Unlike the CEOs of major public companies, whose personal financial situation has little effect on their companies’ borrowing, if you are a small business owner, your personal credit is a major factor influencing your company’s access to capital. The power of personal credit scores to predict small business loan repayment, the legal structure of many small businesses, and small business owners’ use of personal guarantees and personal borrowing to finance business operations, all link small business owners’ personal credit to their companies’ access to capital.

Many, if not most, lenders will look at your personal credit score if you are a small business owner seeking a loan for your company. A 2006 report written for the U.S. Small Business Administration found that 71 percent of banks used small business owner credit scores when underwriting small business loans.

The use of the owners’ personal credit scores makes sense. As Federal Reserve Bank of Atlanta researchers explain, the personal credit record of the business owners is a good predictor of the repayment of business loans of less than $100,000.

The legal structure of small businesses also links personal credit to business access to capital. Approximately 72 of U.S. businesses are sole proprietorships, Internal Revenue Service data indicate. Because the debts of sole proprietorships are not legally distinct from those of their owners, lenders and trade creditors pay careful attention to the personal creditworthiness of sole proprietors.

Even when small business owners set up corporations to limit their personal liability for the debt of their businesses, they often tie their personal credit to their companies’ borrowing by personally guaranteeing the debts of their businesses and personally borrowing to finance their companies’ operations. According to analysis by the Federal Reserve, 41 percent of all small business loans and 56 percent of small business borrowing are personally guaranteed.

Studies show that many small business owners borrow personally to finance their business operations, further intertwining small business borrowing and owner personal credit. A paper by Alicia Robb of the University of California at Santa Cruz and David Robinson of Duke University indicating that about one quarter of new companies are funded by the personal borrowing of their founders.

For many small business owners, tapping home equity is an important way personal credit is transformed into business capital. Analysis by Minneapolis-based market research firm, Barlow Research shows that about one quarter of small business owners tap the equity in their homes to finance their businesses either by using their homes as collateral for business loans or by taking home equity loans and plowing the proceeds into their companies.

Drawing on personal credit card credit lines is another way that small business owners use personal credit to finance business operations. According to Intuit’sFuture of Small Business Credit Report, small business owners have $150 billion in outstanding credit card debt that they have used to finance their businesses.


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Goldman Sachs 10,000 Small Businesses is a $500 million investment to help small businesses or entrepreneurs create jobs and economic opportunity by providing them with greater access to business education, financial capital, and business support services.

The program is based on the broadly held view of leading experts that greater access to this combination of education, capital and support services best addresses barriers to growth. 10,000 Small Businesses is funded by Goldman Sachs and The Goldman Sachs Foundation.

The program is currently operating in Chicago, Cleveland, Houston, Long Beach, Los Angeles, New Orleans, New York, Philadelphia, Salt Lake City, Miami, and Detroit. It will continue to expand on a city-by-city basis.

With the launch of 10,000 Small Businesses at Babson College recently, business owners from all 50 states now have the opportunity to participate together in a national class. This unique program is delivered through a blend of online and in-person sessions.

If accepted, the program tuition will be at no cost to applicants. In addition, participating business owners will have the option to have the majority of reasonable travel and lodging costs covered to/from Babson College in Massachusetts for the two, four-day, on campus sessions.

For more information, please visit


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SBA_NSBW_2014_HEROBOX_GENERIC(1)SBA is gearing up for National Small Business Week, May 12-16. They are taking the show on the road to celebrate small businesses across the United States. This year’s activity will include forums and panels about trends in small business, innovation, financing, business growth – and more. There will also be matchmaking events and networking opportunities.

The week will kick off in San Francisco on May 12, followed by events in Kansas City, Boston and Washington, DC. They’ll wrap up in their nation’s capital by honoring small businesses from across the country, culminating in the announcement of 2014’s National Small Business Person of the Year.

Check out the full conference schedule here.

Throughout the week, you can also participate in SBA webinars and online events:

Monday, May 12

  • Smart Small Business Travel: Strategic Ways to Increase Your Return on Travel | 4-5pm ET | with Marriott and Visa Rhonda Abrams

Despite the clear upside, many small business owners limit travel because of cost or a reluctance to be away from their business. Travel is an investment in your business. And like any investment, you want to maximize your return. Get advice and tips on how to do just that from small business expert Rhonda Abrams.

  • Growing Your Business with Direct Mail | 6-7pm ET | with the United States Postal Service

Learn about the value direct mail offers as part of an overall marketing strategy. Gain insight on how mail can be used to acquire new customers, and establish relationships that keep them coming back.

Tuesday, May 13

  • Small Business: Big Benefits | 4-5pm ET | with Colonial Life

Choosing between offering a robust benefits package or cutting back on total offerings is a challenge for many small businesses. Learn about “voluntary benefits” that can allow you to strengthen your existing benefits packages at little or no additional cost.

Wednesday, May 14

  • Achieving Big Customer Loyalty in a Small Business World: 10 Tips to Create A Killer Customer Loyalty Program | 3-4pm ET | with Manta

Learn about the best approaches to jump-start your small business’ customer loyalty program, including how to make sure that your program fits your business’ needs and how to get positive ROI from a digital customer loyalty program.

Thursday, May 15

  • Practical Marketing – A Five-Step Marketing Program for Small Biz | 3-4pm ET | with YP

Gain insight about how to get the most from your marketing time with a 5-step practical marketing plan focused on “doing” – not marketing theory.

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An M&A deal is the biggest deal of your life, so completing a successful transaction is key. Knowing a few key M&A tips — whether you’re merging or acquiring — increases your odds of successfully completing an M&A deal. Secrets to success include the following:

  • Retain capable and experienced M&A advisors. You can’t complete this transaction alone, and a business owner who represents himself in a life-altering deal is asking for trouble. You need a dispassionate advisor, someone who has been through the process before and can guide you to a close. This advice is especially true if you’re selling a business.
  • Don’t allow yourself to get too high or too low during the process. M&A is a roller coaster ride, with ups and downs around every turn as a deal you think is wrapped up one day falls apart the next day . . . only to come back together on the third day. You have to be able to keep an even keel.
  • Check emotion at the door. Despite the frustrations of M&A, you need to keep your emotions in check. Yelling and screaming don’t get the deal done. Logic, facts, and a cool demeanor do.
  • Don’t jump at the first offer. Ideally, you want to have multiple offers before deciding which deal to accept. Having options increases your chances of getting a great deal.
  • Don’t hold out for a marginally better offer. If you want to do a deal and the offer is sufficient, take it. Part of something is better than all of nothing, which may be what you get if you wait around for the perfect deal that never comes.
  • Know when your position is weak or strong. Overplaying a strong hand can chase off otherwise suitable deals; misplaying a weak hand can scuttle the deal and perhaps your career!
  • The market is the best way to determine your company’s valuation. In other words, business appraisal services have limited value. Get out in the market and have actual conversations with actual Buyers.

——— Bill Snow, Mergers & Acquisitions For Dummies