Give people fish, and you feed them once. Teach them to fish, and you feed them forever.

I’m paraphrasing an old saying. Here’s my updated version:

Give one person a business loan and you help start a business. Teach starting a business, and you help a whole community.

That comes up because I’m doing a training tomorrow for the Small Business Administration’s (SBA) Women’s Business Centers (WBC). It’s about teaching entrepreneurship.

In these very politicized, polarized, and economically challenged times, it’s a damn shame we don’t all support spending some public money on the teaching and advocacy of entrepreneurship. I’ve seen WBC, SBA, SBDC, and SCORE programs close up. On the front lines, it’s not politicians or bureaucracy, it’s real people with real experience teaching other people how to start, run, and grow their businesses. It’s workshops, counseling, classes, and demystifying the process, setting the steps. And that’s a good thing.

Entrepreneurship is good for the entrepreneurs, the people they hire, and the communities they change. And entrepreneurship is contagious.

(Image: istockphoto.com)

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Small businesses are the backbone of our economy, creating jobs and adding new and innovative products to the market. The Small Business Administration exists to support both emerging and growing small businesses by offering services, tools, and resources at affordable rates. The SBA also offers several loan programs to help those businesses meet demand, acquire needed assets and personnel, and preserve working capital in an undulating market.  Those programs supplement traditional commercial loans, giving small businesses more options when it comes time to seek outside financial help.

7(a) Loan Program

This program is geared toward businesses that have special requirements either because of where they operate or because of new requirements established by laws such as NAFTA. Businesses that operate in rural and underserved areas, exporters, companies affected by new government regulations, and both active and retired military personnel are all included as “special requirement” businesses under this program. Startups can also seek funding through this program.

Micro Loan Program

Under the micro loan program, the SBA provides small, short-term loans to small businesses and certain nonprofits. The SBA sets very specific guidelines for how the micro loans can be used. Namely, the loans cannot be used for buying real estate or for paying off existing debt. Instead the loans can be used to purchase inventory, furniture, and equipment as well as to use as working capital.  The maximum loan amount allowed under this program is $50,000; however, the average loan amount is typically around the $13,000 range, although the loan amounts can be higher, sometimes as much as $250,000, depending on the micro-loan provider’s parameters.

CDC/504 Loan Program

The 504 program is the vehicle through which the SBA spurs much of its economic development and public policy goals. This program provides long-term, fixed-rate loans for the acquisition of major assets such as commercial real estate, equipment, improvements to real estate, and modernization of facilities for energy efficiency. The maximum loan amount allowed depends on the purpose of the loan and which public policy goal it is satisfying (e.g. rural development, energy efficiency, minorities in business, etc.).

All three programs use third party intermediaries to facilitate funds. Both the 7(a) and 504 programs also require a traditional lender and a consultant to assist with packaging and processing the loan. Check with your local SBA office to learn more and to identify trusted consultants in your area.

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The SBA is one of the most vibrant sources of funds and tools for small business owners. Their lending programs, especially the 504 program, make it possible for all types of small businesses to secure needed funds to continue to grow their business. It takes many people to successfully secure and close an SBA loan. Knowing who they are and how they work together empowers both lenders and borrowers by helping them identify key partners and opportunities.

Player One: The Lender

The first player on the SBA field is the lender. The lender is the one to whom you typically go to when you want a loan. Banks, credit unions, and micro-lenders all fall under this umbrella. The lender covers 50% of the project cost. By committing to only 50% of the total amount, lenders can participate in larger projects they might not otherwise be able to and assume lower risks with better loan-to-value ratios. They are also allowed to facilitate the loan at their own rates and requirements, making it an attractive situation for them (not just for the borrower).

Player Two: Certified Development Corporation (CDC)

Certified Development Corporation, or CDC for short. The CDC is a private, non-profit whose purpose is to promote economic development within its community. The CDC gives out loans for 40% of the project cost (offsetting some of the lender’s and borrower’s funding obligation). They work on behalf of the SBA and operate as the direct liaison between the SBA and the other players.

