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Access to capital for Latina entrepreneurs easier with Micro Offering Safe Harbor Act

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Access to capital, one of the hurdles of Latina small businesses –and that of many other small business owners, is getting a lift. The Micro Offering Safe Harbor Act, which will help small businesses raise capital, was introduced by Congressman Tom Emmer of Minnesota’s 6th District and approved in the House of Representatives.

salary reviews, salary reports, access to capital

This legislation makes a simple technical amendment to the Securities Act of 1933 by defining exactly what qualifies under the “non-public offering” exemption as a way of access to capital. This would allow small businesses to operate with confidence that they are not in violation of the law when doing a non-public securities offering if one or more of the following requirements are met:

  • Each investor has a substantive pre-existing relationship with an owner,
  • There are 35 or fewer purchasers, or
  • The amount does not exceed $500,000
access to capital

Tom Emmer MN 6th District 114th Congress

“Entrepreneurs will be able to more easily launch their startups and existing businesses will have better prospects for growth,” said Emmer. “By simply clarifying an old law, more small businesses will raise capital through non-public offerings, easing the burdens of red-tape, onerous paperwork, and the threat of lawsuits. Congress has much more work to do to fully unleash the American economic engine and this legislation is one of many steps I will take to help Minnesotans achieve the American Dream. With labor force participation at an all time low and many families still having less income than they had before the 2008 economic collapse, it is my duty to do everything I can to get America’s economy firing on all cylinders.”

Several small business advocacy organizations have endorsed the Micro Offering Safe Harbor Act including the National Small Business Association and the Small Business & Entrepreneurship Council (SBEC). The SBEC stated, “The legislation would appropriately scale federal rules and regulatory compliance for small businesses, thus providing another practical option for entrepreneurs to raise the capital they need to startup or grow their firms.”

The “Micro Lending Safe Harbor Act”, sponsored by Congressman Tom Emmer, has captured some solid endorsements as both the National Small Business Associationand the Small Business & Entrepreneurship Council. The bill is part of a growing recognition by elected officials that small business powers the economy and the need to make laws easier for SMEs to find access to capital.

Pipeline Fellowship Natalia Oberti

Pipeline Fellowship Conference in the making of women angel investors

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Natalia Oberti Noguera, CEO and Founder Pipeline Fellowhsip

Natalia Oberti Noguera, CEO and Founder Pipeline Fellowhsip

The Pipeline Fellowship conference is an all-day event on angel investing open to the public. Panels and presentations cover topics ranging from angel investing in action to due diligence, structuring the deal, valuation, and the post-investment relationship.

UPCOMING CONFERENCE

2015 Bay Area Pipeline Fellowship Conference

Friday, October 9, 2015, 8:30AM – 6:00PM (PDT)

Surprised? Curious? Each year, the Pipeline Fellowship selects five to ten women  in cities around the country to learn the skills of becoming an angel investor. The program includes attending monthly workshops and being mentored by seasoned male and female financiers.

The architect behind this initiative is Colombian-Italian Natalia Oberti Noguera, an unstoppable LGBT Latina who aims at “changing the faces of angel investors” in a White male-dominant industry.

“There are enough white guys investing in other white guys and I decided to change that,” she said at the Latinas Think Big™ Innovation Summit when prompted why she decided to start this women-led for profit social venture. That statement caught my attention for sure!

When I contacted Natalia for an interview, she immediately responded. “We target our potential investors through people like you who are genuinely interested in having a great conversation and sharing the message about this topic, and also through social media,” she said.

Growing up in Latin America, Natalia did not have entrepreneurial role models around her. “My father worked for the United Nations and we moved around a lot: I lived in Ecuador, Colombia, Honduras and the Dominican Republic. Quoting Marie Wilson from The White House Project, ‘you can’t be what you can’t see’.”

Years later,  she finally took permanent residence in New York City. “I hold a BA in Economics and Comparative Literature from Yale University –I like to say that I majored in extra-curriculars. I didn’t realize that what I was doing was being entrepreneurial,” she said.

Pipeline Fellowship Natalia Oberti

 

The same way, when she meets her potential angels in training, she encourages them to become role models for other women.

“In 2011, at our first bootcamp in NYC, a woman of color approached me at the end of the session and said, ‘I was raised skeptical that women can be investors but you are right, I could be an angel!’ Those are the type of stories that keep me going. While women of color investors’ numbers are low –only 19 percent of investors are women and 4 percent are minorities–, they are not zero,” Natalia said.

