Let's Get Down to Business...

Bank Loans to Small Businesses: What do they look like?

The financial resources for starting small businesses historically come from equal parts of founder investments and borrowed funds. 

Commercial banks are the dominant source of credit, providing a majority of the equipment financing and lines of credit used by small businesses.

But what are the characteristics of bank loans to small businesses?  Typically, how much is borrowed and how are they repaid?  Is collateral required?  Do the terms vary depending on the loan's purpose?

Wells Fargo Bank is the nation's largest small business lender where small business loans are defined as being less than $100,000.  As of year-end 2006, they had committed over 820,000 loans with an average loan size of $26,000, a grand total of over $18 billion.

The following two tables describe Wells Fargo Bank's terms and conditions for the two principal loan types used by small businesses, a line-of-credit and equipment financing.

Feedback - Give it early and often

It's important that we communicate with one another about how you're doing in the course.  All too often, evaluations come at the end of a course when it's too late to make mid-course corrections.

How about doing things different and maybe better?

Here's a link to a Confidential Survey where you can give me some feedback on what's working or not working for you:  Click to Give Feedback

Your feedback is confidential.  I'm the only one who will see it.  Access to your feedback is password protected.

Your feedback can also be anonymous if you want.  If you want me to contact you, or know who you are, leave your name and how to contact you.  Otherwise, your feedback will be anonymous if you want it to be.

Let me know early and often how things are going.  Thanks for your help.

How Big is "Too Big" in the "Too Big to Fail" Debate?

Most of the Financial Reform debate has focused on what should we do when (not if) a financial banking behemoth fails.

It's argued that something will need to be done because doing nothing risks "systemic failure," which is something so bad that the entire economy might fail unless something is done.

Is that the right question? What about asking instead, "How big is 'too big'?" Why do we need financial institutions so big that they might drag down the entire economy if they fail?

What's the "right size" for banks? Shouldn't they be only big enough to serve their local economy without risking the national economy if they fail? But what's a "local economy?"

Answering those questions isn't easy. It requires first understanding the boundaries of a "local economy." Do we really need "global" financial institutions? Don't banks have to be bigger than the neighborhood coffee shop in order to have the financial clout to make something happen? What is that "right size?"

Here's a video that uses some fancy algorithms to give you a peek at how to answer those questions. Enjoy.

Team Member Evaluations

Sometime after submitting your Final Business Plan and making your Extra-Credit Presentation (if your team did that), but before the Final Exam, please evaluate how your teammates performed.

The evaluation is confidential; I'm the only one who will see it or know its contents.

Intra-team discussions or agreements about scoring are strictly prohibited.  Once in a while, team members collude and decide they will give high grades to one other regardless of how well or badly the member did.  Don't do that.  This is your first - and it won't be your last - personnel evaluation assignment.  It's not always fun but make the best of it and do it honestly and thoroughly.

Two versions of the Evaluation form are included.

One is an "Electronic" version with pull-down menus for entering team-member grades.  When completed, save it and send it to me as an attachment to an e-mail message.

Or there's a "Hard Copy" version with "Bubbles" for entering team-member grades.  Print out this version, complete it and hand it directly to me. 

It's up to you how you get it done.  Just please make sure you do get it done.

Be sure to fill-in your team name and your name at the top of the form.  Enter each teammate's name in a scoring section. 

Then evaluate their contribution by category using the "Grading Standards" and by selecting the menu choice or "bubbling" the dotted-circle that best describes how your teammate performed.

Also, follow the rule that "Any Score of 0, 1 or 2 must be explained."  This ensures that any low scores are justified.  If no explanation is given for a score of 0, 1 or 2, a score of "3" will be awarded.

Use the "Comments, Explanation or Documentation" section to explain any score below "3."  Or you can also use this section to acknowledge a teammate's outstanding performance.

• Download Team Member Evaluation (Electronic)
• Download Team Member Evaluation (Hard Copy)

Watching the Stock Markets - There's No Better Leading Indicator

Our look at Stock Markets (Exchanges) didn't do justice to the subject.  I hope though it whetted your appetite.  There's no better Crystal Ball than watching how stocks and the various indexes react to economic news.

Here are my notes and PowerPoint Slides:  Download Investing in Stocks

Remember that a stock's "price" doesn't necessarily equal its "value" to you.  Calculating a stock's value involves a simple equation that gets very complicated in its application.  That's why the "Efficient Market Hypothesis" (what your textbook calls "Stock Market Efficiency") doesn't stand up in the real world. 

Review Appendix "B" in our textbook plus my notes.  Then add a daily dose of Stock Market News to your diet.  I guarantee that it contains no calories but does have loads of nourishment for your curiosity about the business world.

One Last "Need-to-Know" - Financial Strategy

There's no better way to end the term with some more finance stuff.  And the best part of this last dose:  it's actually useful!

There are a couple of parts of Chapter 17 you can bypass.  Section 3 deals with Mergers and Acquisitions, a topic that generates a lot of media attention but not something you need to know in order to earn your first $6 or $7 million.

Now here's the interesting stuff.  First, here are my lecture notes and PowerPoint slides from the topic's lecture:

• Download Financing (Week 9)

I'll bet you can hardly wait to "turn-the-page" and keep reading...

The Home Stretch - The Ninth Week's Study Guide

Your list of things to get done is getting shorter.

The Finish Line is in sight.  You're almost there.

Here's your Study Guide for the Course's Ninth Week.  Enjoy.

Download Ninth Week Study Guide

Advertising: Protected Free Speech or Needs-to-be-Regulated?

The tactical side of your promotional analysis is figuring out how to communicate with your customer.  There are lots of different ways, one of which is advertising. 

Media advertising (print and electronic being the most prevalent) may be the "Ultimate Elevator Pitch." 

For openers, you've got to get your customer's undivided attention.  How are you going to do that? 

Next, how will you deliver your message?  Is it most effectively delivered by words or images?  What are the right words?  Could you draw a picture for your customers of what they will experience?

From your strategic analysis, you should know what your customers want to know.  What kinds of information - and how much of it - do they want and will they use when making a Buy/No-Buy decision?  The advertiser's task is figuring out how to tell them what they want to know, no more and no less.

Last, the advertising message must conclude with "Here's what we want you to do."  Sometimes this will be a telephone number to call to buy the product.  Other times it will be an "invitation" to learn more. 

Getting all this right isn't easy.  It starts with understanding the "fit" between your product and your customer.  And there's a lot of pressure to get it right.  Think about the cost of a 30-second Super Bowl ad; it may be as much as $75,000 for each second. 

Here are my lecture notes and PowerPoint slides.  Enjoy. 

• Download Advertising