Singapore Firms Turn to Bartering

By Mariko Oi Asia Business Report, BBC World, Singapore
16 May 2009

In northern Singapore, among many residential flats, there stands a huge six-storey building called Northlink.

It houses more than 500 small to medium sized businesses, or SMEs. They are the backbone of Singapore's economy, and yet they are the hardest hit by the current recession. Since the global credit crunch spread to the city state, banks became nervous to lend - especially to SMEs. Alarmed by the situation, the government has announced that it will spend almost $4bn (£2.6bn) to stimulate bank lending in the budget.

But Singapore is experiencing its worst downturn in its history, with the economy forecast to shrink by much as 10% this year. And the freeze in credit markets is not yet thawing. So businesses are turning to alternative methods to pay their bills, a tactic once considered a last resort, namely the age old practice of barter trade.

Last resort
On the top floor of Northlink building, manager Malvin Khoo is busy finalising deals with his clients. He owns a Singapore based printing and packaging firm that employs 15 people.

"The greatest thing about bartering is I could be ordering a jumbo jet, or a yacht tomorrow," he quips. Obviously, that is "quite unlikely", he laughs, though he has managed to use a property in Malaysia to barter with. "It is the cheapest way to expand my business." Mr Khoo joined Barterxchange, a network of 600 businesses in Malaysia and Singapore, 18 months ago.

Instead of simplistic one-to-one direct exchange of goods and services, members go online.
Forget cash. They have their own universal currency.

Companies earn credits by offering their services and skills. They can then use them to get what they need from other members.
"I had some customers that I did packaging for, who had surplus plates," explains Mr Khoo. "So I structured to trade $20,000 worth of plates to restaurants. Some of them were just opening up so they needed new plates."

In return, Mr Khoo scored free meals at various restaurants. One of them is Megumi Japanese restaurant, which has sold dining vouchers worth more than $10,000.

"Not only did we get free webpage design and printing services by bartering, we also got some tremendous exposure to the business community," says managing director Hazel Hok.
"We used to be a local neighbourhood restaurant, but we have seen a significant increase in corporate functions."

New members
And there is no geographical boundary. Asia's biggest barter trade site is connected to more than a dozen global websites, where half a million companies participate. "We have even sent electronic goods to Nigeria," says Lee Oi Kum, executive chairman of Barterxchange.

The industry is now worth over $8bn annually, according to the International Reciprocal Trade Association. And its popularity is rising. Barterxchange has seen a 30% jump in its membership since 2007. Companies cannot operate solely by bartering. But it definitely offers alternative methods to make things a little easier.

SBIR Developments

An SBIR potpourri: Politics, Russ to the rescue and a Phase III bonanza?

Steven S. Clark

March 18, 2009

http://wistechnology.com/articles/5738/

A recent Biotech Takes column covered how the political battle over making venture-backed biotech companies eligible for Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) program funding derailed passage of the SBIR reauthorization bill last year. Some of the political machinations that went into last year's non-decision are becoming clear and may be resurrected again in the current congress, 

A continuing resolution is needed very soon in order to extend the life of the SBIR/STTR program beyond March 20. But, the word from Washington insiders is that the House wants a very short continuing resolution (perhaps only a couple of months), while the Senate wants a longer continuation.  The House wants the short time line so it can rush through a reauthorization bill with limited debate and amendments. Sadly, this is reminiscent of last year's fiasco when the House Small Business Committee, chaired by Nydia Velázquez (D-NY), prevented any testimony from small business interests, which strongly opposed letting venture capital-backed biotechs apply for program funding. It appears that Ms Velázquez again wants to suspend committee rules in order to ram her favored reauthorization bill through the committee. Last year, the Senate drafted a compromise version of the SBIR/STTR reauthorization that was acceptable to both venture capital and small business interests, yet, for some reason, Ms Velázquez wants to return to the bill the House approved and that was strongly opposed by the small business lobby and that was not supported by the Senate.The House and Senate will most likely pass another continuing resolution but battle over its length.   

