Small Business Health Coverage And Retirement Plans

August 23, 2016 by

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Saving for retirement as a small business owner is hard.  The extra cash is immediately invested in the business, and retirement plans are always for tomorrow.  According to  the Employee Benefit Research Institute (EBRI), many Americans are falling short when it comes to retirement. In 2015, 28% of Americans had less than $1,000 dollars saved, and a whooping 64% had less than $50,000.  While retirement plans are not always available through their employers, many workers should be happy to know that the ease to open a retirement account through other mediums is fairly easy and pain free.

To read more about this topic, follow the links below.

Some Small Businesses Restore Group Health Coverage

Backtracking reflects tighter labor market and pricier individual plans.

Some small companies that dropped group health insurance for their employees are reversing course, driven by a tightening labor market and rising costs and fewer choices for individual coverage.

Laura Cottrell, owner of a seven-person home-furnishings and home-improvement products business in St. Louis, dropped group coverage in 2014, not only because of the cost but also the complexities of picking the right plan within a short deadline. Instead, she gave her employees a raise that they could use to buy their own health plans, sparing her from choosing for them.

Now Ms. Cottrell is looking at adding health benefits to make a cabinetry business she launched this year more attractive to potential employees. If she makes the change, she says she would offer coverage to employees of both of her businesses.

“People are looking for health care,” said Ms. Cottrell, who said she was recently turned down by one job candidate because she doesn’t offer health benefits. Adding to her pain: UnitedHealth Group Inc., her personal carrier, won’t offer individual coverage in Missouri next year.

When can you quit your day job when starting a small business?

Q: When you’re starting a small business, when is the right time to quit your day job — financially speaking? If you’re starting your own business and you plan to take out a loan, should you factor in your own living expenses?

Anonymous business owner.

A: When you are starting a business, your personal finances are inseparable from the business. So you need to factor your living expenses into all your financial calculations.

An exercise I use with my students is to have them calculate their “runway.” It is a simple calculation to determine how long they have before they and the business run out of money. How long before the business has to take off. How do you calculate your runway?

 You begin by estimating the cash needs of the business. This includes investments in property, plant and equipment, lease improvements, inventory and all the other outflows of cash required to get a business off the ground. Don’t underestimate your monthly outflows.

California set to join states offering retirement plans

Workers without a workplace option can now open accounts.

More than half of American workers — roughly 55 million — don’t have access to a retirement savings plan on the job.

While those people can open an individual retirement account with an investment company, less than 1 in 3 American households has an IRAand even then most of those people have access to an employer-sponsored plan such as a 401(k).

This week California lawmakers are expected to vote on a bill that would enroll employees who are not covered by an employer-sponsored retirement plan at work into a state-run one.

Lawmakers in California, the nation’s most populous state, are not alone. Since 2012, more than half of state legislatures have considered bills that would create government-run retirement plans for private-sector workers. (See map below.)

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Business News For The Small Business Owner

August 17, 2016 by

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It is perhaps the ability of a small business owner to keep optimism at high levels to be able to do what they do every single day.  There is no other people telling you what to do, or what jobs require top priority.    As a small business owner, the credit and blame stop with them.  There is no employee that works in a small business, that is not the responsibility of the owner.  The successes and the failures mean something else for them as well.  To be a small business owner is to be different.  To have the courage to do what many others wish to do, but are afraid to take the first step.  Read more about business news by following the links below.

Abrams: Small businesses have already won the gold

Small-business owners: If you’ve been watching the Olympics, you may be getting the wrong message. I’m here to tell you that you’re winners, even if you never get the business equivalent of an Olympic gold medal.

For the past week, I’ve been mesmerized watching swimmer Katie Ledecky breaking world records with ease. Usain Bolt running faster than any man on Earth, and smiling as he does it. Those amazing, fearless gymnasts, led by Simone Biles, risking life and limb.

But one aspect of Olympic coverage that frustrates me is when someone asks a silver- or bronze-medal winner if they’re disappointed because they didn’t win the gold.

