No More Rate Hikes
March 26th, 2019

Pedal to the metal.  As of right now (March 2019) the Fed is projecting no more rate hikes this year.  Because of that rates on bank loans are not likely to be going up as opposed to what everyone thought six months ago.  So if there is any thought of possibly borrowing for some purpose for your business (New building?  New equipment?) the next several months might be the time to consider it.  And what this reprieve gives you is time to get your financial statements up to date and accurate, particularly your balance sheet if they already aren’t.  If you approach a bank for a loan your financial statements are the two of the most important things they are going to ask for, the other being your last two or three year’s business tax returns.  If you haven’t filed last year’s taxes, don’t bother to go.  The bank isn’t going to move forward until you get them.  And also, if you approach a bank for a loan and your financial statements are not current it tells the banker that you are not managing your business as you should.

Current rates are still historically low.  If you have credit card debt that has been used for your business or other short-term debt that may be coming due in the not-too-distant future there may be an opportunity to get an SBA working capital loan to refinance all of them into one loan.  And here is one of the greatest advantages of SBA loans – long amortizations.  An SBA working capital loan carries a term of seven years, offering the borrower the ability to stretch out payments over a longer period thus helping to enhance cash flow.

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In 1911 Irving Berlin wrote a song titled “Everybody’s Doing It.”  That could very well become the theme song for what’s happening now in the world of microloan-sized small business loans – loans under $50,000.  More and more nonbank lenders – fintech lenders, are getting into that market because of the reluctance of banks to make them.  But even some banks are beginning to stick their toes in the water for the same reason that the fintech lenders are – the availability of massive amounts of data, much of which comes from social media posts, allowing them to create algorithms that make lending decisions almost instantly.

Another sign of the changing times is that the insurance giant – Nationwide, has recently partnered with one of the major fintech lenders – Blue Vine, to start tapping into that market.  There is much more coming.  The outlook for small business microloans is continuing to look improve.

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That’s the famous sound of a Harley Davidson at idle – iconic, known world-wide.  Screeeeeeech!  That’s the sound of the new Harley LiveWire electric motorcycle.  It sounds very much like a Skilsaw cutting through a piece of wood.  Why?  Is nothing sacred?  The primary reason is that Harley’s longtime customer base – Boomers, are having more and more trouble getting on and off their bikes, so a lot of used Harleys are beginning to show up in the market.  Another factor is that today’s younger, urban and female riders are looking for smaller lighter bikes.  So here you have a 115 year-old company needing to pivot or continue losing market share.  Startups are not the only ones that sometimes need to pivot. 

So Harley’s answer, introduced in 2018 was the LiveWire, carrying a hefty price tag of $30,000.  The potatoes are fading.  The screech is coming.  Companies of every kind and description can get complacent.  One of the best all-time examples is the railroad passenger industry.  At the beginning of the 20th century almost all passenger traffic was by rail whereas by the year 2000 almost all passengers were going by car or plane.  The railroads believed that nothing could replace passenger rail.  They were complacent.

They didn’t pivot.

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We are not ever going back to the pre- 2008 recession type of consumer spending because Amazon was just beginning to dramatically change the way consumers buy things, and in 2019 people want fast and easy (i.e. not leave home in most cases).  More and more things can now be ordered online and delivered to your door.  Rather than go to the grocery store, just order it online and go sit in the reserved spaces in the parking lot and have someone bring it out to you and help you put it in your car.  So why would a consumer want to buy from you?  What do you offer that your competitors don’t?  Obviously if what you are selling can be easily bought online it is going to be harder to compete without running into Amazon and all its siblings.  But, a high percentage of products are still purchased “brick and mortar.”  Consumers are doing more research online but then still going to the brick and mortar to purchase. 

 So what is the value of what you are selling?  What is your unique value proposition?  Is it price?  Quality?  Service?  Experience?  Location?  If your business is still reasonably successful, should you assume that since no customers are complaining that they are happy?  Maybe there are customers who have left because they did not get what they wanted or expected and their wants were ignored.  Back to the question of why a customer buys from you.  If you haven’t taken a serious look at it, stop and think what it might be if you were forced to describe what you sell in 25 words or less, and don’t say service.  Everyone expects good service.  So what is the real reason people buy from you?  A perfect illustration of that 25-words-or less description of why customers buy might be Federal Express – “When it absolutely, positively has to be there overnight.”  9 words.

It might not hurt to give this some thought in regards to your business.  Maybe your competitors haven’t.  Some of your competitors may be gone or about to be.  Maybe if you really hone in on what you do best you can not only compete in today’s world, but come out growing.  It could be a unique opportunity.

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