As I write this, the market price for a single bitcoin is $1,259 on the Mt. Gox exchange. It was around $152 on November 1. If you don’t understand the sentence I just wrote – don’t worry. Bitcoin is a virtual currency that is still being sorted out by individuals, markets, banks and government. In watching all of the buzz around Bitcoin I find myself thinking about small businesses and the ups and downs they experience in much the same fashion as the bitcoin phenomenon.
Matt Horne, Founder and CEO of DECO Windshields chatted with me yesterday in a Google Hangout about all things business finance. Matt has built a company that generates over $5,000,000 in revenue and had lots to say about money, business and the learning curve that he has had to go on to keep the doors open while dealing with massive growth. He used a term – “fringe bankers” – to refer to capital groups in the market that have been able to help DECO with their cash needs. I like the term and think I will be adding it to my vocabulary.
If you own a home or have ever purchased a home but did not have more than 20% to use as a down payment chances are that your mortgage needed to be insured by CMHC or another company. Mortgage insurance helps banks and lenders in the event that you stop making mortgage payments and your mortgage goes into default. The insurance premium charged by CMHC and others is passed on to you the borrower and can add up to 2.90% to your mortgage amount. The largest insurance provider in Canada is actually the Canadian government through the Canadian Mortgage and Housing Corporation. Yes you read that correctly. The government charges banks insurance premiums that get passed to you so that if you default on your mortgage the government will ensure the bank doesn’t suffer a total loss.
From time to time I read a great article (defined by me to be innovative and creative) and feel the need to share it. For those of you who are aware of Uber this article may be of interest to you. For those of you who do not know of Uber you should know that they have been disrupting the taxi industry in a big way. They built a platform for people who need a ride and for people who can provide the ride they need. The cost is more than that of a taxi but the experience is apparently incomparable as the owners of the car get rated for the service they provide meaning you are able to get a “private driver” as you need it without paying the full time wage of a driver. As a result of not only their popularity but also their expansion they are now looking at helping 100,000 entrepreneurs get onto their platform in countries around the world (see “Financing 100,000 Entrepreneurs“).
This comes up often with small business owners – what is your business worth today? Many small business owners don’t usually have a clear answer or even an idea of how to value what they are building. I thought I would share some basic information about how to answer this question for those business owners that may just need a little bit of guidance.
Talk to any banker, lender, mortgage specialist or broker about paperwork and one of their biggest frustrations would be “when clients send me their information in bits and pieces over dozens of emails and faxes”. It’s amazing that everyone needs access to the documents and information associated with a borrower but there is no streamlined system or platform for everyone to use to easily share their information other than email messages, faxes and plain old fashion photocopies.
I was sitting with an RBC mortgage specialist today who is also a good friend of mine. We were discussing the woes of life and catching up on industry news and market changes. He mentioned to me that he didn’t realize that commercial mortgages required so much time to not only get approved but to get funded. He specializes in residential mortgages and passes commercial mortgages along to a colleague who specializes in commercial mortgages. In the last referral he made it took a few months just to get the paperwork together.
I was reading the results of a survey conducted by the Business Development Bank of Canada (BDC) that highlighted three main reasons why companies seeking financing were not able to obtain the loan they wanted. In my experience working with businesses to secure debt financing I agree with the reasons and would suggest an additional reason that supersedes them all.
I was reminded today that in our business days turn into months without even noticing it. I have a client that is seeking a refinance of a private mortgage and had expected to have everything completed at the beginning of September. It is now the middle of November and we will be getting our Deal Package out to lenders this week seeking a Term Sheet or Commitment Letter.
Many small businesses have a hard time with technology. A hard time understanding what technology they should be using as well as a hard time staying up to date on the changes happening in the marketplace with technology that could be helping their business do more. Believe it or not the Government of Canada has a technology financing program that your business may be able to benefit from.