She firmly believes that seeing other Latinas and women of color on the panels is a powerful message that motivates women to act. “I ‘hate’ non-profits,” she said boldly. “The perception this society has about the concept of money is different for men than for women. When a woman wants to help change the world, she starts a charity. When a man wants to do it, he builds a billion dollar business. Creating a self-sustaining venture that invests in women entrepreneurs’ projects and startups is the best way to advocate for doing well while doing good, and it should be the only way to make a profit,” Natalia assured.

For that purpose, the Pipeline Fellowship bootcamp includes three important aspects of becoming an angel investor: education, mentoring and practice. “Women who are interested in investing their money in exchange for equity in companies they believe in are helped to make the best decisions through our program,” Natalia explained. “We try to match local entrepreneurs with local investors but sometimes it is hard. We receive thousands of emails from women starting their own business who are looking to access capital but fewer are willing to step up and provide funding,” Natalia said. “Additionally, it is relatively accessible once the applicants meet the requirements,” she said. Each fellow pays $4,500 for tuition and commits to investing $5,000 toward a $50,000 investment in a start-up that meets the Pipeline Fellowship Pitch Summit criteria.

So what are you waiting for? Get your investors’ juices going and out in the real world to help other women fulfill their dreams. Latinas we tend to think that we need to keep our wealth to help our children; however, building someone else’s dream today might make that person pay it forward to our own children in the future.

After all, it takes a community of women investors to raise a successful woman entrepreneur.

 

https://www.youtube.com/watch?v=NI_RAEdKvTk

Jesse Torres and Aaron M. Sanchez Two Men in your Business

Crowdfunding using social media to fund your startup

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crowdfunding money access to capital

Before crowdfunding became the ubiquitous start-up funding mechanism that it is today, most entrepreneurs were limited to reaching out to their friends and family when it came to raising money for a new venture or to grow an existing business. Thanks to the Internet, social media and the power and influence of the crowd, funding is more accessible to more people than at any time in the history of civilization. Welcome to the age of hyper-democratization of business creation.

crowdfunding money access to capital

The truth about crowdfunding to access capital for small biz

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Many small business owners “in the fringe” are looking at crowdfunding as a way to access capital for their small businesses but not everything is as simple as making your plea online.

Posted by Dustin McManus on November 19, 2014 on the Small Business Majority Blog.

crowdfunding, money, access to capital

Q: How do small business owners feel about access to capital?

A: Access to capital has been a persistent problem for entrepreneurs, particularly since the recession. While some parts of the business community have found it easier to secure capital, there are significant gaps in critical areas, such as minority and rural communities, as well as for groups of entrepreneurs like women and veterans. Our opinion polling found that an overwhelming 90% of small business owners nationwide agree that access to credit for a small business is a problem, with 61% agreeing it’s harder to get a loan now than it was before the 2008 recession.

Q: How does crowdfunding relate to access to capital?

A: Crowdfunding is a method of funding by raising monetary contributions from a large number of people, typically online. Small businesses have seen the rapid growth of alternative sources of capital like crowdfunding, which leaves entrepreneurs at risk due to the lack of fair and clear regulations on this new venture. Policymakers must address the risk that comes with alternative sources of capital that balances very real opportunities without stifling this same innovation that has the potential to create more options and points of access to capital for small businesses.

You might be interested: Women business startups apply for seed grant program

Q: How can lawmakers ensure fair regulation of crowdfunding to protect small businesses?

A: The JOBS Act of 2012 required the SEC to issue guidance on crowdfunding. Lawmakers should issue these final rules as quickly as possible, with no further delay, and strike the appropriate balance between oversight and opportunity.

Q: What else can be done to help small businesses access capital more easily?

A: One solution is to change outdated regulations that limit credit unions from meeting small business needs. Currently, there are federal regulations in place that bar credit unions from lending more than 12.25% of their assets to businesses, resulting in businesses belonging to these credit unions having $13 billion less in capital available to them. Bipartisan legislation in Congress would change this and allow credit unions to lend up to 27.5% of their assets, increasing options for small businesses and creating thousands of new jobs with no additional risk for taxpayers.

Q: What about efforts for entrepreneurs that are historically underserved in accessing capital like minorities and women?

A: Continuing to support and expand efforts by the SBA, USDA and other agencies to close gaps through loan guarantee programs will help serve minority, women, veteran and rural entrepreneurs in their attempts to access capital. With innovative new ways of streamlining and simplifying loan-making for small businesses and opening new avenues of capital for them being used, the existing needs of minority entrepreneurs will can be met in order for them to continue serving their function as job creators. Particularly for women, who account for only 16% of conventional small business loans, legislation such as the Women’s Small Business Ownership Act would address this gender gap in lending by expanding or improving SBA programs to reach more women seeking business loans.

