Tag Archive | "funding"

Micro Business Funding an Environmental Business


Micro business funding an environmental micro business.

biowash

Here is a great micro idea. Have your own micro business that helps the environment.

This site has recently looked at numerous ways of funding a micro business beyond bank loans.

Here is a way to self fund a micro business for the environment with Purely Green.

Ted Tidwell, the maker of Purely Green bio degradable cleaner sent me this note: Hi Gary, Regarding funding a micro business. Realizing that initial capitalization is a major challenge to many potential but under capitalized business owners, 1st Enviro Safety recently developed a Purely Green starter kit for only $500.

It was originally designed as a sample kit for sophisticated sales executives wishing to establish large industrial accounts. (The EPA is forcing industry to replace toxic cleaners and degreasers with USDA BioPreferred solutions.)

Then, someone realized that the kit is adaptable for retailing in weekend flea markets, home and garden shows and/or environmental expo sales.

The “Purely Green” label was inspired by a major international retailer’s conclusion that ours was the only “truly green” cleaner on the market.

The label shows a cute little girl and a huge truck conveying the message that it is “gentle enough for babies yet powerful enough for truck engines.”

The investment is only $500 (+ delivery) and the suggested retail exceeds $1,100.00. For written details, e-mail me at  tedtid7@yahoo.com. Ted

biowash

We have shared ideas about Purely Green and Bio Wash many times at this site. We use the non mutagenic bio degradable cleaner it for everything from washing dishes to cleaning the house to killing ants and even spraying our citrus grove.  We have been spraying our hemlock trees for years as it kills the Wooly Adelgid a blight that threatens hemlocks  on the US east coast.

This is a remarkable environmental product… great for cleaning oil spills and was even used to help kill anthrax that contaminated Federal buildings.

Recently Ted Tidwell sent me this note and photos.

Gary, A client just sent me this note.  “Hi Ted,  These pictures are from a client who has been using Purely Green and Bio Wash.  You can see the results of using BioWash on their vegetables.  I will include their email and comments about both products that you will appreciate, no doubt.   To say the least, they are very happy with the products!

“Please read the information from these dear people who run a business in north New South Wales and who are Purely Green and BioWash devotees.  They breed goats and run a farm as their business.

“Apart from this email, I also received an email in which she said that Purely Green is the best kitchen and bathroom cleaner she has ever used.

“We have one goat that had severe rain scald/excema, I washed her three times with Purely Green and now her skin is clean and healthy.  Likewise my mare who used to suffer with the itch( mane and tail rubbed out) She is now growing everything back and there is no evidence of any more rubbing. I still spray her every now and then just in case.     We also use it when we get any skin irritation or insect bites even leeches. One spray and instantly the itching stops as if by miracle.

“Also you can see by the photos that my garden is thriving with the biowash. Everything is so healthy and growing like crazy. Especially the Rhubarb…

biowash

“and the radishes

biowash

“cabbages…

biowash

“and lettuce.

biowash

“The roses are the best I have ever grown and that is despite the wettest season, endless rain and humidity. I do spray for blackspot.

“The cabbages and related vegies have not had any insecticide on them and they are unblemished.

“For the first time I had success with onions.  They are huge!

biowash

“I was just about to give up on growing them after failure after failure before. I thought the climate or soil did not suit them here.

The cucurbits are finally getting away after a slow start due to a very cool spring they do not show any sign of mildew despite the wet. Should be a good harvest judging by the flowers they are setting.

biowash

“Anyway, I shall keep you posted and if you are ever on the east coast, drop in you are most welcome. Regards”

What a wonderful micro business idea for those who want to help the environment and desire to protect their financial future with their own micro business… use and market Purely Green and Bio Wash.

For written details, e-mail me Ted Tidwell at tedtid7@yahoo.com

Gary

Order my report “Funding a Micro Business – How to Raise Money Abroad”. $9.99

Join  Merri and me when we  personally conduct International Business and Investing  seminars. We have two more of these seminars set up throughout 2011 to share what we are doing with our international investing and internet business. We share how you can use the same steps to create your own online business.  See our 2011 International Made EZ seminar schedule here.

Our next seminar is in June 2011 but you do not have to wait. Order the last International Business Made EZ seminar on MP3.