Most of these fantastic athletes react the way American swimmer Nathan Adrian did when asked whether he was upset that he “only” got a bronze. He looked surprised, then, with an endearing grin, he reminded the correspondent that hey, he was at the Olympics and he won a medal. How great is that?

The Truth About Hiring Friends in Your Small Business

Hiring friends must be done with care to be successful.

Small business ideas are often mulled over by friends long before you take the plunge and say, “I’ve made the decision. I’m starting my own business.” Friends’ reactions may range from encouragement to total negativity, but there’s a good chance at least one friend might be interested in working for you or with you.

While mixing business with friendship can work out, many people choose to keep business separate from friendships. Business relationships gone sour can ruin relationships, and some people avoid this risk by starting out with a “no hiring friends” policy. Most people fall between the two extremes of wanting to hire friends and refusing to do so. With strict boundaries, it’s possible to successfully hire friends for your business.

Hiring a Friend Will Be Fine, Right?

Maybe? After deciding to start your own business, it’s intuitive that many people want friends on board to help build the business. And since close friends tend to be vocal supporters of your ideas, and may be willing to work long hours with little or no pay it makes the choice a quick solution.

Aetna ditching 70% of its ObamaCare business

Insurance giant Aetna won’t be offering coverage under ObamaCare next year in 11 of the 15 states it now serves — an announcement that instantly became an issue in the presidential race.

Aetna’s decision led Donald Trump to charge that President Obama’s health care reform was “imploding.”

“Aetna’s decision to leave the Affordable Care Act’s public marketplaces is the latest blow to this broken law that is slowly imploding under its regulatory red tape,” said Trump campaign deputy national policy director Dan Kowalski.

“Millions of Americans have lost their health coverage under this disastrous policy, eliminating their ability to choose their doctors. Thousands of businesses have been forced to cut employment or shutter their doors in response to Obama’s signature achievement,” he added.

The company had previously warned that it expected to lose more than $300 million this year on the 900,000 patients it covers under the Affordable Care Act.

Aetna said it is pulling out of ObamaCare markets in Arizona, Florida, Georgia, Illinois, Kentucky, Missouri, North Carolina, Ohio, Pennsylvania, South Carolina and Texas.

 

 

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Don’t Let Passive-Aggressive Employees Harm Your Business

August 8, 2016 by

64735957Passive-aggressive is a word you hear people use a lot.  But, many of them use it to describe someone’s actions when it doesn’t actually apply.  They don’t seem to understand what it really means; it’s just a buzz word.

Small business owners are some of the people who don’t understand it.  Overall, they rarely recognize the behavior and don’t see how it’s negatively affecting their company.  That’s a problem, because odds are they’ve had in the past, currently have or will in the future have passive-aggressive employees.

The smart owner will learn what passive-aggressive behavior is, be able to recognize it and know how to manage it.  If it’s not managed it can and will: undermine authority, damage morale, lower productivity and quality, harm customer/vendor relationships, create a hostile work environment and increase staff turnover. 

It has turned functional operations into nonfunctional ones, without the owner knowing how it happened.  The behavior is hard to identify if you don’t know what you’re looking for.  It’s a sneaky, deliberate, sabotaging, underground way for an employee to express anger at his boss, managers, co-workers and the company, without getting caught doing it.

He wants to avoid direct, face-to face communication (passive), while still being able to act on his anger (aggressive).  He thinks his anger is justified, but won’t state his concerns or dissatisfaction directly.  Passive-aggressive people believe others “must pay” for their unhappiness, and they “get back” at them in indirect ways. 

Some of these ways include:

  • Always having excuses (“good reasons”) for not doing tasks they’ve agreed to do, have been assigned to do or are their regular job duties.
  • Regularly missing clear deadlines, with excuses for why they couldn’t meet them.
  • Withholding information, sometimes critical, from others while feigning ignorance — “All they needed to do was ask me for it.”
  • “Stirring things up,” then standing in the background to watch the fireworks.
  • Going over someone’s head or behind their back to make them appear incompetent.
  • Using innuendo and rumor to sabotage others and their work. 
  • Not taking responsibility for their actions/words, while repeatedly blaming others.
  • Giving others vague, incomplete instructions and blaming them when the job goes wrong.
  • Claiming information has been sent when it hasn’t — “The text, email, fax, phone message must have gotten lost.”
  • Appearing busy (texting, emailing, walking around) without doing any identifiable work.
  • Taking credit for others’ work.

