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Recently I met with one of the Managing Directors of Equities at Sandler O’Neill, investment bankers and research analysts to financial institutions. Our conversation centered on the current state of the capital markets, a topic very important to FTRANS as our mission is to provide small and medium businesses access to the cash flow they need to run their businesses.
He had several charts tracking 20 years of year over year changes in bank and non-bank credit availability. Two charts grabbed my attention. One illustrated non-bank home mortgage availability dropped from a $700 billion increase year over year to a $300 billion decrease, a $1 trillion change since the beginning of this year. Yes, a trillion. The other chart, clearly showed the recent, significant drop in non-bank consumer credit which together declined a whopping $1.4 trillion year over year. The decline in these non-bank shadow credit markets was chilling.
Why does your typical small to medium business owner care that home mortgage lending and consumer credit have cratered? Experts estimate that at least 20% to 30% of small businesses have used to the equity in their home to start up their business, ease a cash flow crunch or grow their business. Additionally, according to a June 18, 2009 article in the New York Times entitled, “A Credit Squeeze for Small Business Owners,” by Andrew Martin, 59% of small businesses in the US rely on credit cards to finance their day-to-day operations.
A quick Google search uncovers recent articles touting the benefits of leveraging the equity in your home as a funding source for small and medium sized businesses. Housing prices were rising and the interest was deductible. Of course, we are also aware of the low, introductory “teaser” rates formerly offered for credit card balance transfers when opening a new card account. As illustrated by the charts, both of these financial markets have diminished significantly. As a result, for most businesses, these funding streams are now dry and businesses are going to have to tap alternative sources of capital such as leveraging their receivables. If you are a small business owner, the health of your Customer Portfolio (your sales + your ability to convert those sales into cash) is going to, more than ever, play a significant part in the viability of your business.
A portion of the fourth floor of the parking garage for the Centergy offices (and FTRANS) collapsed into the basement today around 12:15. There is no immediate report of anyone being hurt. Check out this image from the FTRANS window and one from the ajc. For more, click here.
Have you ever tried to get good information about who your potential customers are? We are working on a project to draw a picture of our ideal customer. That got me thinking. What if there was a dependable source where I could learn key information about my target market? What if I could find out good, reliable information on the average size of companies within a SIC code in my geographic area?
If you are a Peachtree accounting software user, which probably also means you are a small to medium business, it’s likely you cannot buy sophisticated market data. The latest version of Peachtree Software includes a module called Business Analytics. Business Analytics is primarily a tool to benchmark financial results against other businesses, sliced and diced by region, size, industry, etc. Why not use it to learn about your competitors or your customers? With more than 500,000 customers, the Peachtree userbase is an information gold mine. Plus, the information gets more valuable as more and more Peachtree customers use Business Analytics. And, get the word out about this new module; it can only help you.