Player Three: SBA Consultant

Often a third party consultant is brought on to facilitate the deal. Usually the consultant is secured by the borrower and acts on behalf of the borrower’s interests. An SBA Consultant is someone with ties to one or more CDCs and multiple lenders. They bring to the table knowledge of the intricate and ever-evolving process and requirements for qualifying for an SBA loan, a network of lenders and CDCs to help back the loan, and skills in project management and business finance.

Player Four: The Borrower

Of course in any loan transaction there must be a borrower. The borrower is the small business owner(s) who are seeking the funds, whether it’s for purchasing real estate, financing growth, or acquiring other fixed assets.

Of course there will be additional players depending on the transaction. If you’re acquiring real estate then a real estate agent or broker, Title Company, inspector, contractor, and other parties will be involved. For equipment and software a vendor may be involved. Be sure to educate yourself on every player, what their roles and functions are, so you can ensure that they fulfill their duties and execute a smooth transaction.

I had something else planned for this blog today, but the White House Startup America Partnership makes anything else trivial.

OK, yes, it’s government, federal government no less, and it’s political by definition. I was raised to question authority and mistrust the official story. But even so, here’s why I’m optimistic about this one:

1. They have real entrepreneurs involved. AOL co-founder Steve Case is the chairman. Innovative venture capitalist Brad Feld was also featured in the opening ceremony.
2. They’re working with real small business information. Kauffman Foundation CEO Carl Schramm is a founding board member. The Small Business Administration (SBA) administrator Karen Mills spoke at the opening. Kauffman and the SBA are definitive information sources on small business in this country.
3. Real money is involved: Intel has committed $200 million of “new investment in U.S. companies.” IBM will invest $150 million this year “to fund programs that promote entrepreneurs and new business opportunities in the United States.” HP is committing $4 million for a learning initiative for entrepreneurs, and Facebook is launching Startup Days, a series of 12 to 15 events across the country. (Although to be fair, whether this is new money, that would have been invested regardless, is hard to tell.) The website has a collage of some very impressive logos; they include more than a dozen companies and organizations that have committed to help.

So maybe this time they’ll be able to overcome partisan politics and do something that matters. More capital, better information, more learning, and more support for entrepreneurship. After all, entrepreneurship is contagious, so spreading the “infection” could help. I hope so.

Congratulations to the Small Business Administration (SBA) for a great new redesign of its flagship SBA.gov website. The recent release is a huge improvement. This has always been the granddaddy source of official information on small business in the United States. For years its had thousands upon thousands of pages of information about starting a business, running a business, finding financing, government programs, small business research. It’s always been the first place for real businesses to look for real information.

But it has never been this easy to navigate or this well organized. There was just so much information, it could be hard to find and sift through it all.

I’ve spent some time with it since it came out just a couple of weeks ago, sort of in the holiday lull, and I like it a lot. The new version is a lot easier to use, meaning categories are easier to understand and searching is more logical.

The new site highlights a new SBA Direct tool designed to help users navigate quickly to information on specific topics like financing, marketing, and business planning. It also leads you to local resources quickly. The idea is to make it “hyper local.”

The team in charge looked deeply at analytics showing the actual usage patterns of the previous site, meaning what topics business owners looked for depending on their industry and stage of growth, and so forth. They also used advances made at the related business.gov information site, which is much more social with blogging and forums. As a frequent blogger on that site, I’ve seen the progress as it has evolved.

I’ve been a fan of the SBA for 20-some years now, during both Democratic and Republican presidential administrations, during booms and recessions, without ever having taken out an SBA loan for my own business. What I get from the SBA is reliable information; programs like SBA local offices, Small Business Development Centers, Womens’ Business Centers, and SCORE, and small business leadership.

For small business information, analysis, statistics, not to mention tutorials and step-by-step guidance, www.sba.gov is the first place to go.

The Small Business Administration has announced an all new “Small Loan Advantage and Community Advantage Loan Initiatives”  program.