Doing some of these things doesn’t make a person passive-aggressive, it makes them human.  Instead, look for someone who has a pattern of consistently deflecting fault by having an excuse — which includes blaming someone or something else — for doing poor or incomplete work.  He believes he’s a victim, but it’s really the business that’s a victim of his behavior.

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Small Business News For The Entrepreneur

August 3, 2016 by

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It seems that after so many months of uncertainty about the US economy, reports are becoming more encouraging for the US. A  Deutsche Bank strategist writes that in the last past two weeks the US market has surprisingly jumped into positive territory for the first time in almost two years.

With more jobs in manufacturing and services, the result should be a positive economic growth for the small business owner as well.

To read more about this and other  stories, follow the links below.

How These Entrepreneurs Are Living the Startup Life 24/7

If you occasionally get nostalgic for college – missing its around-the-clock access to homework help and social outlets — or if you’re tired of the lonely business owner’s life, you may be captivated by the idea of living with a group of entrepreneurs. But could you take the constant stream of ideas, the high energy, the 24/7 lifestyle? To some, such as Chandler Bolt, this living situation is nothing short of a profitable dream come true.

Bolt, the founder of Self-Publishing School, has lived in San Diego for the last year with four other super smart and motivated online entrepreneurs. The goal in creating the living arrangement was to create an intentional community of likeminded business people intent on improving every level of their lives – from physical to financial.

“I thought, ‘Why not put five people in a house?’” Bolt, said. “I thrive best when there’s work going on around me – knowing there’s stuff always happening.”

12 tips for creating a must-read business blog

Business owners, bloggers and online marketers discuss what small businesses can do to drive traffic to their blogs, increase their page views and keep readers coming back for more.

Too often business owners start blogging in the hope that it will drive traffic to their business, only to quickly fall into the trap of posting stale or sales-heavy content that gets no or few views. Then they become frustrated and either blog less frequently or abandon their blog, wondering why they bothered.

1. Think about and write for your target audience. “Think about the audience you are trying to attract to your blog and share content that is relevant, interesting and valuable to that specific demographic,” says Arsineh Ghazarian, cofounder & CEO, Zveil.

July Small Business Job Growth Is Positive, Paychex CEO Mucci Tells CNBC

Paychex (PAYX) CEO Martin Mucci discussed the country’s July small business job growth, which slowed from last month, on CNBC today.

NEW YORK (TheStreet) — Paychex  (PAYX) CEO Martin Mucci explained the outsourcing solutions company’s somewhat weak July survey results on small business job growth, which were released Tuesday morning, with CNBC‘s Brian Sullivan on “Squawk Box.”

Small business job growth was down by 0.12% to 100.68 in July after increasing 0.21% to 100.81 in June, according to the Paychex IHS Small Business Jobs Index.
“It was just a small drop in July after a pretty good increase in June, so we’ve been a bit choppy this year on the overall index but year to date we’re up 0.3% so I think it’s still positive. It’s cautious but it’s still positive,” Mucci said.
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Globalization and The Small Business Owner

July 7, 2016 by

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For many small businesses, sales are important if not the most critical part in the success of their business. Having sales people eager to learn, and try new venues to increase their sales success, is pivotal to the small business owner.  Sales tools, and online selling venues that the sales employee wants to try should be encouraged by the small business owner.

For more about this and other topics follow the links below.

This Financial Giant Will Challenge Square and OnDeck With Small Business Loans

The credit card giant will debut an online lending service this year.

American Express is expanding into the lending business for small businesses, according to a new report from Bloomberg.

