Category Archives: Articles

Knowledge is Power When You’re Looking for Capital

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Paul Goblet, Investment Advisor to the New Mexico Small Business Investment Corporation

In the midst of the credit crisis, foreclosures and bank closings, it’s certainly understandable that some businesses have a harder time getting a loan than they did 18 months ago. Yet New Mexico has been spared much of the financial pain being experienced in Florida, California and elsewhere.

In many cases, failure to qualify for a loan has more to do with a person’s business or personal credit than it does with the nation’s economy.  No one today wants to lend to businesses with these problems:

  • A history of being late on interest and principal payments to creditors
  • A prior foreclosure or debt settlement
  • Little or no means to support the consistent repayment of the loan
  • No collateral of any merit or value to support the loan
  • A poor debt service coverage or debt-to-equity ratio, which leads to a low credit score

Compounding the problem is that many business owners don’t know where to turn for information, assistance or training to fix a credit problem.  Small Business Development Centers are among the most helpful resources in the state for this type of guidance.  Similarly, WESST provides technical assistance and training to business owners and those looking to start a business.

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Poor Hires to Management Team Can Destroy a Business

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Mark Walztoni, Human Capital Advisor at Flywheel Ventures and Managing Director at Sustainable Ventures Alliance LLC

Mark Walztoni

Given that 60 percent of an angel investor’s decision to invest is based on the strength of the management team, according to the National Angel Association, an entrepreneur or investor needs to get the right people on the management team — in the positions that match their talents — and get the wrong people off the team.

Identifying and retaining top talent can be more challenging in New Mexico than it is in other places, judging by the numbers of reports about the dearth of top talent here.

It’s all in the specs

While candidate identification largely occurs online, the first step is to develop a clear job specification, including clear objectives and responsibilities for each job on the management team. The most effective companies use behavior-based questions about past situations to identify the cultural requirements and expectations of the prospective hire’s internal and external customers, peers and staff. Continue reading →

What’s in a Name? A Potential Gold Mine

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Deborah Peacock

Deborah Peacock of Peacock Myers P.C.

Consumer reliance on Kleenex as the colloquial term for all facial tissues and Fiberglas the generic term for glass fiber insulation is an asset of incalculable value to the manufacturers of both products because Kleenex and Fiberglas came to be seen as the very incarnation of their respective products, rather than specific brands. To continue in this vein, the makers of both protect these names with trademarks to distinguish them from imitators.

Anyone with a product that could set a standard in its class in commerce should consider obtaining trademark protection. Before proceeding further, she should consult a qualified attorney or legal expert. Continue reading →

SBA Program Helps Disadvantaged Small Businesses Grow

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John Woosley, Director, U.S. Small Business Administration, New Mexico District Office

John Woosley, Director, U.S. Small Business Administration, New Mexico District Office

Most business owners are aware of the loan guarantees provided by the U.S. Small Business Administration (SBA) to help support and develop their businesses. SBA is also the agency that helps small businesses contract with the federal government, the largest customer in the world.  Included in that contracting role is the 8(a) program, which uses federal contracting opportunities to help socially and economically disadvantaged small businesses participate in the marketplace.

Under the program, SBA business development specialists provide a broad range of support such as mentoring, procurement assistance, training and other financial, management and technical assistance to help these businesses prepare to do business with the federal government and other customers.

Who is eligible

The general eligibility for the 8(a) program includes individuals who are “socially and economically disadvantaged.” This category includes people who are members of racial and ethnic minority groups and other individuals who can show individual social disadvantage.  A personal net worth of $250,000 or less, excluding the value of any residence and the applicant business, is one of the parameters for economic disadvantage for the purposes of this program.

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State of NM Construction Industries Bond Requirements

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In 2008, the New Mexico Legislature passed a new law requiring contractors to carry a $10,000 Consumer Protection Code Bond to satisfy the financial responsibility requirement for licensure.  This new bond replaces the three options that were previously authorized by statute to satisfy this requirement.  These options included the Penalty Bond, the Cash Collateral Assignment, or the Audited Financial Statement.  As of July 1, 2009, this different bond type is required for all new licenses and all renewals of a current Construction Industries Division- (CID) issued license.

The change in the bond requirement is not merely a change in form and cost.  The state legislature amended the Construction Industries Licensing Act in the 2007 legislative session to change the type of bond required for licensure. Formerly, the bond could be attached only by the state to satisfy penalties assessed against a licensee by the state. Under the new law, a consumer is now able to attach the bond for assistance in correcting building code violations caused by a licensee.

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ARC Loans Help Small Businesses Bridge Debt Gap

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David Valdez, Vice President Small Business Lending, Century Bank

David Valdez, Vice President Small Business Lending, Century Bank

Despite signs that the recession is easing in some quarters, many small businesses continue to struggle to pay off business-related debt. America’s Recovery Capital Loan Program — better known as the ARC loan program — can provide up to $35,000 in short-term relief to help qualified small businesses return to profitability.

The program was authorized by the American Recovery and Reinvestment Act, which became law in February. ARC loans are being offered by various Small Business Administration lenders until September 30, 2010, or as long as the money lasts.

How to qualify

To qualify for an ARC loan, the business must have been in operation for at least two years and have financial statements or tax returns showing profitability or a positive cash flow in at least one of the past two years. The business must be able to project sufficient cash flow to meet its business-related debts in the future.

