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Small businesses employ 50.1 percent of the private work force and provide approximately 75 percent of the net new jobs added to the economy, making the sector a quintessential economic driver.
However, despite considerable improvements compared to the 1980s, business bankruptcies still reach the thousands-38,155 in 2002, according to United States Small Business Administration. Inadequate or ill-timed financing follows close behind poor management as main business failure culprit.
According to SBA, "whether you're starting a business or expanding one, sufficient ready capital is essential".
Banks as source of capital
Family, friends or angel investing may be a good source of financing for start-up techs, considering the low capital attached to cheaper hardware and software nowadays. On the other hand, banks market a variety of services and offers providing ease for entrepreneurs starting an investment. Central Pacific Bank-named as 2004 & 2005 SBA Lender of the Year-for one, markets an equipment and vehicle leasing program which offers an alternative to borrowing that can lower monthly payments, conserve operating capital, finance 100% of equipment costs and provide flexible end of lease terms.
However, it must be recognized that banks or credit unions will provide loans to entrepreneurs only if a sound business proposal is established.
Innovation is a key instrument in the technology realm, especially with information technology and communication becoming more and more prevalent and ubiquitous. This presupposes that new and progressive technology deserves favor when it comes to funding.
In addition, bankers analyze and evaluate certain aspects of the potential borrower including ability to repay, credit history, equity and collateral prior to disbursing.
Beyond financing for tech entreps
One thing for start-up techs to keep in mind is a clear goal and a worthwhile purpose for their activities. Long-term planning is essential in developing a path to success. Envisioning beyond the first year or two of operation may give businessmen and employees a concrete idea of where they want to go.
But an entrepreneur should be wary of constant technological innovations. In this respect, short-term objectives must be realized to keep an updated position in the tech realm.
Equally important is calling on the right professionals to do their job for you. Software development, for example, needs software developers not some businessman who knows how to book an accounting. Concretely, an entrepreneur must be knowledgeable about the matters concerning his or her business, otherwise, lose the leadership factor, or worse, be duped by more clued-up employees.
Central Pacific Bank also recognizes women-business owners which represent the fastest growing segment of the economy, according to its CEO and Vice-Chairman, Clint Arnoldus.
Through Women's Business Central, businesswomen are given special privileges making it easier for them to find financing and consultation services.
"This is something that the bank started to make to make it easier for women to do their business. They can find people that understand small business and be able to get the financing and any sort of consulting they need to move their company along," Mr. Arnoldus said. "What drives (our economy) powerfully are just the millions of small businesses that are in this country and we think that focusing on the fastest growing segment is something that is very exciting especially here in Hawaii where we need more diversification and we need small companies that are employing people that are creating more diversified economy."
Rizwan Virk, author of Start-Up Myths: How to Avoid the Pitfalls of Starting and Growing Your New Venture (1998) writes some entrepreneurs shun banks and outside investors to subsequently avoid possible debt accumulation or, basically, having to answer to anyone.
However, this makes it doubly harder to finance a business especially for start-up tech companies needing to invest on equipment and materials to keep their business up and running. With small business owners representing 99.7 per cent of the US employer population, it is unequivocally important to provide flexible financing options that promote viability.
With today's business environment reliant on information technology and with globalization as a platform for fierce transnational competition, small businesses must be able to keep a parallel performance (if not a competitive advantage) with their opponents through having up-to-date software and dependable hardware equipment, which nowadays are not hard to acquire.
According to co-founder of DigitalConsumer.org, Joe Kraus, compared to a decade ago, currently existing cost differences make it much easier to start a business (especially tech-based businesses) on much less capital (more from www.business-opportunities.biz). These are as follows:
· Software development is relatively cheaper
· Hardware cost is inexpensive
· Start-ups have access to global labor
These three realities, along with an effective financial grounding, make the latter part of this decade more viable for start-up tech companies.
However,
Sources:
United States Small Business Administration, <www.sba.gov>
Central Pacific Bank, <www.centralpacificbank.com>
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