The financial giant will debut a new lending arm, called Working Capital Terms, which will make online loans to small businesses who use American Express credit cards. Loans will range from $1,000 to $750,000, and interest will be tacked on at a rate of 0.5% for a 30-day loan to 1.5% for a 90-day loan, Bloomberg reported.

Online lending is a space that existing financial technology companies where have been attempting to grow, but investors have been skeptical. Square, the San Francisco payments company led by Twitter co-founder Jack Dorsey, has seen growth in Square Capital, its lending arm which provides cash advances to merchants using Square’s point of sale service. Squarerecently announced that it would be expanding into traditional online loans, with fees between 10% to 16% of the amount borrowed.

Strategies: Globalization is a small-business necessity

With the U.K.’s vote to leave the European Unionand a U.S. presidential candidate vowing to build a wall between the USA and America’s third-largest trading partner, globalization is a current buzzword on cable news talk shows.  But for American small businesses, it is a double-edged sword.

For decades, some small businesses have been threatened, or shut down, by foreign competitors. At the same time, many American small businesses have been created and grown as a result of global trade.

There was a moment perfectly capturing the clash between globalization and isolation when President Obama took the stage at the Global Entrepreneurship Summit (GES) on June 24 at Stanford University.

In the hall were 700 smart, creative, capable entrepreneurs, from all corners of the globe. These were the types of people — if not the individuals themselves —  building the next Apple, Amazon or Genentech. They were prime examples of the possibilities and inevitability of globalization.

Are You Building a Startup or a Small Business?

There are approximately 29 million small businesses in the United States, about 23 million of which are sole proprietorships. This doesn’t include non-profits, nor businesses with over 500 employees. Of the total 29 million, only 418,000 or so are labeled as startups. Clearly there’s a difference between startups and small businesses, but what is it?

Startups are generally described as new, tech-based businesses focused on exponential growth. They’re generally temporary, use mostly outside investment for funding, and are led by entrepreneurs who want to create something far bigger than themselves. In other words, a startup is an explosive innovation whose goal is to transcend its people.

When we think of small businesses, we tend to think of mom-and-pop shops, restaurants, local law and accounting practices, and similar businesses. We think of the Jones’s and their three generations of financial planners in the same little building they’ve been in since ’57. We think of the mechanic and his 10 guys working on cars non-stop. We think of the local coffee shop owner who just sold his business to start some other venture. Maybe we even think of the marketing expert who climbed the corporate ladder and now does consulting. These images hold true in the data as well.

 

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Are You Really Delegating?

July 7, 2016 by

64510516A lot of successful small business owners think they’re good at delegating work to others.  However, their employees, sub-contractors, partners, customers and family would disagree with this thinking.  In actuality, most owners aren’t good at delegating responsibility and tasks to others.

The average owner’s way of delegating is some combination of: writing a memo or email, yelling, begging, assuming employees “will figure it out,” threatening, bribing and making promises he won’t keep.  And it’s true — these techniques do work in the short term, but they eventually fail in the long term. 

There’s a better way of assigning responsibility to others, and it’s a method which can be learned.  However, the steps must be practiced to become skilled at them.  But, once they’re mastered they can be used in work, home and social situations. 

The first step is to define the task.  This includes identifying what materials, time, money and people are needed.  The owner sets realistic, measurable targets and decides when progress reports will be due.  The desired goal of the project should be defined.  Employees aren’t mind readers — they should clearly know what’s needed, when it ought to happen and what the expected outcome is.   

Assigning the task to the right employee is the second step.  Now that the task has been defined, matching the right person to the job is important to it being successfully completed.  The right person should have the training, knowledge and ability to do it correctly.   Anything else is a set up for the employee and the owner.

The final step is discussing the task with the assigned employee.  Let the person know why they’ve been chosen for the project; focusing on their value to the company and qualifications.  Go over the job’s requirements, budgets, timelines and goals with them.  Make sure they completely understand what the task requires and what’s expected of them. 