Complete Seminar ($379)
Intl. Business Made EZ Seminar only ($149)
Intl. Investing Made EZ Seminar only  ($149)
Quantum Wealth Workshop only ($99)

Micro Business Funding SBDC


New micro business funding SBDC is available from Small Business Development Centers

Having your own micro business can help you keep up and get ahead in these times of rapid change and inflation.

How does one get started and how does on go about funding a micro business?

micro-business-shot

President Obama signed the Small Business Jobs Act into force last year.

One way is through government sponsored programs.  The Small Business Jobs Act of 2010 for example provides eight Micro Business Tax Cuts.

• The law increases the small business expensing limit to $500,000 for 2010 and 2011.

• The law makes a permanent change to allow qualified small businesses to carry back their general business credits to offset five years of taxes.

• The law temporarily puts in place for 2010 the elimination of all capital gains taxes for those who invest in small business.

• The law temporarily increases the amount of start-up expenditures entrepreneurs can deduct for 2010.

• The law permanently provides deductions for employer-provided cell phones.

• The law allows the self-employed to deduct health insurance costs for themselves and their family members this year.

• The law changes, beginning this year, the limitations on penalties for errors in tax reporting that disproportionately affect small business.

• The law extended 50% bonus depreciation through 2010; however, the new Tax Relief Act of 2010 further extends and expands this to 100% of any productive capital investments in 2011.

In addition this new act provides more financing for small business start ups.

A February 2, 2011 Online News Reordnet.com entitled “STOCKTON  Federal grant to be aimed at small startups” tells about some of micro business funding in Northern California where over $600,000 is available in that region.

The article says:  The Small Business Development Center in Stockton hopes to use about $50,000 in federal grant funding to provide services to very small startup businesses.

It is part of six grants to regional SBDC agencies around the country announced last week by the U.S. Small Business Administration in Washington, D.C.

“Our goal is to examine the possibility of providing a virtual incubator to micro-businesses in San Joaquin County,” said Gillian Murphy, director of the Small Business Development Center at San Joaquin Delta College.

“It’ll be focused on micro-enterprise,” Murphy said Monday. “I’m a strong believer we can create jobs by creating one-, two-, three- and four-person businesses.”

The six grants were the first announced as part of $50 million in funding included in the Small Business Jobs Act of 2010 and signed by the president in September.

The aim is to support job creation and retention among small businesses through in-depth business counseling and advising entrepreneurs and small business owners.

Another way to fund a micro business is with overseas investors and partners. There can be tax and asset protection benefits to this for of micro business funding as well… plus if you want to travel or live globally this is a fun adventurous way to start.

The Small Business Administration provides some tips for getting started.  Whether you get funded from an agency program or from investors… here are seven of the  tips that are useful.

Micro Business Tip #1: Think About Starting. If you’re thinking about starting a small business, you should start by weighing the pros and cons, so that you can make a wise decision.

Micro Business Tip #2: Find a Mentor or Counselor. When you’re in the initial phases of getting your small business off the ground, you could probably use some guidance and advice from a mentor or counselor.

Micro Business Tip #3: Write a Business Plan. Now that you’ve decided that you’d like to open a small business, you should put your thoughts down on paper. This way, your business idea is expressed in a plan – a living document that outlines every critical aspect.

Micro Business Tip #4: Prepare Your Finances.
Before you head to your bank or credit union to apply for a loan, be sure that you understand your situation and your options. What are your startup costs? At what level of revenue will your business break even?

Micro Business Tip #5: Loans, Grants & Funding.
You have a variety of options when it comes to financing your small business. In addition to traditional loans, you may wish to explore other opportunities that range from grants and bonds to investor-based venture capital.

Micro Business Tip #6: Business Law & Regulations,
As a small business owner, you are subject to the same regulations as large corporations. Even if you’re starting out on a small level and planning to grow, you must comply with business laws and regulations from the day you open.

Micro Business Tip #7: Marketing a New Business. Let’s say you have a great product, and you’re ready to fill orders. You might be missing a crucial business aspect: marketing – or telling people why they need your great product in the first place.