Politics at HHS 

In the recently passed American Recovery and Reinvestment Act of 2009, the National Institutes of Health (NIH) received a whopping infusion of $8.2 billion of stimulus money, on top of a 3.2 percent budget increase in the Omnibus Appropriations Act that President Obama just signed. Thus, the act's munificence represents a 27 percent boost over institute's base budget. But, it seems that the Department of Health and Human Services (HHS) and NIH do not want biotech companies to share in this windfall. The reinvestment act bill specifically directs the institute to exclude SBIR/STTR research from the stimulus money. Yet, neither the House nor the Senate recovery bills contained such exclusionary language, which means that it was inserted into the final bill by the House/Senate Conference Committee and was never voted on by either House. Furthermore, it recently was revealed that HHS resorted to a last-minute Machiavellian maneuver to get this exclusion inserted into the bill. 

The chairwoman of the Senate Committee on Small Business and Entrepreneurship (SBE), Mary Landrieu (D-LA), and ranking minority member Olympia Snowe (R-ME), sent a very strongly worded letter to Charles Johnson, the acting secretary of HHS, to express their concern over the SBIR exclusion in NIH's recovery money. The letter says that the SBE “…questions…the NIH's and Department of Health and Human Services' (HHS) commitment to small, high-tech firms and the success of the SBIR and STTR programs.” The Senators also reminded NIH that there remains a statutory obligation in the Small Business Act that requires NIH to allocate a total of 2.8 percent of its research funds to SBIR/STTR programs. So, it boils down to which contradictory legal obligation HHS and NIH will decide to follow.

The senators' letter concludes with this admonishment and instruction, “…we respectfully request that HHS specifically consult us when making legislative recommendations that affect these programs that are squarely within our Committee's jurisdiction.” Ouch!

HHS Antipathy to SBIR/STTR Funding

Over the past two congresses, NIH and HHS have been major opponents to yet another controversial SBIR proposal to increase the percent of SBIR/STTR allocations. This basically is a protectionist stand for academic research over “less pure” commercial oriented research. NIH doesn't believe that there are enough "high quality" SBIR proposals to warrant increased allocations. The Small Business Technology Council (SBTC) obtained some of the figures and calculations used by NIH, and claims NIH is using fuzzy math.

This is an odd stance by NIH and HHS since a study by the National Research Council (NRC) found that the SBIR program, “…is sound in concept and effective in practice”; was “stimulating technological innovation”; “linking universities to the public and private markets”; “increasing private sector commercialization of innovations” at an “impressive” rate; and “providing widely distributed support for innovation activity.” The study also concluded that the SBIR/STTR program was a boon to research universities as it promotes commercial development of university-based technologies. So, one wonders why HHS opposes expanding the SBIR/STTR programs.

Senator Russ to the rescue?

Senator Russ Feingold (D-WI), citing the NRC report, recently championed expanding the SBIR program by introducing the “Strengthening Our Economy Through Small Business Innovation Act of 2009” (S. 177). In a statement in the Congressional Record, Feingold opined that, “…it is essential that our (economic recovery) efforts not just be short term fixes—they must not only aim to create jobs and investment opportunities in the short term, they must be part of strategic efforts to strengthen our Nation's innovation capabilities and sustain long term economic development.... There is no better way to do this than by stimulating and supporting small business innovation,....”

Feingold's bill has three key provisions: First it would reauthorize the SBIR/STTR programs for 14 years to provide greater funding continuity and certainty for applicants and awardees. It also proposes to increase agency allocations for SBIR from 2.5 percent to 10 percent of their research and development budgets. Similarly, STTR allocations would increase from the current 0.3 percent to 1 percent. SBIR award limits would also increase from $100,000 to $300,000 for phase I awards and from $750,000 to $2.2 million for phase II. Finally, it also sets funding priorities for energy innovation, water safety, domestic security and transportation. Too bad about that, NIH.

The bill, which currently has no co-sponsors, was referred to the Senate Committee on Small Business and Entrepreneurship.

A Phase III Bonanza?