Most owners haven’t learned these steps and struggle with believing they need to do them.  Some say, “I should just be able to tell someone to do something and they should do it.  I shouldn’t have to do anything else.”  While others say, “If I want something done right I have to do it myself.”  Neither way of thinking is productive, especially for long term success.

No matter how intelligent or energetic an owner is his reluctance to learn how to successfully delegate will eventually take its toll.  There’s a tipping point where a too controlling or a too detached management style deters expansion.  Also, over time, these styles affect the bottom line; profitable companies lose ground.  It’s too bad, because once learned it isn’t hard to do.

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Taxes, Economy, and Productivity In the Workplace

July 1, 2016 by

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For many people considering starting their own business, the statistics are not very encouraging.  According to an article in Forbes magazine, 7 out of 10 small businesses survive at least 2 years in the United States, and although some people believe those are grim statistics and do not reflect the real reasons why many business close their doors after two years, the truth is many do close their doors and that’s what counts.  Choosing the best state and the best people to help you start your business seem to be key if you want to succeed.

The Growing Gig Economy’s Impact On Small Business

There’s a trendy term making its way through the business world: the gig economy. As a small business owner, you’ve likely heard it being thrown around at networking events or read about it in industry publications. But what does it mean, and how does it affect your business? In this article, we’ll discuss exactly what the term “gig economy” refers to and how it’s shaping today’s small businesses.

Defining the Gig Economy

There was a time when the word “gig” conjured images of a garage band booking a concert at your local bar and grill. Now, however, the word refers to any project an independent professional completes in exchange for pay.

It can be concluded, then, that the term “gig economy” references the increasing trend in today’s business world toward hiring independent contractors (think interims, consultants, freelancers) as an integral part of companies’ task forces.

State Ranks 10th Worst For Small Business Taxes

Connecticut ranked 10th worst in the country for small business taxes, according to a report issued Wednesday. It is the fourth straight year for that ranking.

The Small Business and Entrepreneurship Council (SBEC) ranked Connecticut 41st of the 50 U.S. states in its annual Small Business Tax Index. The last time the state wasn’t ranked in the bottom 10 was 2012 when it was 40th. The report is issued just ahead of the new fiscal year, which begins July 1. Connecticut did not pass any new taxes in its budget set to take effect Friday.

SBEC uses 25 measures to create a ratings system for the index. The measures include the state’s personal income tax rate, taxes applied to LLCs and other types of companies, gas and internet taxes, among other factors.

Connecticut’s index rating was 65.467, which put it between Nebraska with a 57.933 and Maine at 65.492. South Dakota ranked first at 12.114 and California was last with a rating of 84.547. In addition to Maine, Vermont was another New England state that rated below Connecticut.

7 Small-Business Owners Share Their Best Productivity Tips (Infographic)

Efficiency is a buzzword often bandied about in the office, but what does it actually mean and why is it so important?

Merriam-Webster defines it as “the ability to do something or produce something without wasting materials, time, or energy.” In other words, efficiency — rooted in the Latin verb efficere, which means “to accomplish” — is essentially making haste without waste. In the results now-focused world of business, it’s accomplishing things quickly without frittering away company time or money, both of which many entrepreneurs cannot afford to lose.

To help you mind your business — and, by extension, your bottom line — in good time, the folks at Make It Cheaper, a service that helps small and medium-sized businesses negotiate cheaper rates on insurance, broadband and electricity, have rounded up seven key efficiency lessons from a host of entrepreneurs. From delegating tasks to avoiding distractions, check them out in the short and, yes, efficient infographic below.

 

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Busy and Productive Aren’t the Same Thing

June 1, 2016 by

business (11)It’s confusing.  There’s a big difference between being busy and being productive, but many people think they’re the same thing – especially small business owners.  They often mistake a busy employee for a productive one, usually to the business’s disadvantage.  Thousands of businesses have closed because, while they may have been busy, they weren’t productive.

This isn’t just playing with words; there’s a marked distinction between the concepts, and the actions which go with them.  A difference that’s important for owners to understand.  Many don’t have a good working knowledge of the process of or requirements for genuine productivity.

