December 15, 2008

Miami is hosting free webinars, a seminar on the web, to inform its small business community of alternative financing options that can strengthen their balance sheets in this current tight lending market.

The vitality of the small business community is critically important to Miami's economy given the many thousands of small businesses in the city. Eight million small businesses across the country seek more than $270 billion in financing annually. With 65 to 70 percent of small businesses unable to qualify for traditional small business bank loans when an economy is healthy, today these numbers have increased due to the financial markets and economic conditions nationally.

More than 40 percent of small businesses that have been declined credit by traditional lenders have historically turned to home equity to finance their business; a resource that is increasingly difficult to tap because of the current housing market. This has created a large financing gap for both start-ups and already successful small businesses that do not meet current bank lending criteria. The impact of this financing gap is being felt on Main Streets across the country including Miami.

The city's first small business financing alternatives webinar was held in August and explained the financial lending market situation and navigated participants through options available to them other than the banks and traditional lenders that they are not qualified for. At the same time it pointed out the dangers of merchant cash advances – a predatory lending scheme on the rise across the country.

The on-line seminar was open to all members of Miami's small business community and is part of Miami Mayor Manny Diaz's and the city's ongoing ‘ACCESS Miami' initiative that provides financial education and small business support programming. The session was moderated by Miami Special Projects Administrator William Porro, who partnered with Mitch Jacobs, small business expert and founder of On Deck Capital, who provided financial education and advice.

Small business owners must understand the financing options available to them in order to improve their success rates in raising capital and reduce the time and expense incurred when seeking credit and access to capital. Participants learned about the range of financing products available to them as well as the costs and risks associated with some unregulated financing products, many of which are more prevalent given the explosion of merchant cash advance financing.

"Economic conditions across the United States have left many small businesses struggling to access the capital they need to stay afloat," said Diaz. "Predatory lending practices threaten the livelihoods of thousands of small businesses and micro enterprises, including the thousands based in Miami, and ACCESS Miami is dedicated to offering educational support to our entrepreneurs."

Merchant cash advances with annual percentage rates of 150-200 percent are threatening the viability of small and family-run businesses on Main Street America. Diaz, President of The U.S. Conference of Mayors, joined the nation's mayors in passing a resolution at the organization's 76th annual conference in Miami in June, calling for small business education on predatory and payday lending.

During this special webinar, Jacobs explained the processes involved in raising and borrowing capital and the range of available small business financing alternatives, providing advice on how to evaluate lenders and avoid predatory products. He described the various options, what each required and how they worked, including: Peer-to-peer lending, non-profit lending, how to raise venture capital, to various friends-and-family networks, and lastly, equipment leasing.

Porro and Jacobs also discussed when it is appropriate, safe and makes sense for a small business to borrow, ultimately noting that a business should borrow when it is making an investment that will generate sufficient cash flow to pay the business owner, service the loan, pay for operations and where the business will generate more cash flow than before the loan, after the loan is paid off. Jacobs also explained that it is appropriate for small businesses to borrow in order to protect cash flow that it has already developed, even if it means paying the business owner less for a period of time. The seminar also provided the basic rules-of-thumb on how much should be borrowed.

Participants were walked through the detailed steps involved in preparing a small business to submit a loan application. He explained that the key is being ready once the application has been submitted and being prepared for all the due diligence a lender will require before approval. Key points made included having important paperwork such as tax returns and payment processing statements ready, reviewing your credit report in advance to ensure its accuracy, researching potential lenders, asking the right questions, and being smart about how existing credit is used to demonstrate to lenders how creditworthy the business is.

The response and feedback from the one-hour webinar was very encouraging and ACCESS Miami plans to continue this small business finance education with a series of related webinars with On Deck Capital as part of a concerted push to provide Miami's small business community with valuable financing information. As fallout in the credit markets continues and the country faces a serious economic downtown, it remains important that the small businesses that form the backbone of Main Street USA, continue to fuel the nation's metro economies and that small businesses continue to have access to the capital they need to start up, or improve or maintain their financial viability.

For more information on ACCESS Miami's small business finance webinar series, please contact William Porro or Vivian Romero at the City of Miami's Office of Economic Development Initiatives – ACCESS Miami at ed@miamigov.com. To review the small business financing options information discussed during the seminar, please visit the ACCESS Miami website at www.accessmiamijobs.com. For information on how to host a webinar in your city, contact Howard Katzenberg at hkatzenberg@ondeckcapital.com