to lessen the paper trail.

Donna David, a professional organizer in New York City, is a staunch proponent of this tip. “Use technology to help clear the clutter,” counsels David, who works with many small businesses on their spring cleaning. “Scan your documents and store online and in the cloud so you can shred most originals.” She urges small business owners to do this on a regular basis. “Discard the things you don't need: recycle, shred, or toss,” she says.

And if you've have an excess stack of business cards, David suggests that you eliminate them by using either the Camcard or Cardmuch app. “Just snap a picture of the card and data will be stored in your contacts,” she notes.

Recycle electronics for cash

Rather than discard old or excess items like cell phones, tablets, or other similar gadgets, you might consider using a company such as Gizmogul, which specializes in paying people for their old working or non-working electronics and excess furniture.

According to Barry Schneider, co-founder of Gizmogul, this is a great way for consumers and businesses to get the most value out of unwanted electronics or furniture. Not only does this afford business owners the opportunity to buy new equipment or furniture with the cash they receive via recycling, but it can also remove clutter and open up some much needed space.

However, if you consider this option, Schneider shares a few tips:

       --Trade in early. The longer you wait, the more your phone will depreciate in value.

       --Before taking your old cell phones to a recycling company like Gizmogul, make sure the device can be used with a difference service provider, suggests Schneider. “It will increase the value of your phone instantly,” he says.

       --Perform a basic data wipe on all electronics or gadgets. To completely delete any other data on your computer equipment or device, e-cycle your trash with a company that provides a certificate of data destruction. This allows you to be sure that sensitive information won’t end up in the wrong hands.

Clearing out excess or old inventory is a terrific way for a small business to make space for new merchandise. When done regularly it can help a company stay current with customer preferences and help out charitable organizations along the way.


How to Get Paid Faster

Posted by Touchpoint Apr 14, 2014

Get_Paid_Faster_body.jpgby Erin O’Donnell.

Christiane Waldron once spent a month chasing $600. As president and CEO of Jenetiqa, a luxury skin care products company, she sells to salons, physicians, and boutiques on consignment. That means she’s often waiting to get paid.

One client dodged her for weeks, with a new excuse each time. She didn’t have her checkbook. She had a meeting. She needed to transfer money. Waldron drove back and forth across town time and again, trying to meet up with her in person.

“I told her, ‘I can’t extend credit. We’re both small businesses, and I have to get paid,’ Waldron recalls. “She asked for another discount.”

Waldron says clients make similar excuses with maddening regularity. Since she started Jenetiqa in 2011, she’s learned some lessons the hard way. “As a small business, you cannot operate on trust, but sometimes you don’t have a choice,” she says.

It’s common for small businesses to struggle with uneven cash flow. But business advisors say there are ways to even out the feast/famine cycle by getting paid faster. It takes planning, communication, and lots of follow up. Below, some small business owners explain how they get customers to pay on time.

Require some payment up front

Business consultant Shell Black advises business owners to require a percentage of payment up front for project-based work. His Dallas-based company,, is a Salesforce Cloud Alliance Partner that helps other small businesses set up and make use of Salesforce’s customer relationship management products.


Black says he’ll commonly ask for a 50 percent deposit of the total cost to schedule a consultant’s time. Then, he bills the rest at natural project milestones such as the completion of data migration or user training.

Ironically, the companies with the deepest pockets are the ones that seem to take the longest to pay. “Bigger companies throw their weight around a little bit. Small businesses understand the necessity of getting paid,” Black says.

Set expectations

Be direct with customers about when you need to be paid, says Neil Kristianson, founder of Only Sky Artist, a music management firm in Chicago.

In his current business, Kristianson finds himself using many of the same practices he did when he remodeled homes for a living. Back then, he would draw up a calendar for each project, laying out the work to be done, inspection dates, and so on. Payment dates were written right on the calendar, and every client received a copy. The effect was remarkable. “My accountant was amazed that my receivables rarely went past five days,” Kristianson says.

As a consultant to musicians, he still uses the calendar system. It’s adaptable to any project-based business, Kristianson says, especially those that don’t operate on monthly invoices. And it puts the responsibility on the client to manage his or her cash flow.

“Once I figured that out, I realized I had to do a better job of communicating when I need to get paid,” he says. “I got tired of them saying, ‘Can you wait while I move some money around?’”


Create an even stream of cash

Kristianson also timed his invoicing and due dates to his project costs, so that he wasn’t scrambling for cash. In construction, it’s easy to know when you’ll be buying lumber or paying a sub-contractor, so he made sure to structure his payment schedule accordingly. He learned to forecast break-even times, and that’s when he would make the next invoice due.

He also varied the number of payments based on project size. Smaller jobs were broken into three payments, but for bigger jobs he sent out up to seven invoices.

Black recommends more frequent invoices to smooth out the peaks and valleys of cash flow. Even though it means more paperwork, he says, it also means you can invoice for smaller amounts, and that can encourage clients to pay quicker.