 

5 Cs bankers ask for small biz loans post-Recession

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bankers ask for small business loansAfter the Great Recession of 2008, the lack of sources for borrowing money has put many small businesses on hold or simply cleaned them out. The quest to borrow money to sustain operations or build inventory has been a lost battle for startups and those less than two years in business. Here are some tips from Betty Reiff, Assistant Vice President Portfolio Credit Manager for the Sun National Bank Business Banking division to improve your chances to obtain access to traditional small business loans.

Banks still keep a tight fist on small business loans

In this tough economic environment, banks ensure that loans will be repaid by streamlining the application process and helping potential borrowers understand the loan requirements and their debt obligations. As an underwriter, Reiff believes the five Cs of loan evaluation have not changed but the order in which each one is evaluated has. She refers to capacity –or cash flow-, collateral, capital, conditions and character.

  1. Capacity or cash flow requirements are placed at 1.2 times the amount of the requested loan. If $100K is the amount requested, Reiff needs to see approximately a monthly cash flow of $6000 net income –after interest and depreciation– to approve the application.
  2. Collateral is another tough requirement that only has not eased but increased since the Great Recession. “We expect the borrower to pay down 25 to 30 percent towards the purchase of a real estate property while working capital tops 80 percent of accounts receivables under 90 days,” she said.
  3. Capital is the amount banks require small entrepreneurs to invest in their own business, and how much they would invest at the time of the request. The bank should not be the only source of funds.
  4. Conditions –the capacity of the business to deal with current economic climate as well as any Nature or man provoked disaster– need a sustainable plan and a small business should be able to provide one in those circumstances.
  5. Character talks to the personality and disposition of the borrower used to be a very important factor in the lending process but with a changing economy, banks’ ability to extend traditional finance has lessened. Even if the small business owner has been a bank client for many years, character will not change a “no” to a “yes” in the underwriting process if the cash flow and the collateral are not strong factors, according to Reiff.

Did you have a bankruptcy due to a nasty divorce? Tax liens or judgments because of a family member’s long-term care? Partners that left you running on empty? All the information that will appear on your credit is viewed with better eyes if explained in anticipation.

“Not all negative information is bad news if the underwriter can see you handled the situation properly. It might even help the borrower in certain cases.”

Most importantly, do not hide any information. Reiff “googles” her clients and their businesses trying to confirm stories and situations. “With all the public information out there, it is hard not to find what you are looking for. Better to tell everything up front and see if the item can be overcome than have the underwriter discover something and wonder ‘What else don’t we know,’” she concluded.Business Handshake

 

General small business loans 7(a): amounts, fees & interest rates

The specific terms of SBA loans are negotiated between a borrower and an SBA-approved lender. Find out what provisions apply to all SBA 7(a) loans. (At the SBA corner)

 

(A version of this article appeared on May 2013 @VOXXI.com)

credit cards credit history

Growing your business might mean growing your debt

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Falling credit cards - debt conceptby Hispanic Chamber of E-Commerce Team

Over time, your business will—hopefully—grow, seizing new opportunities to expand and to flourish. As these opportunities present themselves, you may face the question of how you’ll pay for them on the front-end—how you’ll afford a new building, for instance, with larger office space, or how you’ll get additional inventory.

In these cases, you may find that you need to borrow money—which of course requires you to have some decent business credit. Building credit is as important for corporations as it is for individuals—and it can be just as difficult.

There are a few tips you can keep in mind to make the process a bit smoother, though—including the following:

  1. Start by acknowledging that it’s not entirely about the business credit; your personal credit is also going to be scrutinized, as likely as not. Because most new businesses don’t really have a credit history to speak of, lenders will look at the personal credit of the business owner. Your personal financial habits, then, could very directly impact your business’ long-term financial options.
  2. At the same time, it is important to maintain a separation between the company’s finances and your own personal finances. You shouldn’t be putting business expenses on your personal credit card, and you definitely shouldn’t be putting personal expenses on the business card. Either scenario could come back to haunt you.
  3. Apply for credit early—before you really need it, even. If you have no credit history to speak of then it could take months, even years for you to get approved. If you open up a business credit card or take out a very small loan early on, it gives lenders something to appraise—and could reduce your wait time when you need to take out a much larger loan.
  4. Keep an eye on your credit cards and loan payments—and pay them on time. This is obvious yet it cannot be emphasized enough: The better relationship you can maintain with your lender, the more likely you’ll be to get a more sizable loan down the road.