ARC loans aim to help small-business people pay down or refinance existing business loans so they can redirect cash flow from making loan payments to investing in their businesses. The borrower must not be more than 60 days past due on any loan being paid with ARC funds. The business owner also must prove immediate financial hardship in the form of declining sales, frozen credit or difficulty meeting payroll or payments on rent or loans.

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A Perfect TEN

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Leslie Elgood, Chief Executive Officer, New Mexico Community Capital

Leslie Elgood, Chief Executive Officer, New Mexico Community Capital

Joseph Godfrey knew the recycling business before he moved to Taos from Vermont six years ago, but he had never run a business of his own before he bought Recycle Taos in late 2007. Essential to his success, Godfrey said, was connecting with Taos Entrepreneurial Network (TEN), an independent nonprofit organization of entrepreneurs and local community leaders that began as a 2004 project of the Sirolli Foundation spearheaded by the McCune Charitable Foundation.

TEN’s philosophy was adapted from the work of Ernesto Sirolli, an innovator in rural economic development. After seeing self-sufficient communities in Zambia pushed into unsustainable types of development by foreign-aid officials in the early 1970s, Sirolli tried a different approach: He tapped into the entrepreneurial spirit of rural residents by backing home-grown initiatives the locals needed and could support. His model has been duplicated in 250 communities around the globe, including Taos, New Mexico.

The core of Sirolli’s plan is “enterprise facilitation” — a support system designed to help entrepreneurs turn ideas into viable ventures by helping them find the resources and learn the skills they need to produce, market and finance a product or service. TEN tailored the idea in Taos to fit local conditions including the employment of a trained “network facilitator” to focus simply on networking and let entrepreneurs choose how to reach their goals.

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Credit Score: Important in Good Times and Bad

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Leslie Hoffman, Vice President of Lending and Client Service, ACCION New Mexico

Leslie Hoffman, Vice President of Lending and Client Service, ACCION New Mexico

Those who spend their careers watching the economy contract and expand agree on at least one thing: a person’s credit score is important in any economic cycle.  Before extending credit to an individual or business, bankers want to review the borrower’s credit report and know their credit score.

Financial institutions verify credit through reports that reflects how an individual has handled his debts.  Three national companies – Equifax, Experian and Transunion – track credit and produce reports.  All include similar information.

Report elements include personal information such as Social Security number and employment record, borrowing history, a record of creditors who have reviewed the credit history, and other public information such as foreclosures or bankruptcies.

Credit scores generally range from 350 to 850 points, with most people scoring in the 600 to 700 range. A high score indicates good credit. Lenders review credit scores to determine loan amounts and interest rates that will be charged, and a higher score usually yields more favorable loan terms.

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Farmington’s Enterprising Spirit

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Jasper Welch, Director of the San Juan College Quality Center for Business

Jasper Welch, Director of the San Juan College Quality Center for Business

It might be the size of a “big-box” store, but the Quality Center for Business in Farmington deals in something more valuable than merchandise. Inside this 43,000 square-foot space reside the San Juan College Enterprise Center, San Juan Economic Development Service, Small Business Development Center and the Workforce Training Center — all sponsored or supported by San Juan College. The College facility is also home to the Enterprise Loan Fund, the SBDC grant-funded Procurement Assistance Office and more than a dozen small businesses now being incubated in these nurturing surroundings.

The multi-program facility is the only one of New Mexico’s seven business incubators to be organized as a one-stop resource center for entrepreneurs. (The state’s other incubators are the Santa Fe Business Incubator, NMSU Arrowhead Business Incubator, Los Alamos Small Business Center, Clovis Business Incubator and South Valley and WESST Corp business incubators in the Albuquerque area.)

Rather than creating a stand-alone business incubator, San Juan College 10 years ago partnered with public and private organizations to create a place where entrepreneurs could find all the resources an enterprising person might need under one roof. The college and the city had a common goal: to encourage business startups and expansions and diversify the region’s economy beyond the economic cycles of the oil and gas industry.

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Cleantech: Still Attractive and Attracting Investment

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Supporting low-impact forms of energy generation — cleantech, as it’s called — has been a hot topic politically and socially and has been a subject of mainstream debate and politics for the past 10 years.  As a result of consumer, regulatory and private interest in the cleantech sector, it has also been a hot topic for investing, and venture-capital investment in cleantech increased exponentially in the past decade. In 2001, venture capitalists invested roughly $507 million in clean-technology companies.  By 2008, annual investment in the sector was $8.4 billion.

Where did it go?

Much of the early investment in cleantech was done in the form of large deals with relatively small equity investments alongside massive debt-capital structures to help finance major infrastructure projects in solar power, wind power and smart-grid energy distribution. At first it appeared as though investors’ bets on cleantech would pay off: The price of oil skyrocketed to nearly $150 per barrel over a six-month period in 2008, and equity indexes that tracked the performance of public cleantech companies became extremely popular among hedge fund investors.

The 2008 election of Barack Obama and a Democratic majority in both the House and Senate was expected to lift the industry, as a climate-conscious Democratic administration would make significant investments alongside private investors and create incentives to invest more capital in cleantech, thereby increasing company valuations.

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