“It pulls the cash flow forward,” Black says. “If you’re waiting until the end of the month to bill, you’ve already paid the payroll or the cost of goods on that deliverable. You’re potentially waiting 30 days to get paid.”

Sending invoices for smaller amounts can also negate the need for the boss’s signature. Black knows of one company where invoices for more than $10,000 require the approval of the CEO, who is notorious for letting things languish on his desk.

Get ahead of excuses

One of the most common excuses business owners hear for non-payment is “I didn’t see that invoice.” Now, technology is helping to eliminate that reason.

Waldron sends her invoices through QuickBooks, but she has also started following up via email, with the invoice attached as a PDF file. A week later, she follows up again with a phone call or text. And she now accepts payments on her mobile phone. “It takes perseverance, but it wears on you because the cash flow is so tight,” Waldron says. “You can’t afford to have $2,000 of accounts receivable out there.”

Software like Salesforce is pulling back the curtain on customers’ claims of ignorance, too, because it tells you when a client has viewed the invoice, Black says.

If you put your expectations in writing, Black says, it’s easy to remind customers about the terms of your agreement. For instance, you can reserve the right to stop work on an unpaid invoice after 30 days. Black says he recalls mentioning that to a client only once. “It’s there because it helps you have a little leverage, in case you get someone who doesn’t pay you for 60 or 80 days,” he says.

Finally, Black says, don’t wait for a bill to go past due. If a couple of weeks have gone by since you sent the invoice, it’s perfectly reasonable to call and remind the customer that it’s due soon.

Waldron says offering multiple ways to pay, including Paypal and wire transfer, also helps eliminate excuses. As much as she hates to lose business, she will also cut off delinquent clients unless they pay in advance.

Waldron says she has learned to be persistent and to set the right tone from the first transaction. “If a customer is late in paying you the first time, chances are it will be that way every time.”

by David Tremblay.

There is no silver bullet when it comes to getting a loan to fund your business.  With Small Business lending on the rise, knowing how to approach the process can help you secure a loan more quickly than others in your industry. When it comes down to it, it’s all about Ability, Stability, and Willingness to Pay, limiting uncertainty on the lender’s side by providing a very detailed plan.


Respondents were split when asked by our Fall Small Business Owners Report what they believe is the most important factor in receiving a loan.

Small Business Owner Report Graphic

The funny thing is that none of them are wrong.  Most financial institutions look at ALL those things, but in reality, less-than-perfect credit scores or a lack of a previous business borrowing history won’t carry the same weight individually that cash flow does. It’s also important to have a good relationship with your banker, who can provide context if one of those factors comes up short. Figuring out how much to ask for when applying for a business loan is part and parcel of the factors above. Here are a few thoughts on how financial institutions look at those different factors:


Cash flow:  Cash flow is typically considered the primary source of repayment for credit. It is important because that’s what repays the lines of credit and loans that banks extend to clients.  Does your business have the financial capacity to support debt and expenses?  Do your assets outweigh your liabilities? Typically a business needs to have between $1.15 and $1.35 of income to support every $1 of debt service, including the new debt being requested. The extra $0.15 to $0.35 provides a cushion for your business to absorb unexpected expenses or a downturn in the economy. It is important for the business to demonstrate more than one year of adequate cash flow history to show consistency in the ability to service debts. The ability to use projected cash flows as opposed to historical cash flows is uncommon.  Inadequate cash flow is a frequent reason why banks are unable to extend new credit to businesses.


Image of David TremblayCredit score:  Banks often look at multiple credit scores – business scores, consumer scores of the owners who will act as personal guarantors, and other internal scores based on bank risk factors and relationships. The credit scores of the business and individual owners in and of itself aren’t nearly as important as what is driving them, but the scores still play an important role in predicting creditworthiness.  As Jeannie Kelly also notes in a post running today on the MasterCard Small Business site, important drivers of credit scores are payment history, amounts owed, length of credit history, types of credit used and new credit opened.


Track record of ability to repay previous loans:  Relationships are important to banks, whether new or existing. An established borrowing and/or deposit relationship with their bank is often beneficial to the applicant requesting new credit. An existing borrowing and/or deposit relationship can offer immediate insight into the potential creditworthiness of the applicant based on the bank’s established risk guidelines.  When applicants have a proven track record of adequate repayment of previous loans, the decision to extend new credit is often an easier or quicker one to make.  The length of time for a bank to consider a small business to have a proven repayment track record can vary. Two years would be considered a minimum but 5+ years is preferred in order to establish trends that cross different economic cycles. Business borrowing history is less important than credit scores or cash flows but it brings an additional positive factor to the lending decision.