Obviously, the whole idea behind the stimulus bill is to quickly infuse capital into the economy, but the federal agencies that are to spread the act's largesse are constrained by Federal Acquisition Regulations that require, except under special circumstances, that federal government contracts be issued only after a "fair and open competition." Of course it takes time and effort for each agency to draft and issue requests for proposals and then to collect and evaluate applications before new contracts and grants can be issued. Agency procurement officers would love to bypass the competition requirement and just issue contracts. 

Well, there just might be a “special circumstances” solution that would allow them to do this. A recent article on the SBIR Coach blog, points out that Jere Glover, executive director of the Small Business Technology Council (SBTC), an arm of the National Small Business Association (NSBA), has raised a simple strategy to directly leverage SBIR Phase I and II awards directly into Phase III contracts without going through the usual competition process. It turns out that once you have a Phase I or II SBIR (or STTR) award, all subsequent government contracts (or grants) for work that "derives from, extends, or logically concludes" the work supported by the award are “sole source justified.” This means that if you currently have an SBIR or STTR grant that is related to a program or RFP at any Federal agency, you can call the procurement officer who's responsible for issuing stimulus contracts for that program and claim that you have a "sole source justification" to do the work. If s/he agrees, then the contract can be immediately issued to you, styled as a Phase III SBIR, without the need for competition.Furthermore, it is not necessary to first have a Phase II award since all you need to do is make a case for “sole source justification.” This is a way to jump from a phase I SBIR directly to phase III. At lease one such Phase III contract was issued to a business that had a Department of Defense Phase I SBIR for some work that applied the same technology that the DOT sought. 

Of course, you do need to have something of value to offer and there needs to be a match with agency needs and your capabilities. You can find information on Federal grants and contracts on the recovery.gov web site and in the stimulus bill itself. Additional information and updates on all of this will be placed on the on the SBTC website, but the most informative information will be found in the "Members Center" section, so you might consider joining the SBTC and help support its advocacy programs.

Malaysia SME Blog

Check this out New Straits Times has a Malaysia SME blog Amazing!
Can somebody check out the Credit Bureau that they have just announced?

SME Funding Options

Businesses abandoning the banks

Mike Symes - Tuesday 07.04.09, 11:12am

http://www.smebusinessnews.co.uk/businesses-abandoning-the-banks/216/

New research just published reveals a massive increase in credit refusal for businesses, driving owners to seek out alternative funding options.

The independent study of 1000 UK accountants has revealed that the number of business clients being refused finance by traditional lenders this year has almost tripled. Such a dramatic rise in the level of credit restrictions is stimulating renewed interest in alternative forms of finance.
 
Previous research in 2008 indicated that less than a fifth of accountant’s clients had been refused credit from traditional sources such as banks. However in just 12 months, the downturn has had a major impact with refusals rocketing to nearly two thirds (58 per cent).
 
Other key findings from the research include:
· Businesses in the North East are suffering the most with a reported 73 per cent of accountants’ clients having been refused credit this year, compared to 48 per cent in the South East
· Amongst the accountants surveyed, the recruitment industry (24 per cent) is seen to be suffering the most from financial difficulty, followed by construction/property (23 per cent). Retail Services are perceived to be the most stable
· Seventy-one per cent of accountants have seen an increase in clients suffering with bad debt, with over two thirds (70 per cent), believing services such as Bad Debt Protection are more important for business today than a year ago.

With banks proving less than supportive, this is a good time to considerindependent financing options such as invoice discounting.

UK Banks and SMEs in Tough Times

From The Sunday Times

March 29, 2009

Banks let 120 small businesses go under every day

The government claims its Enterprise Finance Guarantee scheme is working but small firms insist the banks are still applying it unfairly

Rachel Bridge

When Frank Stevens asked Barclays bank for a £500,000 loan to help pay for a new showroom at his boat business in Weymouth, the bank said yes — on condition that he first deposited the same amount, £500,000, at the bank.

Stevens — whose firm, Blue Water Horizons, is just yards from where the 2012 Olympics sailing events will take place and so hopes to benefit from the surge in visitors — was astounded by the bank’s response. He said: “I couldn’t believe it when they told me. If I had the money in the first place I wouldn’t need to go to the bank to borrow it.”