Building business credit takes time, and it takes a sense of direction—so start now. Remember, as you do, why you’re doing it, and how it might ultimately serve your business down the road.

Access to capital requires skin in the game

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bank loan, investing in your business, access to capitalBy Jesse Torres

Most successful entrepreneurs at some point realize that they will need access to fresh capital if their business is going to continue growing. The capital may be needed to purchase new equipment to increase production or purchase raw materials or inventory to meet demand or all of the above.

In some cases the business owner may transfer personal assets into the business, borrow from family and friends or take on investors. In many instances, though, the entrepreneur must attract capital from another source: a bank.

Although many successful business owners will at some point seek a bank loan to grow their business, most have no clue what bankers look for when evaluating such a request. As a result, many entrepreneurs are not prepared for the process, resulting in a painful experience.

Bankers are not rocket scientists or magicians. Their method of evaluating loan requests is standard, straightforward and transparent. Ultimately, a banker’s objective is to determine how to best structure the borrowing, based on the business owner’s needs. A second objective is to determine if, based on current and reasonable projected business operations, the loan will be repaid as structured.

Bankers evaluate a number of factors including the past performance of the company, collateral coverage and the administration of the business and its projections. But most loan evaluations begin with determining the amount of skin the entrepreneur has in the game.

Business owners must have a “reasonable” amount invested in their business to receive favorable consideration for a loan. This ensures that, when combined with borrowed funds, the business can operate soundly and will not be overburdened by the loan payments. Also, a strong equity position supports the notion that a business owner is likely to do everything possible to protect the investment made in the company, thereby doing everything possible to repay the bank.

Debt-to-equity ratio, what is?

Banks scrutinize the business’ debt-to-equity ratio to understand how much money they are being asked to loan relative to how much the owner has invested. The smaller the ratio, the stronger the company and the more likely the bank will approve the loan.

As David A. Duryee explained in his book The Business Owner’s Guide to Achieving Financial Success, “a debt-to-equity ratio of 2.25 would mean that there is $2.25 in liabilities for every $1.00 of equity.” That means lenders have just more than twice as much invested in the company as owners do.

The first task that entrepreneurs anticipating a loan request must complete is to calculate their debt-to-equity ratio. Next, they should determine whether the debt-to-equity ratio is so high that it will likely kill a loan request. But how high is too high? The answer is, it depends.

Each industry has its own benchmarks for low, moderate and high debt-to-equity ratios. Within each industry, different variables figure in such as revenue size, location, years in operation or whether the borrower is operating a franchise.

Trade organizations often maintain metrics, including debt-to-equity ratios, for the business types they represent. For example, restaurant owners seeking to compare their debt-to-equity ratio to others can check CSI Market to find debt-to-equity ratios, as well as other metrics, for their industry.Business Handshake

Comparing a company’s debt-to-equity ratio to similar businesses is essential because different industries maintain different balance-sheet structures. According to Investopedia, “the debt/equity ratio also depends on the industry in which the company operates. For example, capital intensive industries such as auto manufacturers tend to have a debt/equity ratio above 2, while personal computer companies have a debt/equity ratio of under 0.5.”

Strong equity with a moderate to minimal debt level can produce a debt-to-equity ratio well below the industry average. The owner has thus granted the business an improved ability to sustain itself during tough times. In contrast, a business with minimal or nonexistent equity has a higher risk of default, particularly during difficult periods.

Strong equity, a business owner skin in the game

Strong equity investment demonstrates to a lender that the owner is very committed to the business. Sufficient equity is particularly important for new or expanding businesses since right after a launch or expansion the business may not be profitable and will require ongoing financial support by the owner.

Weak equity investment increases risk. Nonexistent equity can make obtaining a loan almost impossible, as the owner has not shown a commitment to the business.

The stronger the debt-to-equity ratio, the lower the risk and the greater the likelihood of a loan being be approved. By contrast, the owners of businesses with high debt and low equity are prime candidates for a painful experience.

 

 About Jesse TorresJesse_Torres

Jesse Torres has spent nearly 20 years in leadership and executive management posts, including executive management roles at financial institutions. In 2013 the Independent Community Bankers of America named him a top community banker influencer on social media. He is a frequent speaker at financial services and leadership conferences and has written several books. He hosts an NBC News Radio show called Money Talk with Jesse Torres.
Follow @jstorres or contact  Jesse@JesseTorres.com