Annual revenues:  The gross annual revenues of a business is one factor that helps banks size potential credit needs and guide applicants to the most appropriate products available.  Annual revenue size is an indicator of how marketable the product or service is.  After our established revenue minimum of $250,000 for lines/loans, revenue trends over several years become far more important than the number itself.  Banks also care more about client base diversification to provide cushions in volatile markets. 


Personal finances:  Work experience, experience in your industry, and personal credit history are all “character traits” banks will consider. Your personal integrity and good standing—and the integrity and standing of those closely tied to the success of the business—are critically important. Business owners who have demonstrated challenges in managing their personal finances will have higher hurdles to obtaining new credit for their business. Related to this, many banks will ask how much stake the owners have in their business. If leadership is heavily invested monetarily in their own business, the bank sees this as a higher commitment to success, and therefore a higher chance of repaying the loan. To be further prepared for the loan application process, the Small Business Administration website has a Business Loan checklist that goes in more detail.


Again, it’s important to develop a strong relationship with your business banker – before you ever ask for credit. If that person understands the story behind the factors above, she can make the process much easier and help you get a yes to your loan request.


This month, I’ll be part of a Google Hangout on this very topic, so feel free to revisit this post for an updated start time. Top small business influencers from around the country will be discussing what drives credit decisions.

Choosing_the_right_CreditCard_Infographic_Thumbnail.jpgGive your business some credit. When it comes to credit cards, the right choice can make a big difference, and can play a very important part of the successful growth of any small business. Understanding the different features, benefits and trade-offs of all the options available is key. Our new infographic will help you get started.

Click here to view the Best Credit Card for Your Business infographic.

QA_Good_Bad_Debt_body.jpgby Erin O’Donnell.

As an attorney with 18 years experience in consumer and business financial debt-related services, Leslie H. Tayne understands the power—and pitfalls—of debt. Her firm, Tayne Law Group, P.C., concentrates on debt management, debt resolution, and bankruptcy alternatives for consumers, small business owners, and professionals who require help managing their finances. Recently, writer Erin O’Donnell spoke with Tayne about the different kinds of business debt and how entrepreneurs can use it wisely to help grow their business.

EO: What kind of debt is good for a small business?

LT: All business debt can be considered good debt until it becomes unmanageable. When growing your business, borrowing from family, business expansion loans, and investor-related loans are all acceptable.

A small business loan is good debt, but you should understand what you’re getting for your money. What are the interest rates? What are the default terms? Often people can’t even tell me those things. As with any loan, you need to know what happens if you can’t repay the money. What happens if you default and your wife guaranteed it? The government can garnish her wages. They can take your tax refund money. If you don’t understand the terms, you don’t understand what the exposure is for your business.

Funding from private investors is considered good debt, and a good opportunity. It proves that someone is willing to invest in your business. Take the time to write a solid business plan if you’re going to seek out investment money. That means looking at your business health and having a backup plan financially. They’ll want to be repaid: how you plan to do that? And in what time period?


Consider what your debt will look like going forward, in case you plan to borrow more at a later date. Another creditor may look at those loans and see that there are priority lien holders against you. They may think, ‘I could get nothing if I lend you money and you’re unable to repay it.’

EO: Can lenders take a business owner’s personal finances into consideration?

LT: The truth is that banks are not just looking at the business but at the owner as well. They want to see that you’ve paid your own bills on time and that you’re not overextended with credit cards. Your available credit versus what you owe is certainly going to be an issue with creditors.

EO: How much debt should a business take on?

LT: You want to keep the debt for your business below 25 percent of what is available to you. But I don’t think you can expect to keep the percentage that low early on. When you’re starting out, especially if you took out a business loan, you may have significant debt, and that’s normal. For some businesses, like restaurants, it can be that way for a couple of years. Paying back those loans should be a top priority, so keep that ratio in the back of your head. As you expand, keep asking yourself if it makes sense to still have those loans. Are you being negatively impacted by the amount of debt? A few years down the road it might make sense to pay off an old loan that carries a higher rate or unfavorable terms. You could take out a new loan with better terms.

EO: Can a business borrow its way to growth?

LT: You have to break that strategy down as a business owner and decide how it’s going to impact you. What are your real costs? You can borrow to grow, but you have to delve into the cost for each item and each employee. How much will it decrease costs to train your employees and maintain your equipment? I don’t think people do the cost analysis as detailed as they should. That’s a mistake small business owners make a lot.

If you’re borrowing to grow your business, that’s different from borrowing to save or maintain your business. When you have a growth strategy that means you have a plan in place to pay back the loan. If you’re adding more debt to a strained cash flow process, you’re putting yourself into further risk. A business looking to grow is much healthier.


Disclaimer: Since the details of your situation are unique, you should always seek the services of a qualified professional for advice specific to your business.

SeparatingPersonalBizFinances_body.jpgby Iris Dorbian.

It can be very tempting for small business owners to borrow from personal savings to keep their start-ups afloat. But to do so repeatedly would be a serious mistake that could ultimately result in an IRS audit. How then can business owners learn to separate business and personal expenses in ways that will lessen financial risk?