His experience is by no means unique. Happily for Stevens, the money he needed was to expand his already thriving business. For many other small firms, though, the money they seek will spell the difference between survival and disaster.

When the government unveiled its Enterprise Finance Guarantee (EFG) scheme a few months ago to help small firms that were facing temporary cash-flow problems, there were loud cheers from Britain’s small-business community.

With delayed payments from customers who owed money adding to the problems they were already experiencing in the face of declining sales, the promise of an instant injection of cash to tide them over a difficult patch was extremely appealing. With the government pledging to back £1.3 billion in loans and overdrafts with a 75% guarantee so as to encourage banks to lend, they thought they could at last begin to sleep more easily.

Sadly it hasn’t quite turned out that way. Britain’s high-street banks are still refusing to lend to small businesses and the consequences are proving catastrophic. About 120 small firms are going bust every day and thousands more are teetering on the brink of bankruptcy.

As a result 36,000 small firms are expected to close down this year, according to BDO Stoy Hayward, the business adviser, causing the loss of 150,000 jobs. And a large part of the blame, claim small firms, lies squarely with the banks, which are putting up every kind of obstacle to prevent small firms getting the financial help that they need.

Over the past few weeks The Sunday Times has received dozens of e-mails from small-business owners who have been refused a loan under the EFG scheme or who are struggling with the hurdles involved in accessing it. And this is just the tip of the iceberg.

Steve Hay at the accountancy firm 2020 said: “Every one of my clients who has applied for EFG has been knocked back. I haven’t heard of anybody getting a loan under this scheme. They get to a first meeting with the bank and that is as far as it gets. The banks have no interest in lending money.”

Indeed, anecdotal evidence suggests that many of the loans that are being made under the EFG scheme are not actually new funding at all, but merely a transfer of an existing loan or overdraft facility with a small top-up into the scheme.

The banks themselves are certainly not going out of their way to be helpful. Small businesses applying for funding say that getting a response of any kind can take several weeks, with letters going unanswered and their phone calls not returned.

David Hallett is managing director of Carrot Fitness, a health and fitness club in Stourbridge, West Midlands. He said: “We thought that the introduction of a new scheme would help, but it hasn’t made a blind bit of difference. The bank doesn’t return our calls and their attitude on the telephone is not at all helpful.”

Small-business organisations say firms, many of which have been with the same bank for years and know the manager personally, feel betrayed by the shift in attitude.

Stephen Alambritis at the Federation of Small Businesses (FSB) said: “Firms are feeling let down by a bank manager who wanted to know them for the past 10 years but now all of a sudden isn’t returning their phone calls.”

One of the biggest bones of contention is that even though the government has said that banks should not be taking small-business owners’ homes as security for a loan or overdraft made under the EFG scheme, in practice this is exactly what they are doing.

Huw Radley has been trying to negotiate an overdraft facility of £250,000 with Royal Bank of Scotland to support his business Solent Composite Systems, based near Portsmouth, which provides technology and manufacturing for the energy industry. Having initially been prepared to provide an overdraft backed by an unsupported personal guarantee, RBS is now demanding that he put up his home as security, something Radley is refusing to do.

He said: “Quite apart from the fact that we will never do it on that basis, this approach is specifically prohibited within the EFG scheme. However, no amount of discussion or argument will get RBS away from that stance, and of late we are barely on speaking terms as a result of their endless intransigence. We have been in business for five years, and until now have never had any need for any loans. I’m incredibly frustrated and angry.”

Aiden Kelly, who owns Pearce Security, a specialist manufacturing business in Gateshead, has also found himself facing demands from his bank to put his home up as security. He applied for a £100,000 loan under the EFG, of which £30,000 was to replace an existing unsuitable factoring agreement, to help him meet new orders. But he was told by his bank that he would be required to put up his home as security before it could proceed with his application.

Kelly said: “I am frustrated and angry, partly because what the government is saying and what the banks are saying is 100% contradictory. The government can say all it wants about helping small businesses, but if the banks don’t want to do it then they’re not going to. That is the problem.”

Banks are also demanding a whole new raft of personal details and information to support an application for funding that would never have been required in the past.