From the SBA.gov website: “SBA is committed to expanding access to capital for small businesses and entrepreneurs in under-served communities so that we can drive economic growth and job creation.”

The new initiatives promise a smaller application process and faster turn around – from a few minutes to a few days, for SBA 7(a) loans up to $250,000.

Read all the details on www.sba.gov/advantage

The new programs should be live on or around March 15, 2011.

‘Chelle Parmele

Banks and bankers have a relatively bad reputation, largely undeserved. Being more of a natural hermit than a networker, I can’t say I ever looked forward to dealing with banks, even though I had to. But over time, through the years of running the business, I’ve met a lot of smart, likable banking people. And if you’re going to run and especially grow that business of yours, without a lot of other people’s money, then you should get used to dealing with bankers.

So, thinking about banks and banking for the up-and-running entrepreneur, here are my five favorite tips on banks, bankers and banking for bootstrappers.

1.  You want a relationship with a bank

If you’re going to be in business, you’re going to need a relationship with a bank. I know you’re busy and focused on other things, but when it’s time to get a credit line, a bank draft, a letter of credit or even to notarize a stupid letter, you’re going to wish you had a banker to call. And you’ll probably want a local bank to process your credit card sales transactions.

2.  Banks don’t finance business plans, but they help the SBA do it.

In the U.S. for sure, and in most other Western countries, banking laws forbid a bank from loaning you money on your business plan no matter how good it looks. Those laws were written to protect the depositors whose money the bank is using. So the bank can only loan you money for your startup if you’re ready to put up assets (usually your own house) that you’ll lose if your business fails. And it can loan against the assets (called collateral), not your plan.

But there is some truth to the idea that some banks give loans to startups in the U.S., because the SBA works through local banks. The SBA will guarantee up to 70 percent of a business loan, so the banks can take the risk without violating the law. What you need for that is a local bank that works with the SBA. And there are a whole lot of them.

3. There are good reasons and bad reasons to borrow money.

The best reason to borrow money is to support your company while waiting for good customers to pay up. You’ve already made the sale, but you sold to a company and it’s going to pay you in a few months. Especially when it involves a good client who you’re sure will pay, this is relatively safe. Borrowing to build stuff that you already have orders for is good, too. Borrowing to fill cash-flow gaps while waiting to get real money is still risky, but sometimes necessary.

Don’t borrow money on future hopes. That sales scheme you’re sure will bring in $50K? Don’t borrow $20K to prove it. That’s just prospecting, or gambling, with the bank’s money, and it’s a bad bet. You’re borrowing rope to hang yourself with.

4. Banks are not all the same.

In my experience the larger banks are pretty much the same thing, but I’ve had good experiences with smaller local banks, especially smaller local banks emphasizing small business and service. The federal government protects us fairly well against those banking disasters you fear, so it’s not like you’re significantly safer with a larger bank. The key is to have somebody there you can call to ask questions and trust the answers. In some cases, you can get that with the right branch or person at a larger bank.

As you start up, choose your bank well. Talk to three or four. Get advice from people in business you know, and your local Small Business Development Center. Interview the bank. Find out who you’d be talking to.

5.  Be prepared to change banks.

No matter how much you like your bank, be prepared to switch later on. Banks change strategies and policies. Sometimes people make the difference, but sometimes they can’t make any difference on something important, and they’ll switch banks. My company has switched banks to stay with the same loan officer at a different bank. Change is constant. Keep up with it.

Bonus point:

Some smart, interesting and fun people end up in banks. They’re not like the stereotype of bankers. I think they get underestimated a lot because they do have to follow the rules, which is not so bad, since they’re working with other people’s money.

I’m sorry I’m late on recommending John Jantsch’s “These Jobs Ain’t Coming Back” on his Duct Tape Marketing blog. Better late (he posted July 2) than never, though, because it’s important. John doesn’t talk about larger political issues very often, because he’s usually immersed in tools, techniques and practical ways to help real people in real small businesses get their marketing done. So when he does, it’s probably worth reading.