Determine your business entity
Before you establish your small business take the time to figure out what type of entity it will be. Is it a sole proprietorship, meaning you own and run your business by yourself? Or do you have partners? In that instance, your business could be designated as a limited liability company (LLC). Consult a business attorney to figure out what entity type best fits your business. It's important to note that each business structure has its own guidelines concerning specific legal requirements. Be aware of them and do your due diligence to make sure that you have selected the right one. Not taking the time to do this could potentially cause you to run afoul of the IRS. Bradford Hall, managing director of Hall & Co., a 25-member accounting firm in Irvine, Calif., knows this predicament all too well.

“I had just started with a new client that has been a C Corporation (a corporation that is taxed separately from its owners) since it was started 14 years earlier,” he explains. “They shouldn’t have been structured that way and wound up paying more taxes than they should have.”

Use different accounts for personal and business finances
This guidance may sound obvious but it bears repeating. Not only will this help you distinguish one account from the other, it might also prevent you from dipping into the personal well to feed the business coffers.

This same strategy also applies to credit and debit cards. Determine which card you will use for business and which will be used for personal expenses. This is also a good way to establish your business credit.

After launching her small business last March, Dana Manciagli, a Bellevue, Washington-based career consultant, admits she had a hard time distinguishing business and personal expenses.

“Once I started my LLC and realized that I needed to fulfill certain tax and legal requirements, I saw that it would be too time-consuming and potentially cause errors if I didn't have my finances separated,” she explains. Since she was writing off certain business expenses and needed to file 1099s for contractors, she needed to be able to summarize where her business expenses were. “Later, once I got an accountant, they confirmed that separate accounts was a smart move,” she says.

And to further facilitate this distinction, Manciagli advises small business owners to establish online access to those accounts.

Hall says that when his firm takes on a new small business client, he always asks whether they have opened a separate bank account.

“If they say no, we're just paying out of our personal account, I will explain to them that it will be difficult to maintain the deductions with the IRS in the case of an audit,” he cautions. “[In this instance], it's very difficult to distinguish what is personal and what is business when everything goes in and out of the personal account.”


Hire a knowledgeable financial or business expert
To prevent combining personal and business finances, consult an experienced and knowledgeable outsider, such as a CPA or business attorney to review your financial records for discrepancies and other bookkeeping errors. Again, this tip may sound obvious, but Hall says it's something that many small businesses fail to do.

Maintain good records
Hall stresses the importance of keeping clear and organized records. “When you entertain clients or have meals with them, always write down who you met with and what you discussed on the receipts,” he urges. “Keep those receipts. Also, print out your Outlook calendar at the end of the year and keep that for your tax records for your business.”

Hall recalls a client who only kept a year-end credit card summary as documentation for taxes. According to Hall, the client was told by a prior accountant that if they had had this summary, then it was not necessary to keep other supporting documentation. An IRS audit proved otherwise, says Hall, whose firm handled the audit. Although the client did not lose the business, they did have to pay a hefty penalty fee, he says.

“They learned a hard lesson,” recounts Hall.

Still, if you're the kind of business owner who has an aversion to stockpiling receipts, Hall suggests using software programs such as NeatReceipts, which will scan your receipts and keep them in a digital file.

Launching your business from the ground up is a great accomplishment. But it can be undercut if business and personal finances are continually co-mingled. Audits, stiff penalty fees, and even the failure of your business can result if you don't take the proper safeguards to keep these two accounts separate.

Disclaimer: Since the details of your situation are unique, you should always seek the services of a qualified professional for advice specific to your business.

Created for the Bank of America Online Community by Dun & Bradstreet Credibility Corp.

According to the Small Business Administration (SBA), 90% of the $1 trillion borrowed by small businesses each year comes from banks and finance institutions. Despite the large number of businesses who depend on this funding source, the lending process – from application through approval – is often confusing and challenging for business owners. This article is the first article in a four-part series we hope will help shed some light on small business lending.

The Application Process

Applying for small business loans can be frustrating and often takes longer than business owners expect. The good news is that most of the problems small business owners experience when applying for loans occur because the business owner does not know what information and preparation the bank expects from them. Understanding what to bring to a lender meeting can be the first step towards successfully and quickly applying for a loan.

While the details of a loan application process will vary among different banks, there is certain information most banks will want to know. Much of the information they need should be easy to gather such as the age of your business, size of your business (number of employees), annual revenue, how long you’ve owned it, the type of business and industry, years as a customer of the bank, and what percentage of the company you own. Some of the more detailed  information required may include: 

  • Financial and tax statements for the past three years, including income and balance sheets, cash flow, and bank statements. If you have not been in business for that long, you should include a detailed business planSBA websitethe Bank of America Small Business Online Community), though it may still be more difficult for you to successfully find a lender without help from the SBA.
  • Liquidity: How much cash your company can access quickly and easily. Strong liquidity indicates that your business is likely to continue to be able to meet its ongoing financial obligations. Liquidity measures include the current ratioquick ratio
  • Personal financial information such as credit rating, tax returns, and bank statements.


