Yesterday, I learned something new about financing a business. I was speaking with Karen Goodgame of Goodgame Lending Solutions, Inc., a friend of mine who is a mortgage lender and works with entrepreneurs to maximize their ability to adequately finance their new businesses by ensuring that their mortgage is appropriate for their future plans. This process not only includes taking a look at your current mortgage to see if the payments can improved but also looking at the equity you currently have in your home to determine if that's a more efficient way than a bank loan or alternative lending solution to help finance your business.
I have a client whose business is expanding dramatically and she needs cash to finance the expansion -- not an unusual situation for a small business. Her question is should she take angel financing or seek out debt financing, even if it's non-traditional debt financing? This is a tough question and an important one to discuss with both your lawyer and your accountant. In her case, she manufactures her product overseas and has promises for significant orders from very large US retailers. Unfortunately, she doesn't yet have purchase orders so she's generally "unbankable" for more debt. There are alternative lenders that purchase invoices and sometimes purchase orders but this type of debt can be pretty expensive. That being said, often the business only needs to hold that debt for a couple of months until the revenues come in to pay it off. Some companies rely on this type of debt to finance certain transactions for purposes of managing seasonality. If this type of debt financing scares you or if you expect that you'll need the cash on an ongoing basis or if you find an angel who brings something substantial to the table for your business (i.e. connections, expertise), then the angel money might make sense. There are many, many factors relating to whether angel financing will work for your business. Something to keep in mind, though, is that you MUST comply with the Federal Securities Laws which means that you cannot just take the money in exchange for the ownership in the business. The transaction requires legal documentation to support an exemption from registration of the stock with the Securities and Exchange Commission. These transactions are complex, and especially so when the angel has done them one or more times in the past and knows the ins and outs of the transaction. Make sure you work with your advisors when contemplating these decisions to ensure you've crossed your t's and dotted your i's and that the decision makes sense long-term for your business!
I have received questions from clients regarding a new website, Avvo.com, that rates lawyers. There has been much controversy among members of the Bar regarding this site and recently a class action lawsuit has been pursued by some members against Avvo (see the Seattle Times article). For this reason, I feel it's important to provide some information to my readers about Avvo and some of the problems with the site.
The premise is to provide important information about lawyers to the general public -- a great premise. The challenge is in the execution. The site defaults to a rating for each lawyer based on years of experience (when he or she passed the bar exam - not actual experience per se) and any complaints or disciplinary action with the Bar (I don't know if this considers whether any such complaint was dismissed). The problem is that this basic public information is translated by Avvo into three rating categories: Overall, Experience, and Trustworthiness. The only way to improve your default score, is to register (by providing a credit card number) and input additional information about your experience and practice. Many lawyers, myself included, found that information contained on Avvo was incorrect and, again, the only way to correct the information is to register and update the profile.
The site also allows clients to post ratings on these categories which may prove problematic as well. Allowing clients to rate a lawyer on service and responsiveness makes sense, but it's difficult for them to really gauge the competence or effectiveness of their counsel. It's possible that the lawyer did everything 'right' but the client didn't get the result he or she desired and could easily blast the lawyer on Avvo. The lawyer has no power to respond to any such blast due to both the system as well as the Rules of Professional Responsibility promulgated by the Bar Association.
Avvo.com is in it's Beta launch and without any doubt, some aspects of Avvo will have to change but I do not believe it will disappear. Avvo will provide some basic information to help you choose a lawyer -- but remember that personal referrals and your instinct in meeting with a lawyer on the phone or in an interview should guide you more than any rating. The ratings are NOT objective but driven by factors that may or may not be relevant to the practice of law or your situation in particular.
As a side note, I have opted to complete my profile on Avvo.com, partly to correct information listed on the site and partly to embrace a technology that will likely remain in some way shape or form, and I have invited clients to post to the site -- although 1 week later, the postings still haven't shown up on the Avvo site.
Over the past year, the growth of the Hispanic population in the Puget Sound region has been discussed in virtually every business publication. Recently, Conexion Marketing, a hispanic marketing firm and client of mine, published a research paper on the demographics and preferences of the Hispanic population in the region. This paper will provide businesses important information on reaching this growing group of consumers and business owners. The Puget Sound Business Journal reported on it this week (article) and it will be available for download on the website for Conexion Marketing beginning July 1.
I was recently introduced to a site www.createbusinessgrowth.com which brings together numerous small business blogs, social networking sites, and other content through RSS (Really Simple Syndication). I haven't subscribed yet but just perusing what they've got availble has been a lot of fun. I especially enjoy the Quote of the Day! Check it out and chime in!
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