Getting an SBA Loan Is Getting Easier
The new rules have already streamlined the process, although business owners need to watch out for new fees.
Good Morning!
Here are today’s highlights:
Squared Away: “Our mission is to employ as many military spouses as possible.”
Here’s what’s driving the increase in small business insurance rates.
Germany’s economy, including its vaunted auto industry, is in a ditch.
The future of cemeteries is looking increasingly digital.
OPPORTUNITIES
Michelle Penczak, grew her virtual assistant business, Squared Away, by hiring other military spouses: “I posted in a Facebook group for military spouses that we were looking for virtual assistants. We grew slowly and intentionally, adding one or two people every month. As we added assistants, we were able to take on more clients. We've been profitable pretty much since the beginning--we had almost $11 million in revenue last year--and never had to worry about funding. Six years after starting this thing, we're at 400 employees; 95 percent of them are military spouses. We serve more than 1,000 clients, from executives to independent contractors to venture capitalists.”
“‘Our revenue model is that the client pays us and we pay the assistant. That way, our assistants are employees, and we can give them health insurance, mental health days, federal holidays, 401(k) matching, and paid maternity leave--benefits that you don't often have as a military spouse.’”
“‘Our mission is to employ as many military spouses as possible. There are about 700,000 of them in the U.S., so the sky is the limit.’” READ MORE
FINANCE
Changes to the SBA’s 7(a) lending program are already having an impact: “The changes include a number of forms, often redundant, that are no longer required, according to Jennifer Bodenrader, SBA program manager at commercial bank Rockland Trust. Background and fraud checks once performed by the lender are now done by the SBA instead, saving a lender days of waiting. She estimated that some SBA loans can now be done in five days — although some could still take longer depending on a variety of external factors the lender does not control. ‘It is faster for the customer because it’s faster for the lender,’ Bodenrader said, adding that an additional form the lender was required to fill out each time a loan disbursement was made is also no longer required. ‘That process is no longer required. That is big time savings for the customer and for us.’”
“Adam Zaabel, head of credit at small-business loan provider Newity, also believed the changes strengthened and streamlined the program. ‘I think on balance, I am pleased with the changes. I think that the SBA has done what they can to make the program as accessible as possible to small business owners, and that's the direction we need to be going,’ Zaabel said.”
“A change made earlier in 2023 also allows SBA loans for partial changes of ownership. That would include someone buying into a business or selling a piece of a business — a great way for aspiring entrepreneurs to get into a business and learn alongside the prior owner, Bodenrader said.”
“But there is also one potential downside for business owners. Before, the SBA prohibited lenders from charging a flat free for their loans in addition to the origination fees. But now lenders are allowed to do so, up to $2,500, so business owners will have to be careful.” READ MORE
THE ENTREPRENEURIAL LIFE
Ami Kassar needs help (with his email): “I get several hundred communications daily and feel constant pressure to stay on top of them. I check my email inbox when I go to bed at night. If I wake up in the middle of the night, I grope around the bed, looking for my phone. And when I wake up in the morning, my first activity is to see what’s happened, if anything, during the middle of the night. During the day, regardless of what’s on my schedule, I’m always trying to stay on top of my inbox out of fear that, if I leave it alone for a few hours, I will miss something important or it will get out of control. As a result, I know I’ve been spending (or wasting) a few hours daily sorting through emails.”
“Many people have solved their email problems by employing virtual or in-person assistants. There are many options to consider. I have just never been willing to take the plunge. Until now.”
Does anyone have advice for Ami? READ MORE
INTERNATIONAL
In Germany, the economic wheels are coming off: “This is partly a story of a country uncomfortably exposed to circumstances, not least war in Europe and slowdown in China. According to IMF forecasts, Germany will be the only G7 economy to contract this year. Less widely appreciated, though, is the fact that the country’s long-term prospects have dimmed. Germany is exposed to a triple whammy: its industry looks vulnerable to foreign competition and geopolitical strife; its journey to net-zero emissions will be difficult; and its workforce is unusually elderly.”