The following may also be asked in the application:

  • Why are you applying for this loan? While the answer may seem obvious to you, make sure to be specific when explaining this on your application.
  • How will the loan proceeds be used? Be as detailed as possible. For example, include the costs of any equipment you plan to buy or lease.
  • How do you expect the loan to affect the growth and stability of your business? Again, the more detailed your financial projections are, the more effective they may be at demonstrating that your company is a good investment.
  • How much other debt do you have? Other outstanding debt repayments can affect your cash flow and ability to repay new debts.
  • Who are the members of your management team?

Preparing all this information is an important first step before applying for a loan or meeting with a lender. Not only does it make it easier and faster for the lender to process and (hopefully) approve your loan, coming in with all the documentation completed can help you make a good first impression. We will provide more loan application strategies in our next post, so stay tuned.

For more information on business credit and credibility, please visit or call 1-800-280-0306.

* The information and advice provided by Dun & Bradstreet Credibility Corp. is provided "as-is." Dun & Bradstreet Credibility Corp. makes no representations or warranties, express or implied, with respect to such information and the results of the use of such information, including but not limited to implied warranty of merchantability and fitness for a particular purpose. Neither Dun & Bradstreet Credibility Corp. or any of its parents, subsidiaries, affiliates or their respective partners, officers, directors, employees or agents shall be held liable for any damages, whether direct, indirect, incidental, special or consequential, including but not limited to lost revenues or lost profits, arising from or in connection with a business's use or reliance on the information or advice offered by Dun & Bradstreet Credibility Corp.

Buy_or_Rent_Thumb.gifTo buy or to rent? That is the question. At some point in the life of nearly all businesses, owners eventually face this simple, yet complex, question.


Our buy or rent guide will give you an overview of factors to consider when deciding how to acquire property for your business.


Click here to download our guide "Buy or Rent: Securing property for your business."

SBC Team

Small Business Lending Guide

Posted by SBC Team Dec 12, 2013

Lending_GuideThumb.jpgMore and more banks are loosening up and lending again. And as a small business owner, you are constantly under pressure to make sure your business has the financial backing it needs. This new guide will provide a refresher of the most traditional and creative financing options available.

Click here to download our Small Business Lending Guide: An Overview of the Different Types of Lending Options Available for Small Businesses

The-Right-Financing-Thumbnail.jpgVirtually all businesses need access to capital beyond the cash flow generated by continuing operations at different points throughout their lifecycle. The range of financing alternatives is expansive: personal savings, family and friends, grants, loans, lines of credit, credit cards, supplier credit, crowd funding, angel investors, venture capital, and more. Following is a general depiction of the stages of business growth, financial benchmarks typically associated with them, and potential financing sources for each.


Click here to view our infographic titled "The Right Financing at the Right Time".

Infographic_Thumb.gifBack in business: banks are lending again. The recent upswing in the economy is great news for small business owners.


From start-up funds to investors, loans and credit cards, you need to be familiar with the current lending landscape. Our infographic will give you a great overview of benefits and key considerations when making a lending decision for your business.


Click here to view our infographic about the current Small Business Lending Landscape

Bizloans_Body.jpgby Iris Dorbian.


It's a question that besets many small business owners when applying for business loans: how much should I ask for? More so than deciding on which lender to approach, not having a sound estimate of how much capital you need to borrow could lead to cash flow problems—which could lead to your business shutting down.


How then can small business owners determine how much financing they need when approaching lenders? What factors should they take into account when calculating the ideal sum of their business loan?


Be clear on the reason for the loan

Are you launching a startup? Or do you need the loan as additional working capital to make improvements in your business? Answering yes to either question is critical when deciding on how much you need.


Denise Beeson, a small business-funding consultant who previously lent her services to a local SBA-administered Small Business Development Center, a provider of mostly free resources and training to small business entrepreneurs, in Santa Rosa, California, always asks her small business clients the previous questions whenever they come to her about wanting to apply for loans. For those with startups, she does issue a caveat: "If this is a start-up, I remind them that an SBA preferred lender does not fund startups," says Beeson "We then discuss where they may find funding, such as peer-to-peer lending options, tapping into their personal resources, or asking family and friends."


If the small business owner is seeking to buy a business from another, Beeson notes that the seller may fund the loan.


Also, if the small business owner is seeking working capital for myriad reasons, which might include increasing the marketing budget, making renovations, or paying off debt, Beeson says she will ask clients if they can produce documentation verifying that the debt was accrued as a result of the business.