Usually, because they don’t “get it” they don’t make it a priority.  They aren’t good at managing it.  They don’t track it or, worse yet, even expect it out of their employees (or themselves, but that’s another article).  Therefore, let’s look at what it is and why it matters.

Simply put – productivity is the amount of value (money) produced divided by the amount of costs (i.e. time, supplies, personal) required to do so.  It’s calculated by dividing the output created during a specific time by the total cost used to produce it.  This formula can be used to measure the yield of many things: shifts, individuals, products, machines, crews, etc.

But, how does it actually work?  Let’s look at a composite example.

Sam had a successful machine shop with a 1st and 2nd shift.  He wanted to increase his volume, but didn’t know how to get to the next level.  He believed his employees were as productive as they could be, because when he was on the shop floor they always seemed busy.   

He was skeptical when Tim, an outside professional, challenged his beliefs.  Tim was able to document, using the formula for productivity, that the 2nd shift was more productive, therefore more profitable, than the 1st shift.  He was also able to determine the reasons why. 

Even though they worked the same total hours the 2nd shift had higher output, used fewer materials, took less time to do a job and had a smaller amount of rework.  In addition, they had lower employee turnover, fewer call offs and not as much tardiness or early clock outs. 

However, neither shift had a productivity rating over 70%.  Sam admitted that both shift foremen had talked to him about making some changes to increase the efficiency of their crews, but he hadn’t listened.  He’d thought the employee’s busyness was equal to their effectiveness.

An owner should be able to recognize which work creates value.  Typically, this means thinking and behaving differently than he has in the past.  Replacing busy work with productive work can take time and diligence, but it usually results in happier employees, higher profit and increased happiness for the owner. 

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Small Business Social Media, Cybersecurity, And Social Networking

May 20, 2016 by

54642287Many people around the globe are willing to give a lot of private information about themselves if it means they will get something of value in return.  Researchers found that among these, millennial are the most willing demographic to give information about themselves.  And although the information is of value to these companies, millennials do not seem too concerned whether this information will be use ethically or not.

To read more about this and other topics follow the links below.

What Small Businesses Need to Know About the Future of Cybersecurity and Hackers

Q: What should small businesses know about for the future of cybersecurity?

A: The truest way to frame the future of cybersecurity is to expect constant change. With estimates ranging from 20 to 50 billion connected devices coming online between now and 2020, the attack surface is expanding at an exponential rate. This fact along with hyper-connectivity brought on by new technologies like 5G will amplify the appetite of bad actors as they try new techniques to attack and disrupt your business. Our industry will continue to take on these new challenges through continuous innovation and recasting how security solutions are built and deployed.

To help thwart the efforts of cybercriminals who target businesses like yours, make it a point to stay informed of what’s going on in cybersecurity and how it may impact your business. Part of staying informed would include how contemporary security solutions are addressing these cybersecurity challenges. I would suggest taking an hour or two each week to understand the cybersecurity trends that are impacting your specific industry (health, finance, manufacturing, retail, etc.) and along the lines of the size of our business.

Why Social Networking Matters For Small Business Owners

Getting the word out about your company is one of the biggest challenges for small business owners today. No matter how great your product is, it can be hard to get noticed when your marketing budget is a fraction of the size of your bigger competitors.

Fortunately, there are a few things you can do to even the score. With websites like LinkedIn, Facebook, Twitter, Instagram, Periscope, and more being developed each day, it has never been easier to get more bang for your buck and to use social networking to your advantage.

People Give Money to People

It’s an old fundraising adage that people give money to people. This is not to say that a great idea doesn’t help, but at the end of the day the thing that’s going to attract customers to your brand and keep them coming back is a personal connection.

Social networking helps you make a personal connection by allowing you to give your followers access to a behind-the-scenes look at your business. The swanky Providence-based restaurant North’s Twitter feed is a great example of this kind of approach—almost every post has an image of a new menu, fresh ingredients, or a delicious-looking new dish. Including images is a key strategy for increasing intimacy and creating more effective and shareable social media content.