During times of great economic and social change that bring inflation, your own micro business is one of the best ways to secure your finances.  You own micro business can enhance your security… as it creates fun and brings satisfaction in your affairs

Gary

Learn how to fund a micro business with overseas investors.  Read our report Funding a micro business – How to Raise Money Abroad.

Gary

See a micro business idea in the FM story below.

New Report on Micro Business Funding


See below an excerpt from my report “Funding a Micro Business – How to Raise Money Abroad”.

You can learn ways beyond bank loans to fund a micro business with this report..

Funding a Micro Business – How To Raise Money Abroad $9.99

Most countries want to encourage micro businesses.

A Washington Post article entitled “Obama signs $30B small business lending bill” By Darlene Superville explains why. See excerpts below.

micro-business-photo

President Obama signs the Small Business Jobs Act, Monday, Sept. 27, 2010, in the East Room of the White House in Washington. This AP Photo/J. Scott Applewhite is in the article.

WASHINGTON (AP) — Scoring a prized political victory five weeks before the Nov. 2 elections, President Obama on Monday signed a bill to help small businesses expand and hire by cutting their taxes and creating a $30 billion loan fund.

Mr. Obama said small businesses are “the anchors of our Main Streets,” creating most of the jobs in the country.

“It was critical that we cut taxes and make more loans available to entrepreneurs,” he said before signing the bill in the East Room of the White House.

The bill creates a $30 billion government fund to help encourage lending to small businesses, many of which have been having difficulty securing bank loans and credit. The fund will be available to community banks, which could use the money to leverage billions more in loans.

The legislation also includes about $12 billion in tax breaks for small business — eight separate tax cuts that take effect Monday. One such provision increases to $500,000 the amount of investments that businesses would be allowed to write off this year and next.

The measure also gives a boost to some Small Business Administration loan programs.

Despite efforts by the US government… many find funding a micro business difficult.

This is why I have updated and made our report available Funding a Micro Business – How To Raise Money Abroad $9.99

Here is an excerpt from this report:

Gain Great Tax Benefits

The perfect international micro business can lead to the perfect international business tax loophole. Discover tax protection from international business that won’t end. Find out why below in this excerpt from my report “How to Fund a Micro Business”.

The salmon sunset faded in a plum wine horizon and fell drunken in its beauty behind a razor backed ridge. Bird songs grew faint in the evening dusk.  Stars awakened, diamond beacons studded in an inky night.

Rosaspamba, Ecuador. Merri and I cuddled in a growing darkness, fireplace warmed against the evening mist that shrouded our hacienda deep in the Andes.

Introduction

“Life is good,” we thought. We are among the luckiest people in the world. We feel a communion with our God. Our children are fully grown, healthy, well educated, independent and leading balanced lives of purpose. We have one another, the excitement of our own goals and challenges. Plus we can live, financially independent, anywhere in the world we choose!

The goal of this report is to share this great fortune with you. Granted this providence has come in part through hard work, dedication, frugality, persistence, sacrifice, perseverance and more. These are qualities business people must develop if they want success. Then we also need great luck. This has come to Merri and me through the incredible backdrop of our lives. We, as baby boomers, were given a set of conditions that no other people in recorded history have been able to even dare dream, much less enjoy.

As boomers we entered the world of business just as technology shrank the globe. T.V., telephone and low cost travel in jet airplanes provided a horizon-expanding global backdrop to our economic activities. Not even royalty of past times had or could imagine this. Technology enhanced our lives with the fax, the computer and internet. These new inventions unhinged boundaries and expanded perspectives so we could enjoy lifestyles that had been unthinkable just a few short years before.

Technology means that Merri and I can be at our rain forest Ecuadorian hacienda far from any civilization and still run a business with tens of thousands of readers all over the world.

The first of these innovations made it possible for me to begin a global business in 1968 at the age of 21. I started selling investments for a brand new mutual fund company. They had given me a pretty large territory, Asia! I had worked from Hong Kong and traveled continually touching down briefly at the firm’s U.S. headquarters in San Francisco every couple of months. My bi-monthly commute went like this; San Francisco to Tokyo to Seoul, South Korea then Taiwan before I stopped and stayed a while at our regional headquarters in Hong Kong. Then I headed south to Saigon, Bangkok, Kuala Lumpur, Singapore, Djakarta, Manila and back to the U.S. I was a young man who had never been out of Oregon so these journeys changed my perspective incredibly!

