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Monthly Archives: December 2016

6 Way to Recruit the Best Employees

Money is important, but it’s not the only thing top talent wants. They want a work environment that challenges them, allows for innovation, makes work fun but also provides work-life balance. This could mean paid time off (PTO), the ability to work from home, time to volunteer in their communities or the ability to take unpaid leave to pursue interests, to name a few.

Personal finance writer Kevin Mulligan said your company needs to create an employee value proposition (EVP) to use as a selling point with candidates. This should describe what sets your organization apart and why people should want to work there.

“The more attractive your EVP is, the more likely you will be attracting the cream of the crop to your company,” Mulligan wrote in a BusinessDictionary article.

One of the best ways to draw candidates in is a mobile-friendly hiring process. Dr. John Sullivan, a Silicon Valley-based author and HR expert, said that more than 43 percent of job seekers use their mobile phones in their job searches.

“That number will continue to rise until the mobile phone is dominant in recruiting,” he wrote in an article on EREMedia.com.

To that end, your app or website should allow candidates to accept offers, hold live video interviews, complete referral tasks and self-schedule interviews. For retention purposes, you can also build in functions for new employees: an interactive employee handbook, benefit registration, access to PTO balances and more.

Even just a decade ago, it might have seemed like a distant dream to have full-time, off-site employees with the same exact technological capabilities as workers in the office. Today, advancements in cloud computing and videoconferencing have opened the doors to hiring remote staff members, so recruiters are no longer limited to candidates in close geographic proximity to the company’s headquarters.

“If your company is located in a competitive hiring market, you’d be better off searching for top talent in a less competitive area,” said Anthony Smith, founder and CEO of CRM software company Insightly. “Technology allows for smooth collaboration and communication no matter where employees are located, so you don’t need to lose out on experts in your field because of where your company is based.”

This goes back to the workforce’s “immediate” expectations. Top talent will move quickly, because it is in high demand. Be ahead of the curve by investigating ways to speed up your hiring process while still demanding high-quality candidates reach a high standard.

“Others may view your slow hiring as a mirror of the speed in which you make business decisions, and drop out because they expect faster decision making,” Sullivan wrote.

You can speed up hiring by prioritizing hires for revenue-generating or key positions, surveying past candidates for their perception of what worked and what didn’t, and identifying other unnecessary delays that seem to be common in each vacancy-fulfillment effort.

Sometimes the best way to attract a candidate to your organization is to show off the people he or she will join there. Taso Du Val, founder and CEO of global tech industry network Toptal, advised highlighting your company’s existing talent during the recruiting process.

“Talented individuals want to work with top talent, so showcasing the all-stars already on your team can help validate why other high-quality candidates should hop on board,” Du Val said.

Social media profiles have become standard tools for researching and evaluating talent. Instead of looking only at candidates’ résumés, thoroughly vet them by looking at their LinkedIn, Twitter and other social media profiles.

“Candidates’ social media profiles [can highlight] personal experiences and interests that tie into professional lives and skills, and may show the person is a perfect fit,” said Pete Kazanjy, founder of Modern Sales Salon and recruiter search engine TalentBin. “[Depending] on the type of job you’re recruiting for, make sure you’re looking at the right social networking sites to find candidates who may be off your radar.”

How to Find the Right SBA Loan

The SBA’s loan programs are designed specifically for small business owners who don’t have access to other reasonably termed financing. There are four main types of loan programs:

7(a) loan program: This is the SBA’s primary program to help startups and existing small businesses obtain financing. 7(a) loans are the most basic and most commonly used type of loan, as well as the most flexible. The money can be used for a variety of general business purposes, including working capital, machinery and equipment, furniture and fixtures, purchasing or renovating land and buildings, leasehold improvements and debt refinancing. Loan maturity is up to 10 years for working capital and generally up to 25 years for fixed assets. Borrowers can apply through a participating lender institution.

CDC/504 loan program: This program provides businesses with long-term, fixed-rate financing for major assets, such as land and buildings. The loans are typically structured with the SBA providing 40 percent of the total project costs, a participating lender covering up to 50 percent and the borrower putting up the remaining 10 percent. Funds from a 504 loan can be used to purchase existing buildings, land or machinery, and to construct or renovate facilities. These loans cannot be used for working capital or inventory. Under the 504 program, a business qualifies if it has a tangible net worth of less than $15 million and an average net income of $5 million or less after federal income taxes for the two years before application. The maximum amount of a 504 loan is $5 million.

Microloan program: This program offers very small loans to startups, or newly established or growing small businesses. The loans can be used for working capital or the purchase of inventory, supplies, furniture, fixtures, machinery or equipment. The SBA makes funds available to specially designated intermediary lenders, which are nonprofit organizations with experience in lending and technical assistance. Those intermediaries then make loans of up to $50,000, with the average loan being about $13,000. The loan cannot be used to pay existing debts or to purchase real estate.

Disaster loans: The SBA offers this option to businesses that have been affected by a declared disaster. These low-interest loans can be used to repair or replace damaged real estate, personal property, machinery, equipment, inventory and business assets.