3 signs your small business should forego social media, and what to do instead

Wait — you thought every business needs a social media presence? Columnist Jordan Kasteler explains why being on Facebook, Twitter or YouTube may not be the right answer for a small business.

If you’re a small business owner, the title of this article may not sit well with you. After all, there’s no shortage of online articles and blog posts insisting that it’s necessary for businesses of all sizes to maintain a social media presence.

Admittedly, having a professionally crafted social media presence does benefit many large companies worldwide. Social media, when done right, can give a brand or a public figure an effective “voice” and let their personality shine. (Even Bernie Sanders can attest to social media’s branding abilities.)

Effective social media practices also can make a company more visible, as well as build trust with its consumers.

However, all this being said, a huge problem exists for small businesses that spend time and effort on social media: The return on investment is often lacking.

Countless small businesses don’t have the ability to do social media right. Is yours one of them? Here are three signs that you need to be getting out of the social media arena:

 

 

 

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Small Business Lending – Are The Terms In Your Favor?

May 4, 2016 by

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Many small business owners try to keep cash in hand to cover payroll and any other contingencies they may have month in and month out.  If some small businesses have problems meeting payroll that month, they have to come with a solution right away.  Small business loans are a solution for them, but sometimes the terms of the loan are not worth the trouble. Small businesses are the most susceptible to scams, or poor loan rates that eventually are more harmful than not.  Before you signed on a loan that you really need, be careful what you are signing for, understand the terms, and borrow only what you need and not more.  Shop around first, and if a bank is not offering the best terms for you, there are many others that will want to work with you, and your business.

For more about this and other topics follow the links below.

SMALL BUSINESS ALTERNATIVE LENDING: Alternative roads to capital will add billions to the small business lending market.

Small businesses are the backbone of the US economy. Small businesses — businesses with less than 500 employees — represent 99% of US companies, 54% of total sales, and 55% of all jobs, according to the US Small Business Administration. And these businesses need capital in order to grow.

But small businesses are underfunded — only half of small businesses with $100,000 to $1 million of annual revenue received at least some of the financing they applied for from large banks in late 2015. This is partially because banks have retreated from this segment because issuing loans to small businesses using the traditional underwriting model is expensive. This leaves a massive amount of unfulfilled loans that we estimate reached $96.5 billion in Q4 2015.

Alternative lending companies have stepped in to capitalize on the opportunity available in helping meet more small business’ lending needs. Alternative small business lending platforms use machine learning and digital tools to extend credit to a wide array of small businesses quickly and efficiently, particularly to those that have been rejected by banks. Alternative small business lending companies provide digital platforms that connect small business borrowers to capital using nontraditional means.

Small Business Loan Approval Rates Surge

Big banks have long been accused of turning a blind eye to small businesses’ credit needs, but things are changing for the better now.

According to the Biz2Credit Small Business Lending Index, March 2016, the monthly analysis of more than 1,000 small business loan applications on Biz2Credit.com, loan approval rates at big banks and institutional lenders has hit new highs.

By contrast, approval rates declined slightly for small banks, credit unions, and alternative lenders.

Key Highlights

Some of the top findings of the monthly study include the following:

  • Big banks approved 23 percent funding requests in March, up two-tenths of a percent from February 2016,
  • Institutional lenders improved their approval rates to 62.8 percent, up from 62.7 percent in February,

Chase Quietly Launches Its Online Small-Business Loan Platform

Following months of behind-the-scenes work with OnDeck Capital, JPMorgan Chase has quietly started offering online loans to its existing small-business customers.

The New York megabank launched its digital lending platform on a limited basis last week, spokeswoman MaryJane Rogers confirmed Monday.

Existing Chase small-business customers are being prescreened, and some of them are being invited to apply for loans of up to $250,000, according to Brian Geary, director of platform solutions at OnDeck.

JPMorgan has roughly 4 million small-business customers. The bank declined to say how many of those clients have received invitations to apply for a loan, or when its online lending platform will be opened to a broader group of prospective applicants.

 

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