The key to this post is a bit of a reality check, perhaps mixed with a dose of cold water:

Many of 8 million jobs lost during the recession were falsely created by subprime lending and total lack of regard for reality. Many of the programs currently proposed mirror the policies of the past in attempts to spend our way to creating thousands of jobs in sectors that probably can’t sustain long-term job creation.

He follows with this:

Instead of creating thousands of jobs one time, create one job thousands of times.

Which means, he adds: “invest in small business.”

And, as he explains, that means local development agencies should be given the resources to promote what John and others call economic gardening: nurturing startups and small business. I’m glad he’s focusing on what I consider the front lines of small business, the local development agencies. Not that these aren’t also federally funded to some extent. The SBA funds valuable resources such as Small Business Development Centers, SCORE and Women’s Business Centers, etc.), but the focus isn’t large-scale political fighting between the innies (Democrats) and the outies (Republicans). It’s just getting things done. Nurturing small business: The government can’t really do it because it’s about the individuals, the entrepreneurs and existing small businesses–but the government can help.

I posted about Good Clean Love last month; it’s a local (Eugene, Ore.) company that won our angel investment contest. And I’ve been meaning to post about the national SBDC program ever since. Good Clean Love is one of several good local companies that have been through our SBDC’s business management program.

Do you know where your local SBDC is? If you’re serious about starting a business, growing a business that already exists or managing your business better, and you’re in the United States, then you ought to know where the nearest SBDC is. That stands for Small Business Development Center. There are about 1,000 of them in the United States. And they offer one-on-one counseling, workshops and classes–a lot of good front-lines resources to help real people manage real businesses.

For a class on bookkeeping, marketing, business planning, getting financed, call your nearest SBDC. You’ll find it offers excellent counseling and training at amazingly low prices. Our local SBDC, for example, has 29 workshops on its website, most of them two-or-three-hour workshops in essentials such as basic bookkeeping, QuickBooks, Quicken, Getting an SBA Loan, etc., for $49-$99. That’s typical. It also has a two-year once-a-month weeknight comprehensive program.

And about 100 miles north of us, near Portland, Clackamas SBDC director Tim Shea offers his Small Business Greenhouse class, three hours on Tuesday nights from September to February, including books and software.  I’ve been a guest speaker at that one several times; it gets great reviews. 

For a lot of ask-the-expert e-mails I receive, I send people straight to their local SBDC. That’s for questions about starting up, establishing ownership, finding financing, dealing with permits and legal requirements, even online marketing and search engine optimization. Because the SBDCs are funded in part by federal, state and local educational institutions, they tend to be a great deal in consulting and training.

Of course, as with any educational institution, a lot will depend on the actual class, the specific teacher or counselor and the situation of the state SBDC. Some states have better SBDCs than others. Some are linked to state colleges and universities, and some to community colleges. Some have more flexibility than others. Still, although you want to check things out, you should assume the SBDC near you is a great resource until proved otherwise.

Disclosure: I’ve been working with SBDCs since 1995, as part of what I do at Palo Alto Software. I do at least one workshop for the annual SBDC conference every year, and we give a lot of software to SBDC offices to help them help the public. I like these people. I have friends in the Oregon offices, and friends from other states I see every year at the annual conference.

And an additional comment: The SBA entrepreneurship development efforts don’t get enough credit. Whether you like the SBA guaranteed loan program or not (which seems to me to depend mostly on your politics), SBA contribution to entrepreneurship at the frontlines level is significant. That’s about SBDCs, SCORE, Microenterprise Centers, Women Business Centers and SBA information offices, comprehensive statistics and research, and more.

Are you in the U.S.? Are you aware of SCORE? The name stands for Service Corps of Retired Executives, a volunteer organization funded by the SBA that offers free counseling and related help to entrepreneurs and small businesses in the United States.

