Archive for the 'PS Capacity Building' Category

The SBA & Others

Where banks fear to tread, the Small Business Administration (SBA) and other associated public and quasi-public agencies try to fill the void. They do this mostly by guaranteeing small business bank loans to minimize bank risks.

The good news is that the SBA and its sister agencies are setting records these days making loans. The bad news is that these are almost all loans to existing businesses for expansions, not to neophytes for new acquisitions or start-ups.

Timing is a problem with these loans – the whole process can take 3 to 4 months! This is fine for a business expansion loan, but it is a killer when you are trying to keep a buy/sell deal together.

The most useful purpose for these loans is that they can be used to take out seller notes from previous small business sales.

It’s not unusual for a seller note to be written with a ‘balloon payment’ provision to cash out the seller in 3-5 years. By this time, the new owner of the business has a track record that fits the public agency guaranty profile. There is usually time, at this point, to allow for the lengthy 90 to 120-day loan guaranty process.

Source : Glen Cooper, CBA, is a Certified Business Appraiser and is President of Maine Business Brokers


Entrepreneurship & Skills Development Programme

UNIDO’s Rural and Women Entrepreneurship (RWE) Programme contributes to poverty reduction through entrepreneurship development programmes- with a focus on rural development and gender equality.

Individual entrepreneurs are a driving force for competitive MSEs as a growth base. However, the policy and institutional framework needs to be conducive to entrepreneurial initiatives. Human capabilities and the right institutional framework are necessary conditions for entrepreneurship to flourish, particularly in rural areas. Therefore, the essential elements in this Programme are to create a business environment that encourages the initiatives of rural, young and women entrepreneurs and to enhance the human and institutional capacities required to foster entrepreneurial dynamism and enhance productivity.

The RWE’s Entrepreneurship and Skills Development Programme focuses on:

Strengthening the public administration to make the regulatory and administrative environment more conducive for rural, young and women entrepreneurs.

Human resource development for increased competitive entrepreneurship, technology absorbing capacities and women’s control over asset management.

Development of the policy advocacy and the collective self-help capacities of rural, young andwomen entrepreneurs.

The RWE Programme consists of three thematic areas: Rural Entrepreneurship Development, Women and Youth Entrepreneurship Development, and Creative Industries Development.

To get to the Rural & Women Entrepreneurship Unit menu :

Venture Capital Pros

Outside equity investors in your small business purchase are hard to find, but a few do exist.

If it’s an individual ‘angel’ that you want, you will have to explain to this investor why he/she should take the risk when there are so many other, safer ways to invest money. In most cases, angels have strong relationships with those they sponsor. Look for wealthy old-timers you already know. Or, look for specialists who know your industry.

On the institutional side, professional venture capital investment groups nearly always want majority control in growing companies. In most cases, they are seeking only high-growth companies with sales over $5 million. They are looking to invest in companies that can offer the hope of 20-40% annual rate of return on their investment!

Both angels and venture capitalists are mostly still equity investors, not lenders. There are some changes on the horizon in private placement financing, but these will be slow in coming.

Mix and match these seven sources of financing. Plan well and be aggressive about your money search. Almost all businesses get funding from more than one source. There is every reason to seek out funds from all seven!

Source : Glen Cooper, CBA, is a Certified Business Appraiser and is President of Maine Business Brokers

Customers Might Help

If there ever was a stigma attached to asking customers to help you finance your business, it’s not there anymore! Today, the practice of asking for a deposit on a job is common.

One way to do this is to require payment (in part, at least) before you do the job. Also, billing annually for year-long service contracts and offering incentives for pre-payment is now common.

Source : Glen Cooper, CBA, is a Certified Business Appraiser and is President of Maine Business Brokers

Tapping Your Suppliers

After the major sources of financing are in place, don’t overlook your suppliers for some additional help. Almost everyone who sells something to your business can be called upon for special terms if you decide to make the effort of involving them.

Equipment vendors are the most common source – leasing equipment often makes sense for cash-starved business buyers. The rates of interest will most likely exceed 13%, but, you can often get 100% financing this way. Leasing companies can also create cash for you. Sometimes, they will buy your used equipment and lease it back to you.

Another common way to create working capital is to ask suppliers to stretch the interest-free period before you have to pay their bills. In many businesses, running 30, 60 or even 90 days behind on a regular basis can create quite a large working capital account!

Source : Glen Cooper, CBA, is a Certified Business Appraiser and is President of Maine Business Brokers

Banks Finance Assets

Banks are reluctant lenders for small business acquisitions by first-time buyers.

For many reasons, small business acquisition lending is often considered too risky and too cumbersome unless the loan package fits under some type of government-subsidized guaranty program. Even then, the amounts banks will finance are usually limited by the values of the underlying tangible assets being pledged as collateral.

Banks shy away from business buyers without previous experience in the business they are trying to finance. Many small business loans are also just too small to be attractively profitable to a bank.

When banks do finance your purchase of a small business, it’s because you’re a favored customer or you and the business fit the profile that will work for a government-guaranteed loan.

If you have good character, relevant business experience, a healthy down payment, cash reserves and great credit, you have half of what’s needed. The financial ratios of the business also need to be acceptable. The bank is looking for collateral and a capacity to repay the loan from business cash flows.

When the borrower and business are found worthy, banks will finance 50-80% of real estate values, 75-90% of new equipment values, 50% of used equipment, and/or 25-50% of inventories. They generally don’t finance intangible assets, except accounts receivable, for which they will finance 80-90%.

