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Financial expert Michelle Singletary answers questions about personal finance and the economy.
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Businesses Joining Forces
Q: How can entrepreneurs pool their money and resources to stretch their buying power?
Gerry Anderson, Los Angeles, CA
A: Gerry, this is a great question and very forward thinking. The word for small business owners in this enduring recession is "collaboration."
If you are working in an area with a declining business base, it might make sense to contact a well-run competitor and form a joint venture to go after contracts. Better if you both get a piece of the pie, rather than risk getting none at all.
Think about how you can join forces with a business that provides complimentary services to yours. For example, I recently had a deck built that included a gazebo. I wanted to install a ceiling fan in the gazebo, but the contractor who built the deck didn't do such work, and he didn't have anyone to recommend. What he should do is team up with an electrician to offer that service. On the flip side, an electrician who may be out of work could look for a contractor still getting work and offer to work together. Each one of these entrepreneurs could get a job that might funnel work to the other.
If you are looking for resources, I would suggest you find the nearest Small Business Development Center (SBDC). These centers provide management assistance to current and prospective small business owners. Click here to find a center near you. [Gerry, click here for the Los Angeles Regional SBDC Network.]
If your small business is struggling to meet its expenses during these hard economic times, the U.S. Small Business Administration (SBA) has a new loan program that may help.
The SBA America's Recovery Capital Loan Program (ARC) can provide up to $35,000 in a short-term interest-free loan. There is--as always--a catch. You have to have a for-profit business and show that it was profitable, or that it had a positive cash flow, in at least one of the past two years. The ARC money is intended to be used to make loan payments on existing debt. Loan proceeds are provided over a six-month period, and repayment of the ARC loan principal is deferred for 12 months after the last disbursement.
The loans will be offered for as long as funding is available or until September 30, 2010, whichever comes first.