Roger Paine is the managing director of Video Meeting International, a small video-conferencing business based in Cheltenham. When he unsuccessfully applied for a £30,000 loan under the EFG, he discovered that the bank was more interested in looking at his personal circumstances than the business plan and cashflow projections he presented.

He said: “The banks are not basing their lending decisions on the viability of the business, the business expansion plans, cash-flow projections and current and previous trading history as they should be doing, and as the government states that they are, but on irrelevant personal credit information.

“Apparently this is a new procedure that all the banks are doing without letting businesses know at the beginning of the scheme. The EFG scheme is a complete and utter joke and a waste of time and doesn’t help small businesses that desperately need funding now — not in five weeks’ time. It is a complete load of government spin.”

Meanwhile, the government has made a difficult situation a hundred times worse, say small firms, by suspending the highly popular Small Firms Loan Guarantee (SFLG) scheme when the EFG was launched.

The SFLG scheme was run on similar lines to the EFG, but without the need for such stringent security requirements. And while it was privately loathed by the banks that had to administer it, it was much loved by small-business owners for whom it made a real difference and was seen as having played an important role in supporting small firms as they grew.

In the past the SFLG scheme — in which the government guaranteed 75% of loans made by the banks to small businesses of between £5,000 and £250,000 for up to 10 years — helped small businesses such as The Body Shop, Waterstone’s and Coffee Republic to expand and grow.

Suddenly axing it without warning has delivered a horrible double whammy to small firms, which had been expecting to be able to access it and benefit from it this year. For them the government’s actions have made their situation infinitely more precarious and brought the prospect of insolvency that much closer.

Hay at 2020 said that the loss of the SFLG had delivered a real body blow to many small businesses.

“The SFLG has been around for many years and it has always worked. It was a real shot in the arm for some firms. The rules were clear and there for all to see, and to suddenly stop that scheme and replace it with something else is absolutely crazy. All they needed to do was change the rules of the old scheme very slightly so the banks could lend more or to other businesses.

“There is no rhyme nor reason to it. A lot of small companies are really going to struggle this year without the SFLG. Instead of making it better, the government has actually made the situation 100% worse."

John Evans is director of JRE, based in the Midlands. He said that his firm had in the past received funding from the SFLG and paid it back in full, but he was refused help under the EFG scheme.

He said the provision of the EFG should be taken out of the hands of the high-street banks. “I suggest that we tell the banks to repay all public-

provided funds and set up the Post Office with the capability of putting these monies into the community by the provision of lending by mortgages and overdrafts with proper commercial rules,” he said. “They have the regional infrastructure and could occupy the redundant bank buildings.”

Small businesses are also angry that the government has failed to impose specific controls and conditions on the way the banks lend money under the EFG.

Alambritis at the FSB said that although the government had attempted to do the right thing by making £1.3 billion available for small firms, it had made a fundamental mistake by not putting more conditions in place as to how the banks should distribute it.

“The government had good intentions to bail out the banks in order to bail out small businesses, but what it should have done is been a bit smarter and paid the banks in instalments, pending evidence that they were passing on the money to small businesses.

“The banks are hoodwinking the government by allowing their branch managers to turn people away. The frustration of small businesses is that the banks have been bailed out and helped, and so small businesses then had their expectations raised that it was their turn to be helped out by the banks, but that didn’t happen.”

Justin Hunt, who owns a small business doing commercial contracts for grounds maintenance in East Anglia, thinks the banks and the government could be doing a lot more to support small businesses.

He said: “Britain is not a business-friendly country. When push comes to shove, it is the individual who takes the risk — all of it and with absolutely no help from government or any banks.

“Help doesn’t have to be financial — it could be tax breaks or an easing of red tape, in particular health-and-safety bureaucracy or even bringing in legislation to force companies to pay their bills on time. I get fed up hearing idiots from the government who have never taken a risk in their life or even had a vaguely productive job, telling us how things should be done, or vacillating about how much the government is doing to help the small-business community that they always proclaim is the lifeblood of the economy. It’s nonsense and leaves me in despair.”