All this travel (and a great income) were possible because I had learned to sell investments wherever I was in the world.

This business gave me a lot of experience at financing micro business start ups in creative ways.

I have quite a bit of experience in micro business lending.  As mentioned my job when I was just 21 years old was selling US mutual funds in Hong Kong abroad… starting in 1968.

The 1960s had seen great economic expansion in the US until the stock market collapse of 1968 and the recession in the early 1970s. The chart below from tradingeconomics.com clearly shows this.

us-growth-rate

This killed the US mutual fund industry in the US and my business along with it. After six years of this Asian experience, the company I worked for went broke and I was stranded in Hong Kong. The knowledge I had gained allowed me to sell my way out of the mess before immigrating to London, where I lived and worked in England and Europe for over a decade.

I had to start a new micro business. I shifted to selling US and Fiji real estate plus raising money for small US businesses.  Plus I found micro business funding for my own business.

London was the financial center of the world at that time. I had to live there to stay in tune with global investment markets. Then the fax became a household word. Freedoms expanded. So I was able to add a home in the subtropics of Florida. Then as communications improved, we were able to stop commuting between London and Florida and shift our living so we could enjoy Florida ’s warmth in the winter and North Carolina’s cool mountains in the summer.

The computer and internet made this possible. Finally by adding cell phones, DSL, satellite communication and the Internet; Merri can now run our global business with over 20,000 readers spread around the globe from our isolated farm in the Blue Ridge or our inn high in the Andes of Ecuador or our Florida home.

We have the ultimate freedom of earning income wherever we go and have earned millions by simply traveling, discovering and sharing what we learn in our travels.

Here is the courtyard of our Ecuador hotel (where we conducted many seminars).

gary-scott-photo

This report shares ways I gained micro business funding and helped others do the same. This can help you enjoy the freedom of this lifestyle gain income, security and independence.

Knowing how to fund a micro business can help you have a business anywhere in the world. This means that anywhere you go, whenever you travel, wherever you live, you have a business. Trips turn into tax deductible, profit generating events rather than after-tax dollar expenses. You gain mobility, freedom, unbounded horizons and the ability to pick up and go wherever you desire without worrying about how you will financially survive.

Let me give you an example of a micro business selling tax liens.

Case Study Tax Liens

Here is a case study of one micro business idea which is to sell a US tax lien service globally.

Tax lien certificates are issued by county governments in the United States. Counties generate most of their revenues from property tax. This is a growing business as more and more property owners fail to pay their property taxes.

If property owners don’t pay their tax, this can create a revenue short fall. The way many counties deal with this problem is to let outside investors pay delinquent taxes on behalf of those who do not pay. When outside investors pay the tax, they receive a tax lien certificate that guarantees that the investor will be repaid with substantial interest…when the property owners finally pay their tax. The full value of the property guarantees the return to the investor. Since property taxes normally only range from 1% to 2% of a property’s assessed value, the real estate can be worth 50 to 100 times the investment made.

There are three things that make these certificates attractive investments.

First, tax lien certificates are quite safe. The guarantee normally supersedes most other types of liens, including mortgages, IRS liens, etc. Simply said, the property cannot be sold until that tax and penalty is paid back to the investor. In addition if the property owner does not pay the tax within a specified period of time (this alters from state to state), then the investor who holds the certificate has the right to become owner of the land. The other safety factor is that the investor pays his money to the government and gets paid back by the county government. The county takes care of the entire administration of the collection and payment to the investor. You can safely say that the investors pay their money to the government and get paid back by the government.

In some rare instances, if a property owner does not eventually pay the tax, investors are given ownership of the land. This is not a bonus that comes along everyday, but when they do occur they can create substantial profits. There are instances of investors obtaining houses worth $40,000-$60,000, even $70,000 for investments as little as $6,000.

Tax Liens are not as safe as it used to be with falling US property prices… but usually the tax owned is small percentage of the value of the property.

Second, tax liens offer high returns. The interest charged delinquent tax payers varies from state to state, but some states charge as much as 25% interest, which in some instances can be earned in a day!  This is really important in times when returns on most fixed investments are really low.