 

Can You Afford a Small Business Loan?

Figuring out whether you can afford to borrow money for your business is a crucial step in the loan process and one you should definitely take before approaching potential lenders. But determining if you have the resources to make your loan payments can be a bit tricky.

To demystify the math behind small business loans, Business News Daily spoke with two small business lending experts: Chris Hurn, co-founder and CEO of the small business commercial property financing firm Mercantile Capital Corp., and Ty Kiisel, director of content marketing at Lendio, an online platform that connects small business owners with potential lenders.

Can you?

Banks and other lenders use several tools to determine if a business entity is a good candidate for a loan, one of which is a debt service coverage ratio (DSCR). On one side of this ratio is the cash that you, the business owner, have available to pay back a loan in a given year. On the other side is the amount of money you’re borrowing per year, plus interest.

Figuring out your own DSCR isn’t as difficult as some lenders might have you believe, Hurn said. Start by calculating the cash available for your business. Cash available, or cash flow, is the movement of money into and out of your business, measured over a certain period of time — usually weekly, monthly or annually.

To calculate cash flow, start by adding the money that you have on hand at the beginning of the month (starting cash) to the money that comes into your business throughout the month (cash-in). Cash-in includes all the money you receive in sales, paid receivables and interest in a given month. Adding your starting cash to your cash-in will give you your total cash for the month.

Next, you’ll need to calculate how much cash is going out of your business every month (cash-out), including all your expenses for the month. Subtract this number from your total cash for the month to determine the monthly cash flow for your business.

Once you have a number for your monthly cash flow, multiply it by 12 to get your annual cash flow. Then, you can take a deep breath, because the hard part of figuring out your DSCR is over.

“The other side is simple,” said Hurn. “You just do a calculation to determine what the annual debt payments would be on the proposed loan.”

Of course, it’s hard to know exactly how much money you’ll end up receiving from a lender or what the terms of the loan will be, but you can make an estimate based on what you know you need to grow your business and the published interest rates for the lending institution you wish to use.

Now that you have both numbers calculated, you can put them side by side and start answering the question you started with: Can you afford a loan?

Hurn said that business owners with a DSCR of 1.25:1 — also known as 1.25 times coverage — are considered to be a good credit risk, and are usually able to afford, and therefore secure, financing. Kiisel estimated the optimal cash flow needed for a loan-worthy business a bit lower, at 1.15 times coverage.

But Hurn also noted that, over the years, he’s seen many businesses slip under the 1.25-times coverage threshold. For instance, sometimes, businesses that are growing very quickly and those that are expanding to bigger commercial spaces get loans despite having less cash flow.

Traditional Bank Loans

When it comes to alternative lenders, small businesses had the most success with merchant cash advances. The research found that 41 percent of the small businesses surveyed were able to obtain a merchant cash advance, compared with just 20 percent who were able to get a regular loan from an alternative lender.

Most small business owners are relying on their own personal assets to help fund their business. Specifically, more than 70 percent of those surveyed used personal savings, 45 percent used personal credit cards and 19 percent used cash from the sale of personal assets.

 Crowdfunding is growing increasingly popular with small businesses. The research found that 19 percent of small businesses that sought financing in the past three months used crowdfunding as a funding source, compared with just 7 percent of mid-size businesses.

Jeff Stibel, vice chairman of Dun & Bradstreet, said when they began conducting these studies four years ago, small businesses were reeling from the effects of the Great Recession.

“Since then, we have seen steady progress for small businesses being able to acquire the capital they need, although the financing is still predominantly not coming through traditional lenders,” Stibel said in a statement. “It will be interesting to see how the new option of crowdfunding will affect small businesses, as our study has shown more eagerness to use that option as compared to their mid-sized counterparts.”

Although access to capital improved over the past three months, the number of small businesses needing it declined. Overall, demand for capital from small businesses dropped from 38 percent in the first quarter of the year, to 32 percent in the second quarter.

Of those the small businesses that didn’t try to access capital over the past three months, 49 percent said it was because they had enough cash flow in place, while 24 percent indicated they already had sufficient financing. However, 16 percent didn’t apply for financing because they were worried they would be rejected, 12 percent shied away because of the weak economy and 7 percent said they were holding out for cheaper financing rates.

“Business borrowing habits suggest owners may not see a need for an immediate infusion of capital,” said Craig Everett, an assistant professor of finance and director of the Pepperdine Private Capital Markets Project. “However, these findings suggest business owners are still feeling the lasting impact of the recent recession and remain skittish about the future, as reflected in an abundance of caution when it comes to the economic environment.”

Despite the lower demand, the data indicates there could be a spike in the need for capital in the second half of the year. The research shows that 56 percent of small business said they likely would seek financing in the next six months for planned growth or expansion.

The research is a quarterly indicator produced by the Graziadio School of Business and Management at Pepperdine, with the support of Dun & Bradstreet. The current data is based on surveys 1,097 small and mid-size businesses.