Hugh Scott, managing director of data-leakage-prevention firm ASL Security, which has 12 employees and an annual turnover of £1m, is also disillusioned with his bank.

He said: “I submitted a business plan to HSBC before Christmas 2008 and the local commercial manager came to see us and agreed a £50,000 overdraft. I offered a personal guarantee and a debenture on the company. This was all agreed and the security was taken in February. No sooner was the security in place, however, than HSBC changed its mind, blaming the EFG scheme, something it had never mentioned before and offered us only a £20,000 overdraft.

“On the back of the agreed facility, I took on two new salesmen. HSBC is unwinding the security and has refunded all charges, but what a waste of time and effort.”

Frank Stevens, meanwhile, who had hoped to build his new showroom and visitor facility at his Weymouth boat business in time for the Olympics, believes that the real problem is that local bank managers are no longer allowed to make lending decisions.

He has already obtained full planning permission for the new building and amassed a deposit of £250,000 to put towards the £750,000 cost — but without a £500,000 loan from the bank is not able to get started.

He said: “The banks are just doing everything in their power to bolster their balance sheets. I had a meeting with the regional director and he admitted that they were not interested in taking on any new business. I feel very frustrated because the problem with the banks is they are just taking a global view and they are not looking at individual cases. In our case we are sitting literally 300 yards from the site of the sailing Olympics. We might be a bubble that is doing extremely well, but the banks should take account of that.”

Small firms feel that the high-street banks are letting them down in other ways, too. A survey of small firms carried out by the UK200 Group, an association of independent professionals including lawyers and accountants, found that almost half of the respondents said their banks had imposed changes to overdrafts or loans, with 27% claiming that these changes had taken place without notice. Of those surveyed, 13.5% said they had had their overdraft or loan facilities removed altogether.

And a recent survey of 6,000 small businesses by the FSB found that 18% of those taking part said there had been an increase in bank fees compared with last year.

Most respondents said that the interest rate they were being charged on overdrafts and loans was being kept at between 5 and 10 percentage points above Bank rate. A third of the small firms surveyed said their bank was less helpful now than it had been before the credit crunch began.

Small-business organisations are now calling on the banks to act fast to prevent the terrible consequences of their continuing failure to lend.

Alambritis said that the expected loss of some 36,000 small businesses this year would be a tragedy for the whole country. “When small businesses close down they rarely reappear. So you lose that diversity and that choice for consumers.

“Big companies like car giants will close branches and factories and downscale and stop making a certain car. But a small business just closes down and the livelihood of the entrepreneur goes as well.”

Phil Orford, chief executive of the Forum of Private Business, added: “The consequence of small businesses not being able to access adequate finance from lenders is stark — a great many more could be forced to close. Cash must start flowing for the sake of small businesses and the economy as a whole. Time is of the essence.”

Lloyds gets too personal

Lynda Gauld owns public-affairs consultancy Bacchus in Edinburgh.

She contacted her bank, Lloyds TSB, to request a small increase of £3,000 in her business overdraft, only to be told that it would not be approved because she was overdrawn on her personal account with the same bank.

She said: “This was not an issue when I had the initial business overdraft and a business credit card agreed a year ago. We have a cash-flow blip just now and corporation tax due, but the bank wanted me to use the remaining funds in the business account to settle the personal account, or to take out a repayment loan to pay off the personal-account overdraft. I’m very annoyed.

“Instead of assisting a small company that is solvent and in good shape, with an additional £60,000 of contracts signed up and not yet started, with great prospects, we get our personal accounts raked over. My personal financial standing should not have any bearing on my business account, which is exemplary. I have banked with Lloyds TSB for 30 years but am so annoyed I am now in the process of moving my business account elsewhere.”

I’m disappointed and let down by the banks

John Potter owns three Area clothes shops in southern England selling ladies’ fashionwear and accessories, which between them generate a turnover of more than £1.5m. He applied for a loan under the Enterprise Finance Guarantee scheme from Barclays to get some additional working capital but was turned down.

He had been asked by the bank to provide valuations and details of existing mortgage commitments on the directors’ main homes, even though the government has expressly said that banks are not entitled to ask for security based on the owner’s main residence.