Third, tax liens are complicated, require work, effort and take time. Laws, rates and systems vary from county to county. Investors should look at every property before investing in the lien. Plus someone normally has to attend county sponsored auctions to invest in these liens. To invest wisely in tax liens, an investor needs to know the property market in the area where he or she invests. It is important to know the rules, regulations and procedures in that county and finally it is important to stay in tune with the market, inspect properties, attend auctions and often take over and sell properties that might revert back.

All this effort means that most investors do not invest in tax liens. They choose easier, less attractive, riskier investments such as stocks and bonds. This complication means that your competition will be limited.

This also means that tax liens are almost perfect investments to market to overseas investors. First and foremost investors from a distance want security (which is why they are investing in the U.S. in the first place.) They pay their money to the government, have the security of the real estate and they get their money back from the government.

Second, overseas investors want extra profit and you can easily show them how even after paying your service fee, they can make much higher returns with greater safety than in stocks and bonds.

Finally, the whole process is so complicated that they cannot do it without you! The cost of their travel to the U.S., regular inspections and management of the process would cost much more than your fee.

Circle of 100

My report “How to Fund a Micro Business” walks you through all the legal asset protection and tax benefits that an overseas micro business brings.

The most effective structure from a tax deferral point of view is a non U.S. structure (corporation, LLC, limited partnership or trust) that operates entirely outside the U.S. and that is owned 50% or more by a non U.S. person.

If I were building this structure today, I would look for non U.S. citizens or residents to work as sales people and help me expand sales. They would own half the company. I would look to them for capital and business growth.

Some business owners do not want to have someone else own half their business. If this is the case, I recommend that you donate half the business to some U.S. charities. Pay them some dividends as your profit and treat them well. The more charities you select (the Circle of 100 gives one half percent of the business to 100 charities) the less likelihood that any will ever interfere with your control of the business. This gives you practical (though not complete) control.

Security Regulations

The second point on security laws is important because many countries have a myriad of regulations relating to securities. You must be careful that you do not violate security or investment laws in the countries where you do business.

To overcome this, if I were doing this business today, I would not seek investors in the countries where I go. I would sell information. I would instead offer reports, education, real estate inspection and auction services. I would sell correspondence courses and seminars on tax liens. I would never offer investing advice, consultation or services.

Multi Product Marketing

Three steps are needed to get investors to use your services. #1: you need to reach the customer. #2: you need to create confidence in the product. #3: Finally you need to create confidence in your services.

This is good because these three needs create the three business opportunities above of #1: offering tax lien courses or reports, #2: selling tax lien seminars and #3: providing a tax lien service. This generates three steams of income, making it easier to reach customers by mail or over the internet (through correspondence courses), providing an early education before you meet physically. Seminars and reports also add authority to you and your services.

My business would first help investors learn about tax liens. Then it would help them learn about liens being auctioned. Then it would inspect property for the investor and represent them at auctions. These services are not likely to violate security regulations anywhere (though you should always check).

Then I would offer the correspondence course and seminar customer base my property inspection and auction services. I would act as the investor’s agent to bid at auctions on behalf of the investor. Investors would never give investments to me or my firm. They would always pay their investments direct to the U.S. county governments. They would also always be repaid directly from the U.S. county governments.

My fees for the property and auction services would be a percentage of profits that customers gained from these real estate and auction services. I would organize assignments on the liens that investors purchased through me so when the investor was paid by the county, I would automatically be paid my share of the profit from the county as well.

Though you should always check laws in each country where you do business, it will be rare that selling courses and seminars and acting as a person’s property and auction agent (without receiving the investment yourself) will run afoul of regulations. Because form is of vital importance in regulations, if you plan to do substantial business in any one country, check with an attorney and make sure that your documentation is correct for that country.

If one desires even additional layers of legal protection from legislation, an added step is to conduct seminars and talks outside the country where customers live. For example, if you were going to offer services to German investors, conduct all your courses in Switzerland and do not allow Swiss investors to participate.

This method of business not only helps reduce risks of regulatory problems, but also makes good merchandising sense. By focusing first on selling reports about tax liens you establish a base of customers who are likely to be interested in coming to tax lien seminars. The seminar delegates become the logical customers of the property inspection auction service.

