Jim Blasingame

Business futurist, award-winning author, speaker and columnist

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Banking

The Key To A Successful Post-pandemic Banking Relationship

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One of the most interesting relationships in the Main Street economy is the one between business owners and their banks. It is at once powerful and essential. Let me tell you a short story about where this dynamic has been in order to explain where it’s going.

Unlike our big business cousins, small firms have limited capital sources. Indeed, the lion’s share of our growth funds come from a bank loan, with almost 60% being made by a community bank (ICBA). Yet, since 2008, more than half of small business CEOs have consistently reported not needing to borrow money (NFIB).

A dozen years ago, a kind of perfect storm began for Main Street businesses: the 2007-09 recession was made “Great” by the Wall Street-induced financial collapse, which was followed by our economic lost decade during the Obama administration. In survival response, small businesses tightened their belts and deleveraged on a scale not seen in generations.

This deleveraging phenomenon resulted in small businesses retaining more earnings which, by definition, produces stronger balance sheets and reduces loan demand. And it produced a silver lining we didn’t know we had or needed – until last year.

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The New Regular: Putting Lipstick on the Bankruptcy Pig

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This is the ninth edition of my New Regular series, dedicated to helping small businesses cope with the one-two punch of the coronavirus pandemic and associated economic constraints. Normal was just sighted in a homeless shelter in the north of France.

The subject today is a serious and troublesome one. No amount of lipstick will make the bankruptcy pig pretty. But as we roll into the post-pandemic era, we should improve our understanding of it.

You can be technically bankrupt without being legally bankrupt. At some time in their existence, most businesses will experience an upside-down state of negative net worth, where liabilities exceed assets. It’s likely that such a condition will pass unnoticed, possibly even by the owner, because the business might not be insolvent.

Insolvency is a pre-bankruptcy state of financial distress when near-term payment obligations exceed cash-generating ability. This condition is not only noticed, it’s consuming. If you dig yourself out of insolvency and avoid bankruptcy, that becomes a badge of honor. Yes, your humble correspondent knows something about that.

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The special sauce created by small business and community banks

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America is fortunate to have two marketplace sectors that also happen to be unique in the world: 28 million small businesses and 5,000 community banks. Let me tell you a story about why we’re all even more fortunate – especially during a pandemic – that these two groups are next-door neighbors and close friends.

There are many differences between a small business and a big business. But the most dramatic is something you won’t find on Wall Street: small business special sauce. When this rich blend of ethics, values, and value is slathered over Main Street America, it manifests as one of the most powerful forces in nature: high-quality, enduring relationships built on a foundation of trust. 

And these aren’t like your affinity for a big business brand or product – they’re old-school relationships between human beings operating in a new-school marketplace. 

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The Paycheck Protection Program and your small business

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The coronavirus pandemic has thrust Main Street America into a very challenging and unprecedented economic period.

Most businesses have been negatively impacted and millions are in peril. Every owner is justified in their concern for the next few months.

But it’s important to remember that we’re dealing with a global pandemic like no living person has ever experienced, which has caused an economic crisis, the abruptness of which no living person has ever seen. As I said last week – this isn’t your fault. And once we “flatten the curve” of the coronavirus, there’s every reason to believe the economy will return to the growth footing we knew only a few weeks ago.

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Will government help for small business be fast enough?

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The national response to the coronavirus pandemic – however necessary – is crushing Main Street.

This economic tsunami wasn’t caused by market animal spirits, irrational exuberance, bad business practices, or bolloxed supply chains. In the span of a month, an invisible Black Swan took us from robust to shut down. It’s not your fault, small business owner. You didn’t cause this.

That’s why you’re going to hear me say something I’ve never said to the government before. Instead of “Get out of our way,” today I’m saying, “You must step up and step in.”

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Searching for investor capital? Don’t make these mistakes – Part 2

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This is the second article in a two-part series on how to maximize your chances of success when approaching an investor for your business.

Last time, I pointed out one of the modern marketplace myths mouthed by talking heads and politicians, which is that small businesses don’t have enough access to capital. You could write a book about what these people don’t know about small business and, as it turns out, Andrew Sherman did.

Andrew is my friend and long-time member of the Brain Trust of my radio program, and his important book, Raising Capital, reveals, among many other things, the common mistakes entrepreneurs make when searching for investor capital. So far in this series, I’ve revealed six of the mistakes on Andrew’s handy list. This time we’ll cover the other six, each followed by my commentary. To see the first article, search for this title with “Part 1.”

The good news for seekers of investment capital is that outside sources have become more robust and multi-faceted, whether from venture capital funds, angel investors, and more recently, crowdfunding. The rude news is that, just like getting a loan, you have to have your corn flakes together to score this kind of funding. The bad news is the investor capital process is very complex, and almost always takes longer. And as you have and will continue to learn, there’s more to acquiring investor capital than writing a business plan.

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