“I feel disappointed and let down by Barclays,” said Potter. “I also feel that they are not operating in the spirit of the scheme that was intended by the government. We are very happy to provide full personal guarantees because we believe in the business so much. But I am not happy about Barclays asking for mortgage security on my home, which is specifically excluded from the scheme.

“Clearly the scheme is not working. The government may have good intentions, but I think that the money that has been provided to the banks is just not getting through to small businesses.”

THE ENTERPRISE FINANCE GUARANTEE

THE Enterprise Finance Guarantee scheme was set up by the government this year with the aim of helping viable small businesses that were facing temporary cash-flow difficulties — because of late payments from creditors, for example.

The funding of £1.3 billion, which can be given in the form of loans or overdrafts, is 75% guaranteed by the government and is available to small businesses that have a turnover of up to £25m.

The loans, which are made by high-street banks, can vary in size from £1,000 to £1m and run for a period of up to 10 years.

The government has expressly stated that banks are not allowed to demand a family home as security. They are, though, entitled to ask for personal guarantees of up to 100% from the owners of the business.

Baroness Vadera, the minister for small business, said that the scheme — part of a package of funding measures announced by the government — had so far received eligible applications totalling £115m.

With applications running at a rate of £30m a week, the £1.3 billion should be distributed within the year, as planned.

WHAT FIRMS NEED: OUR MANIFESTO

A speedy response. High-street banks are taking six weeks and longer to respond to applications for funding under the Enterprise Finance Guarantee scheme. But small businesses often need the money quickly to pay wages at the end of the week or buy stock to fulfil orders. At the very least the banks should answer their letters and return their phone calls.

A firm commitment from the banks that they will stop demanding security over business owners’ homes, in line with the government’s recommendations.

Greater power to be given to local bank managers to make lending decisions instead of a faceless credit controller at head office. Branch managers know their local market and the businesses that are operating in it. Also, the ability to build a personal relationship between a business and the bank benefits both sides.

Proper advance notice that existing banking arrangements are about to be changed or new charges introduced.

A greater level of understanding from the banks about the challenges small businesses are facing today. Firms that may have been doing well only six months ago ould be struggling now through no fault of their own and they need practical help, not lectures or blame.

M&A during the downturn

Extracted a portion of this long article from BusinessWeek. Full article in the following link: http://www.businessweek.com/print/magazine/content/09_64/s0904036686874.htm

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BusinessWeek 3, Apr 09

How to Make Acquisitions in a Down Economy

Potential deals are abundant because of the recession, but buyers must be careful to avoid the many possible pitfalls

By Amy S. Choi

Impulse shopping is rarely a good idea—especially if you're buying a business. But you shouldn't overlook the importance of serendipity, either. The declining economy has left a raft of formerly solid businesses in distress, making it the right moment to consider whether an acquisition might make sense for you. With company performance—and therefore valuations—suffering, a recession can be an opportune time to buy. "It's a great time to be a careful buyer, which is not an oxymoron," says Eric Siegel, president of advisory firm Siegel Management in Bryn Mawr, Pa.

Just ask Larry Browne, chief executive of Houston-based freight forwarder Diligent Delivery Systems. In March, Browne closed on the acquisition of a four-person courier business in Memphis, opening up a new market for his own company. Acquisitions aren't new to Browne—he's made nine since taking over Diligent in 2001. He's still raring to go. "The opportunities were there last year and are here now," Browne says. "I'm feeling good about '09. We're going to do some deals." His company now has 72 employees and about $40 million in sales, up from less than $1 million in 2001. Browne attributes 25% of his company's growth to acquisitions.

There's more to successful deals than price and timing, of course. Any purchase needs to complement your business strategy and your plans for internally generated growth. Whether you're actively seeking out a deal or one falls into your lap, you'll need to know how to maximize and integrate the new assets before moving forward.

In the best-case scenario, an acquisition would improve your company's profitability and margins and provide dramatically better return than you would get plowing the same money and sweat into organic growth. You should be able to wring some cost savings out of the integrated operation—rarely as easy as it sounds. Alternatively, an acquisition could be a good defensive move, or could raise barriers to entry for competitors.