Bizloans_PQ.jpgWithout providing the necessary paper trail needed to accompany a loan application, small business owners could hurt their chances of getting financing from a lender, insists Beeson. To prove her point, she offers the following anecdote:


"Recently a restaurant client was interested in an SBA loan to consolidate debt based on improvements to the premises," she recalls. "They had almost $100,000 in debt including credit card debt that was claimed as accumulated to the business during the recession. However, when we looked at the statements, the entries were not clear when and what had been done. In addition they could not produce any paid invoices from contractors or suppliers linked to the credit card statements. Unfortunately, we could not move forward because the borrower could not provide the needed documentation to the preferred SBA lender."


Consult trusted financial professionals

If you are unsure or confused about how much you should ask for when applying for a business loan, it might behoove you to visit a financial expert such as a reliable bookkeeper or a CPA that regularly deals with small business clients. By reviewing your financials, he or she can then approximate how much financing you will need, taking into account existing debt obligations and operating revenue. And a word of caution: don’t be lax or lazy when it comes to understanding your financials. Sloppy bookkeeping or a lack of knowledge about your books or tax returns will prevent you from acquiring a loan.


Take into account your other non-related business expenses

To determine how much you’ll be able to repay and the length of the loan’s duration, small business owners need to do a cash flow analysis of all their expenses, including mortgage payments or auto loan payments. By doing so, a business owner will be able to develop a more viable estimate of how much they’ll need to borrow from a lender.


Rohit Arora, CEO of the six-year-old, feels this is an imperative step for all small business owners to take when deciding on how much of a loan they should apply for.


“A lot of business owners don’t take [their miscellaneous non-business expenses into account when deciding how much money they should borrow,” he says. “Everything boils down to your repayment capacity. So if you feel that you can borrow some money and there’s some good opportunity that will help you make money off it, that’s good. But that calculation is not a certainty.”


Carefully consider payment terms

After you analyze your financial situation, both on a personal and business level, you will also need to decide on how long you want to pay off your loan. By following this best practice, you will be able to produce a rational figure as opposed to an amount that you will never be able to discharge in light of your finances and debts.


Arora agrees, offering a hypothetical scenario: “Let’s say a business owner is borrowing $100,000 and they have to pay back everything in one year,” he explains. “Then the amount of repayment they have to make in terms of speed is pretty steep. Typically for small businesses, the cash flow is their bloodline.”


Similarly, Arora says small business owners need to exercise extreme caution, particularly if they’re planning on borrowing from alternative lenders. “A lot of times they want their money back pretty quickly,” he warns.


Know the lender

When figuring out how much money you need to borrow, it’s vital that you research your lending options. Which banks or lenders are amenable to small business owners in your sector? Just conjuring up a random number for a loan will not help you if the lender is not open to your industry, says Beeson, who advises business owners to also explore nontraditional lending options.


If you need to figure out how much of a business loan you should ask for, you will need to know offhand all of your business and non-business expenses. Not only is this information essential for maintaining good credit—a prerequisite for getting a loan—but it will help you come up with a realistic number that will allow you to comfortably fulfill repayment terms and not disrupt your cash flow.


Disclaimer: Since the details of your situation are unique, you should always seek the services of a qualified professional for advice specific to your business.

QAstephentaylor_Body.jpgby Iris Dorbian.

With over 30 years of experience as a chief financial officer/controller, Stephen Taylor prides himself on having the expertise and knowledge to help businesses identify problem areas and then craft solutions to address them. In his current role as partner at B2B CFO Partners, a 26-year-old business advisory firm comprised of former CFOs, Taylor says the bulk of his practice is helping small to medium-sized business owners devise a sound plan on how to sell or exit their business. Recently, Taylor spoke to business writer Iris Dorbian about why he feels it’s imperative that business owners should plot their end scenario right when they launch their business instead of right before retirement.

ID: How do you advise small business owners who want to exit their business? What's the first thing you do?

ST: I start with all my clients asking questions. In the case of an exit, I ask them, "What is it you want to accomplish?" Then the questions go toward assessing their financial and mental readiness to exit. Depending on where they’re at, one exit option might be better suited to their circumstances than another.

ID: When do you think it’s the right time for a small business owner to exit? And conversely, when should they stay?

ST: That’s really up to the business owner. In some cases, the business owner is nearing retirement age but there are other instances where younger entrepreneurs—we call them serial entrepreneurs—build a business and then want to sell it to build another business.

I worked recently with a business owner, close to retirement, about 64 years old, who had a third generation family-owned business. He was just tired and wanted to exit. One thing that all of my partners do when we start working with a client is a "discovery analysis." It's a seller’s due diligence. This gives you a quick snapshot of where the business is. In this case, the client had a manufacturing business but he had some other activities, which included real estate and some rental properties that he owned. By the time I finished my discovery analysis, I concluded that for the five quarters of good data I was able to get, he had very minimal earnings before interest, taxes, depreciation and amortization [also known as EBITDA]. He would not be able to get the price for the business he needed to retire. I helped him get more liquidity into the business. But he will have to spend the next three to five years trying to get some revenue back into the business and some profit. So he was ready to retire, but it just couldn’t happen.