How Would One Start?

Tax liens are complicated. Every state, every county has a different set of rules. This is good as well. If the business were really easy, everyone would do it!

There are two questions that first need to be answered. #1: Where in the US will you develop your tax lien expertise.

#2: Where will you find your clients? Choice number two can help you zero in on the answer to questions #1.

If you want to develop business in Asia then a service on the US . If Latin America is your choice then perhaps Texas. European clients are probably going to be most interested in property on the U.S. East coast.

There are a number of factors to consider to decide where you want to find your clients. First, decide whether your reason for being international is more location based or profit oriented. If, for example, a main reason you want an international business is that you like to spend lots of time in Paris, France is an obvious place to market your products and services.

On the other hand, if you’ll travel wherever business is good, broad based marketing in global or regional publications may make more sense. Then focus on the areas from where you get the best response.

End of Tax Lien Case Study

That’s the idea.  You can apply the principles of this study to any business idea and then use the business evolutionary cycle.

Business Evolutionary Cycle.

Step #1:  Get a micro business idea that leads to enthusiasm.

Step #2: Let the enthusiasm lead to an education.

Step #3: Let the education lead to action.

Step #4: The action will create profits or loss and experience.

Step #5: The experience leads to new micro business ideas.

This is the way successful businesses grow… starting small and evolving philosophically, financially and structurally as they expand. Each time the cycle repeats you are more experienced and have a better capability at making better and larger decisions.

Do this with non US partners and keep your business outsode the US and you can gain some tax benefits as well.

I hope you have enjoyed this excerpt from my report “How to Fund a Micro Business”.  You can order the entire report below.

Order now Funding a Micro Business – How to Raise Money Abroad $9.99

Gary

See seven case studies that can help you have your own micro business below.

Read the entire Washington Post article  Obama signs $30B small business lending bill

Funding a Micro Business


Funding a Micro Business

There are five ways to profit in growing inflation: real estate… multi currency investments…. commodities… equities and by having your own micro business.

Having your own micro business requires work and overcoming a number of obstacles.

One hurdle many micro businesses face is funding.

Our local bank has billboards everywhere that say…

Bank-loans

“We Are Making Loans.”

Bank-loans

I hope they are. Merri and I don’t borrow money (except to leverage our multi currency portfolios from time to time).

But everywhere I hear my neighbors say.   “Banks are making loans?  yeah… sure…. if you do not really need a loan.   Otherwise…. Fat Chance!”

I am very happy that Merri and I do not use debt and have not for decades.

Yet I know that many readers would like a way of funding to start or grow their micro business.  I know many ways to get small business loans beyond banks. More on this in a moment.

First, let’s look at why banks are not expanding credit when they are flush with cash.

Recently there has been a lot of input about how banks are making so much profit but not lending. What’s up?

I know this phenomenon well.   I wrote and talked about the same thing in the 1980s when the US was coming off a recession and the Fed was increasing liquidity and lowering interest rates then as they have been these last several years.

Back then one of my readers… a real estate developer… went bankrupt when his lender jerked his line of credit. One investor or another claimed fraud and the poor developer ended up in criminal court. His defense lawyer called me as an expert witness.

I remember that Federal prosecutor.  He did not like me at all… especially because I refused the defense attorney’s offer of pay. When he asked why… he suggested that the defense had put me up to this.

“Not true,” I replied. “I actually like to see justice”.  The big banks were making all the bucks and the small developer was going down the drain. Then the sytem was blaming some little guy while the fat cats laughed in their country clubs.

The reason banks are not making loans is simple.  The Fed is supplying the banks with reserves at a near-zero rate.  Not much results in bank lending to business, because the banks can buy Treasury bonds that pay 3% to 4%.  They borrow from the government at zero and invest the loan with the government for 3%. Wow anyone could make money with that sort of deal!

I did not like it then when bankers were using my tax dollars and my bank deposits to enrich themselves while they let the overall economic system down. I do not like it now either.

The formula is simple. The Fed lends money at almost nothing. The banks borrow it. The bank invests it right back at no risk.

Why pass it on when the banks can use the loans instead to pump up their profits…  stock market and make fortunes?