“Emerging Chinese rivals also pose a considerable threat, not least to carmakers. Germany’s famous old brands—BMW, Mercedes, Porsche, Volkswagen—risk being left behind as consumers switch to EVs. The combined market capitalization of the four companies is now less than half that of Tesla.”
“Much like the German economy as a whole, their business model was working just too well to adapt. They now face growing competition from China, where exports of EVs are surging. The country’s carmakers bet big on such cars in anticipation of growing demand.”
“Even optimists are losing hope. ‘Artificial intelligence is often irrelevant for us, because there is no AI for a fax machine yet,’ sighs Ann Cathrin Riedel, who runs next, an advocacy group that seeks to digitize public bureaucracies.” READ MORE
ARTIFICIAL INTELLIGENCE
People are turning to ChatbotGPT for help planning their meals—with mixed results: “A growing number of health-conscious consumers are trying out whether artificial intelligence chatbots can develop meal plans to help them save time, lose weight, and even manage chronic conditions. Nutritional health professionals say: Take the results with a pinch of salt. For generally healthy people who understand the platform’s limitations, ChatGPT can be a useful tool, registered dietitians and doctors say. The bot’s meal-plan snafus have included weird recipes and inaccurate nutrition info, according to nutrition professionals and consumers. More seriously, it has suggested meals with ingredients that could be dangerous for some people. For people with medical issues or disordered eating tendencies, health professionals warn, it may do more harm than good.”
“Blakely Scott, 32, a user-experience designer in Atlanta, used ChatGPT in May to create a meal plan. Recipes including a honey-glazed sticky tofu were tasty, she says, and she enjoyed using a plug-in that allowed her to add the ingredients directly to her Instacart shopping cart. But blips—such as issues using the plug-in on her cellphone and leaving out essential ingredients in recipe lists—kept her from using it again.”
“[Jenn] Burt, the mother of four in Massachusetts, says she appreciates the meal-planning help despite the bot’s limitations. She often asks it to help her come up with meal ideas based on leftover ingredients. ‘I have these extra cans of chickpeas, what can I do?’ she says she asks the bot. ‘Please tell me because I can’t spend another minute of brainpower on trying to feed these people.’” READ MORE
COMMERCIAL REAL ESTATE
The owners of some of San Francisco’s most iconic buildings say the buildings have lost as much as 90 percent of their value: “At Chase Center, property owners are attempting to cut the city’s assessed $1.48 billion value for the stadium by some 58 percent to $635 million. The owner of the Transamerica Pyramid, New York developer Shvo, which purchased the building in 2020, is seeking a 53 percent reduction in its assessed value from $485.5 million to $227 million. The Westin St. Francis Hotel owners are applying for a more than 90 percent decrease in its assessed value of $787 million all the way down to $76 million.”
“It’s not unusual for owners to appeal property assessments—successful appeals can mean major tax discounts—but the number of appeals has surged in recent years.”
“‘There’s a crisis out there, and everyone knows it,’ said Peter Fatooh, the president of the appeals firm SF Property Tax Appeals, citing an array of problems ranging from worsening homelessness to record vacancy rates. ‘On the commercial side, there’s no question we’re suffering as much as we did in 2008, if not worse.’” READ MORE
INSURANCE
It’s the reinsurers who are driving up prices and driving insurers out of markets: “Reinsurers have lost money over the last four or five years as they competed to offer the best terms to customers, said Franklin Nutter, president of the Reinsurance Association of America, the industry’s trade group. But late last year, they decided competing this way wasn’t worth the cost. ‘The reinsurance community at large essentially decided we need a reset,’ said Sean Kent, an insurance broker for FirstService Financial, who helps big housing developments find property insurance policies. ‘It was the most volatile of any reinsurance renewal date in decades.’”
“Reinsurers’ increased prices have accelerated changes in an industry grappling with a new sense of uncertainty. The world is warming; storms are getting more intense; inflation has increased the cost of rebuilding after a disaster; and a global increase in interest rates is making money itself more expensive.”