I’ve been one of those SCORE volunteers for about three years now. I notice blog and Twitter SCORE coverage here and there, so I decided this morning that it’s about time I share my “SCORE insider” view of how to use SCORE:

1. Great for starting, fixing or growing your business

SCORE counseling, when done right, can be the exception to all those clichés about free advice: Supposedly you get what you pay for. But in this case, you get experienced people at the tail end of their careers offering to help you with your business for free. Consider the chance to talk to an accountant, banker, or sales or marketing manager, free, about your business. Do you want to validate an idea or ask somebody questions you can’t afford to ask a practicing accountant or consultant, or that you’re afraid to ask your banker? Contact your local SCORE chapter. You can get local contact information at this SCORE location finder page. SCORE includes more than 12,000 volunteer counselors in more than 300 locations.

You don’t necessarily have to get your advice in person. SCORE volunteers offer answers to e-mail questions on the web. Click this link and you’ll see.

And you don’t have to get your advice one-on-one either. A lot of SCORE chapters offer workshops to help. My chapter in Eugene, Ore., does a quarterly workshop that puts a collection of experts (I do the business plan section, and colleagues do sections on basic legal, basic administration, hiring and firing, and marketing). We charge $49 for that, which is barely more than the SCORE costs. We get great reviews. I understand that a lot of the chapters have similar programs. And a lot of chapters have more information on their chapter websites. You can find out by using the SCORE location finder.

SCORE’s main offering is an older person with valuable business experience who can talk to you about your business, or free. These folks can really help you start a business, fix your business or grow your business– especially if you’re new, alone or struggling (you know who you are).

2. Look for advice, not actions, not results

SCORE counselors give advice. They listen and make suggestions. If they can recommend next steps to take, or additional resources, they do. They aren’t free labor, and while they often perform some of the same initial review and assessment services that professional business services (accountants, consultants, etc.) do, they’re going to give you what they can, for free. They’re not going to stick with you through think and thin. They’re best for opinions and suggestions, not actions or results.

By the way, please notice I said “they” and not “we” in this context. While I’ve been a SCORE member for three years, I’ve never done the one-on-one counseling. In my case, unlike the normal SCORE member, I’m not retired, so I don’t have time. I do the business planning section of the workshop every time, and I try to attend e-mails, and occasionally (no promises), I answer e-mails.

3. Shop around. Look for a good match.

One of the best things you want from anybody giving advice is knowing what you don’t know. With SCORE counselors, as with any other collection of successful businesspeople, backgrounds and experience vary. Don’t assume that every SCORE counselor knows everything related to your question, or that the counselor necessarily know what he or she doesn’t know. That “knowing everything” quality isn’t SCORE specific, by the way; it happens with lots of people. You just need to keep it in mind.

Right up front, as you get involved with SCORE counseling, help them help you by defining your needs well and looking for somebody whose experience matches. Ask direct questions: What experience do you have in this area, how does your expertise relate, and is there somebody else in the chapter whose experience and background are a better match?

Here’s an example: For years, long before and after my direct involvement with SCORE, in my business-plan-expert mode I’ve dealt with some people who’ve received really bad business plan advice from random SCORE counselors. Without having the luxury of knowing for sure, I assume what’s happened is that somebody who’s not had much experience related to business planning or entrepreneurship has been answering questions instead of saying he or she doesn’t know. One of these days I’ll post a rant about bankers and accountants and business plans, but that’s not part of this post. And the problem goes way beyond SCORE counselors.

For another example, consider SCORE counselors in light of websites, online marketing and SEO and social media. True, a lot of older people are very involved in social media and the latest and greatest technology. And a lot aren’t. It doesn’t hurt to ask.

4. When in doubt, get a second opinion. And then a third.

The danger here is people taking one SCORE counselor’s word as business gospel. If I’ve learned anything as an alleged business expert for several decades, it’s that expert opinion varies. There are people as qualified as I am in my area of expertise who advise exactly the opposite of what I do. They might be right, and I might be wrong. Think of this as a disclaimer: Results may vary at home. Contents may have shifted during flight.

Conclusion: Don’t settle for a single opinion about anything important, from SCORE or any other source. And that includes this post and my insider view of SCORE.