ID: That’s unfortunate.

ST: It is. Typically these business owners have an unrealistic expectation of what their business is worth. I mean, people tell them things about how to value their business and they tend to listen only to the things that assign the maximum value in their mind for it. We’re able to look at it more objectively and give them a realistic gauge. That’s why it’s best to start this process early. It can take three to five years of planning to do it right.

QAstephentaylor_PQ.jpgID: What was the size of his business?

ST: His business was $7 million to $10 million in revenue. [The staff size was] probably 25 to 30 and probably half of those people were in the office doing various support functions.

ID: How often do you work with small businesses in this situation?

ST: I talk about exit strategies even when the business owner doesn’t bring it up. One of the things that happens a lot in a small business is that for the business owner, it becomes a job and not a business. And when he’s ready to retire, there’s really nothing there of value. If the business owner wants to build something of value, build a company—that’s one thing. But if he’s just in it for a job, he’s not going to have anything of value when he wants to exit.

ID: Based on your experience and insight, what would be your tips to small businesses owners seeking an exit strategy? What should they do and what should they not do?

ST: First of all, it takes a lot of planning obviously. One thing that a lot of small business owners do is run their businesses for tax efficiency and they take advantage of charging whatever they can for the business to save on their income taxes. It’s perfectly fine and legal to do that, but it creates a problem. Buyers will typically look back at the three years of EBITDA. It is important for a business owner to do everything possible to maximize EBITDA at least three years prior to an exit.  Some business owners continue to run their business for tax efficiency but that diminishes EBITDA and the perceived value of the company. If you know you’re going to exit the business in three years, you should start managing to maximize profits and not minimize taxes.

ID: Do you have another example with a small business client that you can share that illustrates one of your tips?

ST: Another one that I was indirectly involved with was when I helped a partner. In this case, the owner wanted to retire but was willing to stay on temporarily. We were able to engineer a plan whereby the manager, chief operating officer, and a group of senior managers were able to buy the business out over time with the seller taking a [promissory] note. That can be done when the business owner has done a good job of building his management team. If you have a strong senior management team, they’re always good candidates to acquire the business.

Disclaimer: Since the details of your situation are unique, you should always seek the services of a qualified professional for advice specific to your business.

VentureCapital_Body.jpgby Jen Hickey.


Before taking on venture capital, entrepreneurs must ask themselves a fundamental question – “Do you want to be rich or be king?” As Harvard Business School Professor Noam Wasserman explains, it’s difficult for founders to maintain control over their businesses once they take on outside investors. However, without them, such businesses like Twitter and Facebook would likely have never have taken off. For those entrepreneurs who have developed a product with a large untapped market and a potential for rapid, high growth, venture capital (VC) funding makes sense if you’re willing to give up some control and most likely sell your business at the end of the investment period, or fund life-cycle (i.e. when the fund becomes due). However, if you would like to build a generational business, an angel investor may offer more favorable terms that will allow you to receive some equity while maintaining a degree of control.


Looking for that big return

“A VC firm does not invest in a business,” explains investment banker Jeff Koons of San Francisco-based Vista Point Advisors. Instead, it invests in a company that will sell for a lot more than it’s worth at the time of the initial investment. And such firms are looking for a big return (up to 20 times the initial investment) in a relatively short amount of time (3 to 10 years, depending on the fund life-cycle). “If your business is growing just 20 to 30 percent per year, VC funding is not for you,” notes Koons. Focusing primarily on the tech sector, Vista Point acts as a broker to bootstrapped entrepreneurs entering the VC world for the first time. “We help them think through the process from valuation to exit,” notes Koons.


Defending your interests 

Vista Point vets various VC firms for the best valuation and possible outcome for the entrepreneur. Unlike others in their field, Vista Point only works on the “sell side,” meaning their sole clients are entrepreneurs. They do not work with VC firms on other deals. “VC firms sometimes look for a break in the negotiations on these smaller deals for the promise of future work for the investment bank on more lucrative deals down the road,” cautions Koons. So a good rule of thumb is to ask any investment brokers if they work on the “buy side,” with VC firms, as well.


Having sound advice makes all the difference when entering the complex world of equity financing. Joshua Mag, CEO of SquareHook, a content management system provider, consulted a former professor who is an operating partner at a large VC firm before taking on equity from an angel investor in June 2012. “Potential investors want to know what market you’re targeting and its size,” notes Mag. “They’re not going to invest in something that doesn’t produce a large return, so there needs to be a big potential market for your product.” The angel investment allowed Mag to quit his full-time job to focus exclusively on building his business, which included hiring a few employees and seeking development assistance. “My decision to take on capital was a choice of acceleration,” explains Mag. “Had I not taken on the capital, this would have been a slower task.”