A January 21, 2011 Time Magazine article entitled Big Bad Bankers outlines the problem. Here is an excerpt: Banks are back.  JPMorgan Chase recently announced that it earned $4.8 billion in the fourth quarter of 2010, nearly 50% over the previous year.

Goldman Sachs employees won’t go hungry. The bank’s fourth-quarter earnings may have been hurt by weak trading results, but it is still hugely profitable.

There is nothing inherently wrong with large banks making large profits. Yet the news from Wall Street is attracting the ire of Main Street, which continues to struggle.

While everyone else struggles, banks have been in a privileged position, benefiting from interest rates on short-term interbank loans (the mother’s milk of all banking transactions) of nearly zero and long-term rates above 3% plus fees.  Because a functioning banking system is as essential to modern society as power plants and water, banks have been given every advantage by government. (See the top 10 bankruptcies.)

They have not, however, responded in kind. They have not aggressively lent money. Instead, they have hoarded capital. They have done so to pay for legal fees and for defaults on mortgages and credit cards. Though loans have increased in recent months, it’s after an unprecedented period of contraction. Credit remains tight.

The goal is not to return to the obscenely loose credit standards that fueled the housing bubble, but large banks are now tilting to the other extreme. Part of the problem is that the regulations designed to prevent a repeat of the crisis of 2008 — including demands for much higher capital reserves, instituted as part of the Basel accords last summer — have incentivized banks to reduce risk, increase their reserves and tighten lending standards.  Instead of taking the government bailouts and then bolstering a weak economy by lending to creditworthy individuals and businesses, banks bolstered their own weak balance sheets.

The bottom line is that the financial reforms of the past year need to be revisited. One solution would be to break up large banks into discrete parts, creating a new Wall Street of boutique banks without as many conflicts of interest. If we aren’t prepared to do that (and there’s a good chance we aren’t, given the likely cuts in pay and staff that would impede regulators and other public-sector workers), we need to create incentives and mandates to lend. Period. It would have been easy to make those part of the bailouts of 2008 and 2009; now it will require carrots like allowing banks more latitude in accounting for bad loans. That will be seen as extending another hand to already flush banks. Unfortunately, it may be a price we need to pay.

A Financial Times web article entitled: “The (still weak) US lending recovery” suggests that bank loan tightening may be easing… but not much.

Here is an excerpt from that FT article on micro business bank loans: A graph from Moody’s Analytics, plotting the federal funds rate against the growth in commercial and industrial loans:

bank-loans

Decent news for the broader economy — though as with employment, new home sales, the small business outlook and a host of other economic indicators that have improved recently, this needs a bit of context.

The Economist Intelligence Unit points out that if you look at the same lending figure year-on-year rather than in six month increments, in December it declined for a twentieth consecutive month. Obviously that doesn’t mean the recent improvement is illusory — the recovery stalled dramatically through the middle of 2010 — only that it is modest, especially given the enormous slack that remains in the economy.

What does one do if they need micro business funding?

Wait for bank lending to grow.  That could take a while… could cause you to miss some good opportunity and even when bank lending eases… there is little chance of small business loans being the first to shake loose.

My experience has been that micro business owners and micro business start ups have to be creative at funding micro startups.

I have quite a bit of experience in micro business lending.  My second job when I was just 21 years old was selling US mutual funds in Hong Kong abroad starting in 1968.

The 1960s had seen great economic expansion in the US until the stock market collapse of 1968 and the recession in the early 1970s. The chart below from tradingeconomics.com clearly shows this.

us-growth-rate

This killed the US mutual fund industry in the US and my business along with it. I had to start a new micro business.  I shifted to selling US and Fiji real estate plus raising money for small US businesses.  Plus I found micro business funding for my own business.

I have related some of my experiences on how to fund a micro business in a new report entitled How to Fund a Micro Business. You can order it below.

Circle of 100. 

Order here. Funding a Micro Business – How to Raise Money Abroad $9.99

Gary

Our February Mt. Dora International Business Made EZ course includes a session on how to funding micro businesses.

Read the Times article “Big Bad Bankers

Read the FT article The (still weak) US Lending Recovery

Protected: Funding a Micro Business – How to Raise Money


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