But, if you’re a first time business buyer, with no previous direct experience in that business, don’t count on the bank. Rejection rates for small business acquisition loans probably exceed 80%!

Banks still don’t train branch managers and junior lending officers in how to screen applicants effectively. So, at the urging of these front line bankers, a lot of time is spent by loan applicants on business plans that never go anywhere. This is an important point to understand if you are involved in a time-sensitive buy/sell transaction.

Source : Glen Cooper, CBA, is a Certified Business Appraiser and is President of Maine Business Brokers

Seller Financing Common

Sellers often prefer to finance their own business sale because ‘playing bank’ can be a smart strategy to achieve the highest possible purchase price. But, even when they don’t want to, the realities of the sale often force them into it. Buyers need and want seller financing.

Sellers typically finance from 30% to 70% of the selling price. They usually take an interest rate below prevailing bank rates. Seller note terms are usually easier to negotiate than bank note terms. Sellers are usually more flexible because they understand the needs of the businesses they sell.

Sometimes, banks will only participate when there is a large amount of seller financing to indicate that the business is sound in the eyes of the seller.

Keep in mind, however, that sellers who are willing to finance buyers, like any other lenders, are also going to want a security interest (like a first mortgage on real estate) that makes sense to them. Seller are very reluctant to finance large sums if they are forced to accept a security interest which is subordinate to that of another lender.

Phone Home First

Remember, in the movie, that ‘ET’ had to ‘phone home’ to be rescued? Well, who says life doesn’t imitate art? When you buy a business, from 20% to 50% will probably come from you or your family. The other investors or lenders will insist that you are financially committed in this way.

Highly leveraged transactions – the ones you don’t need much cash for – only happen for: 1) skilled individuals with special lender or investor relationships, 2) business buyers creating (or protecting) a large number of local jobs which are of public interest, or 3) businesses projected to make exceptional amounts of money. For the rest of us, large cash reserves are essential.

To be taken seriously as a potential small business buyer, you need somewhere between $50,000 to $150,000 of ready cash for a down payment and working capital. This is a minimum figure today.

Source :

Business Plan A Must

You need a business plan to approach any investor or lender. This is where ‘know how’ comes in. You must know how you plan to run your business and be able to communicate this knowledge in an acceptable and convincing form to your potential investor or lender. There are business plan outlines to follow at every bookstore or library. Do not skip this crucial step.

‘Know where’ is the next key component. There are seven types of investors and/or lenders you should consider: 1) You, your family and close friends, 2) sellers, 3) banks, 4) various governmental or non-profit entities, 5) your suppliers, 6) your customers, and 7) other private individuals, including venture capitalists.

Capacity Building (Nonprofit)

The concept of capacity building in nonprofits is similar to the concept of organizational development, organizational effectiveness and/or organizational performance management in for-profits. Capacity building efforts can include a broad range of approaches, eg, granting operating funds, granting management development funds, providing training and development sessions, providing coaching, supporting collaboration with other nonprofits, etc. Prominent methods of organizational performance management in for-profits are beginning to be mentioned in discussions about capacity building, as well, for example, the Balanced Scorecard, principles of organizational change, cultural change, organizational learning, etc.

Carter McNamara, MBA, PhD, Authenticity Consulting, LLC, experts in nonprofit capacity building. Copyright 1997-2008.

Strategic Planning

Simply put, strategic planning determines where an organization is going over the next year or more, how it’s going to get there and how it’ll know if it got there or not. The focus of a strategic plan is usually on the entire organization, while the focus of a business plan is usually on a particular product, service or program.

There are a variety of perspectives, models and approaches used in strategic planning. The way that a strategic plan is developed depends on the nature of the organization’s leadership, culture of the organization, complexity of the organization’s environment, size of the organization, expertise of planners, etc. For example, there are a variety of strategic planning models, including goals-based, issues-based, organic, scenario (some would assert that scenario planning is more a technique than model), etc. Goals-based planning is probably the most common and starts with focus on the organization’s mission (and vision and/or values), goals to work toward the mission, strategies to achieve the goals, and action planning (who will do what and by when). Issues-based strategic planning often starts by examining issues facing the organization, strategies to address those issues, and action plans. Organic strategic planning might start by articulating the organization’s vision and values and then action plans to achieve the vision while adhering to those values. Some planners prefer a particular approach to planning, eg, appreciative inquiry. Some plans are scoped to one year, many to three years, and some to five to ten years into the future. Some plans include only top-level information and no action plans. Some plans are five to eight pages long, while others can be considerably longer.

Quite often, an organization’s strategic planners already know much of what will go into a strategic plan (this is true for business planning, too). However, development of the strategic plan greatly helps to clarify the organization’s plans and ensure that key leaders are all “on the same script”. Far more important than the strategic plan document, is the strategic planning process itself.

By Carter McNamara

Group Decision Making within the Organization

Group decision making is the process of arriving at a judgment based upon the feedback of multiple individuals. Such decision making is a key component to the functioning of an organization, because organizational performance involves more than just individual action. Due to the importance of the group decision making process, decision making models can be used to establish a systematic means of developing effective group decision making. In general, four group decision making models can be identified each possessing distinct advantages and disadvantages. These four models are the rational, political, process, and garbage can models.

by Ryan K. Lahti 

Planification stratégique

Plans à long terme fondés sur les objectifs d’affaires globaux de l’organisation. Les plans stratégiques sont habituellement pluriannuels et portent sur 5 ou 10 ans (ou davantage) en se servant de scénarios ou d’autres méthodes de planification qui identifient les hypothèses, risques et les facteurs environnementaux.