small-biz-owner.jpg

Small-business owners don't need to be told times are tough. They are living it every day. Some are even thriving in this time of economic unrest. But most are toeing the line and looking for ways to make it through the year-old recession. They're looking where they can for assistance and advice.

One organization is helping business owners in Southern California survive and even thrive. The Santa Ana District Office of the U.S. Small Business Administration and its resource partners, Orange County SCORE Chapter 114, Orange County Small Business Development Center and the Institute for Women Entrepreneurs Women's Business Center, have joined forces to form "tiger teams" to help small businesses that need assistance during these tough economic times. Tiger teams consist of representatives from each organization, who are selected based on the needs of each business. The tiger team will meet with businesses on-site to analyze their operations and make recommendations to help them stabilize and improve their businesses.

I asked Jill Andrews, a business development specialist with the SBA Santa Ana District Office, her thoughts on the downturn and what biz owners can do to make it through. She shares her thoughts and some of the things she's hearing from the field. (To see what Brad Mix had to say, click here. Mix is an SBDC counselor and consultant who specializes in financing and loans.)

What are the most common problems you are seeing right now?

The most common issue of concern to small businesses is lack of available capital. Banks that small businesses have traditionally done business with aren't lending money as they have in the past ... even to their customers. Other factors leading to the lack of available capital are many:

  • Credit lines have been reduced or eliminated all together.
  • Banks are looking for very high credit scores (750+) and 30 percent to 35 percent investment or equity position from the borrower on the loans they are making.
  • Small businesses traditionally have used their personal HELOCs to finance their businesses and pay their bills. Many unused portions of home equity lines have been reduced or eliminated.
  • Visa and MasterCard have reduced credit lines.
  • American Express has reduced credit lines.

The other concern is the amount of time it takes to collect receivables and the possibility their customers may not be able to pay. Many small businesses are afraid they will not be able to collect bills from those they are currently doing business with and are worried that state contract payments may be delayed.

Do the specialists see disconnects between what business owners are saying and what the specialists find through their testing?

The specialists are finding a general lack of planning to weather the downturn. These circumstances have caught businesses that have been in business a long time unaware. Every business that depends on consumers to make purchases from discretionary income has been hurt. Retailers who sell clothing, jewelry, flowers have seen a 30 percent to 40 percent decline in sales. Those that offer personal services have also seen sharp declines. Many of these have been in business 20 to 30 years and didn't see this coming. Many bought inventory and can't sell it.

What's one area business owners often cut back spending that they shouldn't?

In my opinion, what small businesses really need is a good software accounting system--and an accountant.

If tiger team members had any pieces of advice for struggling business owners in this climate, what would they be?

  • Know where you are, look at your options and make a plan.
  • Determine if there are aspects of your business that can be modified to take advantage of the downturn (car repair, salvage, thrifty shops, and mobile notary service).
  • Curb spending and control expenses.
  • Ask for a modification in your lease. Having a tenant who pays rent is better than having an empty building. Negotiate.
  • Barter with other small businesses for the services you need.
  • Maintain your relationship with your banker.