“Since the beginning of the year, insurance companies have paid out $40 billion to U.S. customers, putting them on track for another record in yearly losses. At every level, the costs of guarding against risk are rising and everyone, from the leaders of large companies to the owners of homes and small businesses, is feeling the squeeze.”
“‘If you’re a C.E.O. or C.F.O. of a mid-market company — we’re talking about a 500-unit townhome community in Minnesota — they’re talking about reinsurance and the impact that reinsurance has on their bottom line and their profitability,’ Mr. Kent said.” READ MORE
LITIGATION
A climate verdict in Montana could have an impact across the country: “If it holds up against future challenges, the legal victory would be a big one for those pushing to strengthen climate action through the courts. The decision could influence other climate cases currently underway, environmental legal experts say, while also creating a roadmap for future lawsuits. It’s an important signal about the potential of climate litigation to move the ball forward on accountability for carbon emissions.”
“‘I think this is the strongest decision on climate change ever issued by any court,’ Michael Gerrard, founder and faculty director of Columbia Law School’s Sabin Center for Climate Change Law, wrote in an email to Bloomberg Green.”
“In the near term, Montana’s climate-change-excluding environmental review policy is effectively null and void. This means state officials are now legally obligated to factor in the climate impacts of proposed projects they review.”
“Most immediately, Seeley’s decision may have the strongest impact on places where there’s a constitutional right to a healthy environment. At least six other states (Hawaii, Illinois, Massachusetts, New York, Pennsylvania and Rhode Island) ‘and around 150 other countries have a right to a healthy environment explicitly stated in their constitutions,’ Gerrard said. ‘This ruling may inspire similar lawsuits around the world.’” READ MORE
TECHNOLOGY
Even cemeteries are going digital: “When someone dies in Beijing, the body is typically cremated and the ashes are buried behind a gravestone in one of the city’s public cemeteries. Family and friends gather at the site to light candles and burn incense to pay their respects. Zhang Yin, a local resident in her 40s, chose a very different burial rite when her grandmother died earlier this year: She had her ashes stored in a compartment of a large room at Beijing’s Taiziyu Cemetery, almost like a safe deposit box at a bank. An electronic screen on the door of the compartment displaying pictures and videos of the deceased replaces the traditional headstone. It’s a land-saving option that’s also more affordable and dovetails with the growing trend of Chinese families wanting more personalized funerals for their loved ones.”
“The aim is to consolidate all the digital traces of a person in one place, creating a memoir for each person as they pass on, says Jin Leiyi, vice president of Fu Shou Yuan. This memoir can help future generations understand who the deceased was as a person when he was still alive, he says.”
“A digital cemetery spanning 20 square meters (215 square feet) can accommodate more than 150 plots, while a site that size would hold only six traditional gravesites. ‘In large cities like Shanghai, there has been no land supply for cemeteries for many years. The situation is even more dire in Hong Kong, where the scarcity of land for cemeteries is particularly acute,’ Jin says.”
“The era of putting money ‘just into the purchase of land and the amount of stone’ for funerals will soon be over, Jin says. Rather, more money will be spent on science and technology and the emotional experience of cemeteries, he says.” READ MORE
THE 21 HATS PODCAST
When Business Owners Burn Out: This week, Shawn Busse and Jay Goltz discuss a recent Business Journal report that a lot of business owners are feeling burned out. Why is that, and what can owners do to avoid it? And have either Shawn or Jay been there? Plus: Shawn brings us up to date on the leadership transition he’s initiated, and—believe it or not—Jay has had another revelation about ESOPs. Also, do business owners need better regulation or no regulation? And which regulations are annoying Shawn and Jay the most right now? For Shawn it’s the nightmare of having employees in multiple states and having to figure out and comply with the various rules of each of those states.
“That was the last line in the article where it essentially cited that 70 percent of employees are burned out. I mean, two-thirds of the workforce is saying they're burned out. And then only 6 percent of HR leaders are actually saying that it's something that they worry about.”
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
Thanks for reading, everyone. — Loren