Equity comes at a price

Mag gave up 20 percent of equity of his company in exchange for the angel investment; however, a VC investor typically wants at least 20 percent ownership in addition to a board seat and the ultimate sale or IPO of your company upon exit. Nevertheless, how much ownership an entrepreneur gives up, whether to a VC or angel investor, is largely determined by the amount of equity the entrepreneur needs, the valuation of the business, and whether it’s the first, second, or third round of investment.


Aaron Skonnard, CEO of Layton, Utah-based Pluralsight, grew his company’s online training platform for software developers organically for about a decade before taking $27.5 million in Series A funding in 2012. “We saw periodic interest over the years from investors,” notes Skonnard. “But we thought it was too risky to give up too much control in case we needed to change direction.” It was only when Skonnard and his partners felt they had a solid business model and were set to enter a high-growth mode that they decided to take on VC funding.


VentureCapital_PQ.jpgShop around

“It wasn’t so much about the money as forging those strategic relationships,” Skonnard points out. “Once we decided, then it became a financial exercise –– how much do we take, how much do we want to sell, and who’s the right partner to go with.” Skonnard and his partners met with five or six VC firms several times before they decided on one they believed would add the most value to their business. “It was our comfort level with the people and personalities that drove our decision more than the financial metrics,” explains Skonnard. “Make sure you’re happy with the people that will be on your board of directors.”


Investors provide more than just cash

While the cash infusion helps grow your company, partnering with a VC firms also gives you access to new players in your industry, which in turn helps attract the top talent and increase your market presence. Pluralsight’s traditional model had been to work directly with content producers to build its online training library. But with the funding, it was able to finance the purchase of two online training companies, which doubled its content library in a matter of months. “The Series A really unlocked our ability to make those acquisitions,” Skonnard points out. “We would have never been able to consider that without such funding.”


Beyond their connections in financial and sector-specific industries, some VC investors have an entrepreneurial background as well. Brendan Anderson bought his first business in 1995 and has helped manage and invest in many more since then. In 2006, he co-founded Cleveland, Ohio-based Evolution Capital, which invests in $5- to $6-million companies that have at least $500,000 in free cash flow. “We are point-in-time investors looking for entrepreneurs/founders with a vision creating something compelling in the market,” explains Anderson. He and his partners then work with these entrepreneurs to implement the steps needed for growth.


These include getting the entepreneurs’ financials in order to develop a plan for growth, which in turn enables these businesses to attract the best people. Next is transparency, making sure the entrepreneur communicates his vision and shares day-to-day operational data with employees. Finally, holding the entrepreneur and employees accountable for tasks that will move their company forward. “Once these best practices are implemented, they’re happy with the results,” Anderson points out. “But the process of doing it is usually painful.”


“The founder/entrepreneur still owns a major piece of the business even after we invest,” Anderson points out. However, Evolution Capital typically controls the majority interest (more than 50%) and maintains the right to change management and control their exit (with a typical investment ranging from 3-7 years). “We want to build businesses that continue to grow long after our ownership,” he says.


Understanding terms, conditions, and valuation

If you’re considering taking on equity, it’s critical to understand the terms and conditions of any investment agreement. Whether the entrepreneur maintains some control is largely determined by how the deal is structured. Mag decided to go with an angel investor, who was looking for a longer investment with annual dividends rather than a large payout at the end of a VC fund life-cycle. “Taking on VC means you need to have an exit strategy: IPO, sell, or dividends,” notes Mag. “Most VCs want a full exit to collect on their return within a period that is reasonable.”


SBC newsletter logo.gifAnd that’s largely determined by when a business becomes part of the fund. “You want to be invested as soon as possible in the life of the fund,” explains Koons. “If there’s only two years left before the VC firm needs to return capital to their limited partners (i.e. investment occurs in year five of a seven year fund), a company could be sold for a loss or spun out even if it’s achieving its growth projections.” 


Typically, investors are looking for preferred terms that will position them better than other parties (e.g. paid first upon exit, right of first refusal, put option, liquidation preference). Pluralsight has a minority interest deal with their VC investment firm, which has allowed Skonnard and his partners to only give up two seats on their seven-seat board. “The founders still control the board and the ultimate direction of our strategy,” notes Skonnard. “While we have a very healthy relationship with our new board members, we didn’t want to give up too much control.” 


It’s also important to understand valuation, as you need to know what your company is worth in order to negotiate the best terms. “One way to valuate your business is to look at your competitors to see what they sold for upon exit,” explains Mag. There are a number of public sources and tools that list industry comparables. This will also help figure out how much equity you’ll need to put into your business to achieve your growth plans. “That investment defines what your business will be valued at,” explains Mag. “By taking on more than you need, your business is likely losing equity unnecessarily.”


Disclaimer: Since the details of your situation are unique, you should always seek the services of a qualified professional for advice specific to your business.

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