It's vital to understand exactly what you will need to get out of a purchase, whether it be cash flow, employees, customers, real estate, equipment, or technology. Be wary of buying a business that you suspect will complement yours but that you don't fully understand. Just because you make a great peanut butter doesn't mean you can successfully produce jelly.

Relevance of US Small Business Plan

Is President Obama’s New Small Business Plan Relevant?

ANITA CAMPBELL OF SMALL BUSINESS TRENDS 

OPEN FORUM: http://www.openforum.com

MARCH 18TH, 2009

On Monday, March 16, 2009, President Obama announced a new plan to help small businesses. The plan is mainly centered around easing SBA loans. The plan calls for the government to buy up SBA loan securities to free up the secondary markets so banks can sell their SBA loans; it cuts SBA loan fees; and it increases the Federal guarantee on SBA loans to 90%. It also calls for the 21 largest banks getting Federal funding to report on their volume of small business loans each month. The rest of the announced provisions for the most part were already included in the Stimulus package and not new.

So: thumbs up or thumbs down?

I’d say the plan is mildly positive, but mostly it’s just not relevant to the majority of small businesses. Here’s why:

To the extent small businesses actually want SBA loans, this could help. However, not every small business wants or needs a loan. Demand for small business loans is down significantly, according to the U.S. Treasury. As Dawn Rivers Baker noted here not long ago, lack of loans is not what ails many small businesses. In times when the economy is down, going into debt doesn’t necessarily look all that attractive. Battening down the hatches to get through to better times in the economy, does.

The Small Business and Entrepreneurship Council makes a similar point — saying the President’s focus on SBA lending merely helps on the margins:

“While these may help some small businesses that are in a position to borrow money, many small firms are not in sound financial shape or don’t feel it is prudent to increase their debt during the rough economic period.”

Consider, also, how few small businesses actually get SBA loans. For instance, as this Washington Post article reports, SBA loans counted for just 4% of loan volume for small businesses in 2006.

More SBA loans are not a cure-all for every small business — although you would hardly know that based on some reports. For instance, this article on Forbes.com is bizarrely titled “Small Business Loves Obama’s Plan.” However, there are no small business owners interviewed in the article. The title makes it sound as if small business owners spontaneously erupted in applause in favor of the plan. Wishful thinking perhaps … but not what the article says … nor the real-world reaction.

On the other hand, that’s not to say small businesses are against this latest plan, either. I don’t hear small business owners jumping up and down screaming it’s a bad thing. It’s just … not relevant enough for most to care.

However, that said, for the relatively small percentage of small businesses who do need SBA loans in order to hire or operate, and for whom other funding sources are not sufficient or not available, this is welcome news.

The plan also calls for reporting monthly on how much lending is being done for small businesses. But Scott Shane, who also writes here at the OPEN Forum, is quoted in a USAToday article as questioning that provision:

The 21 largest banks getting government financial help will be asked to report monthly how much money they lend to small businesses. This helps “increase transparency and accountability,” Geithner says.

While programs that help a small business “save cash or borrow more money will be helpful,” parts of Obama’s plan don’t make complete sense, says Scott Shane, author of The Illusions of Entrepreneurship.

“I don’t see how making banks tell the government how much they’re lending is doing anything but generate more paperwork for the banks,” he says. He also worries about previously announced tax increases on those with high incomes, many of whom run successful small businesses.

In the end, most small businesses that I know will continue on their way, working to get more sales, not waiting for bailouts and probably not in the market for SBA loans.

In my view, the biggest impact of President Obama’s plan will be symbolic. The improved tone in the Administration of late, sounding more positive, is a welcome move. That may do more to restore confidence in the economy, which is what businesses need, than the SBA lending provisions.

And if this opens things up even a small crack — makes the public and small business owners and the lenders who serve them even a little more confident — then conditions for small businesses may start to improve. It won’t be because of what’s in the plan, but simply because small businesses are being given a little attention and the tone is turning more optimistic and “can do” rather than constantly comparing today with the Great Depression.