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Este informe no está disponible en español. CARIBBEAN BUSINESS Survival Of The FittestIt Takes More Than Luck And A Great Product For A Small Business To Succeed In Puerto Rico. A Well-Prepared Business Plan Plus Adequate Financial And Technical Assistance Can Make The Difference Between Making It And Going Under By JOSE L. CARMONA July 10, 2003 Preparation is key: Entrepreneurs who do their homework and seek help improve their chances of success There are some 110,000 small businesses in Puerto Rico, which together generate 63% of all new jobs and 48% of the island’s gross domestic product, according to the U.S. Census Bureau and the local Commerce Development Administration. Small businesses are indeed the engine that keeps the Puerto Rico economy running. Whether because they have been displaced, laid off, are tired of working for others, or are simply looking for greener pastures, each year thousands of local entrepreneurs decide to start their own business. A considerable number of them fail in their attempts because they lack preparation, planning, or foresight. In 2002, there were 13,770 bankruptcy filings in Puerto Rico, of which 4,084 were Chapter 7 (total liquidation) and 133 were Chapter 11 (business reorganization) cases. What’s more, recent statistics from the U.S. Census Bureau and U.S. Small Business Administration (SBA) indicate that 40% of new businesses fail within a year and 80% within five years. Frightening as they are, these statistics demonstrate that it takes a little more than determination, luck, and a great idea or product to make a business successful. As the statistics and those entrepreneurs who have already been down that road will tell you, businesses that are prepared—which entails finding a niche, analyzing the competition, developing business and marketing plans, and seeking financial and technical assistance—have a much better chance of succeeding. Don’t go it alone Starting a business is no walk in the park, even in the best circumstances. Starting or maintaining one during a struggling economy is all the more challenging. That’s why experts in the field say it is more important than ever to seek financial and technical assistance before, during, and after a business is conceived. What do Empresas Cordero Badillo, Bella International Corp., Wendco, Empresas Vassallo, Roger Electric, and Carla’s Sweets have in common? They are all multimillion-dollar local businesses that started with a little help from the U.S. Small Business Administration. "The owners of these and many other successful businesses have an entrepreneurial mentality as well as vision and drive," Ivan Irizarry, SBA District Director for Puerto Rico and the U.S. Virgin Islands, told CARIBBEAN BUSINESS. "They are proactive, constantly updating their business strategies and keeping themselves and their employees abreast of what is happening in their particular industries." According to Irizarry, it is critical for entrepreneurs to look for financial and technical assistance. He said that most entrepreneurs have excellent ideas, but lack the technology, resources, and know-how to run a business and thus fail in their attempts. Irizarry said the SBA has numerous products and services to help a business prosper, including a redesigned website, www.sba.gov, which offers among other things a complete online course on how to start a business and make it a successful one. "I started in business because I knew there was help available," said Deborah Rosado Shaw, an award-winning Hispanic entrepreneur, author, public speaker, and civic leader. "I was willing to take the risk because I knew there were things I could learn and people who could teach me the nuts and bolts of things about which I knew nothing." Her business strategies have taken her from the South Bronx in New York to the ownership and presidency of a multimillion-dollar wholesale & import business. One of the first things Rosado Shaw did when she was starting up her business was to go to the local Small Business Development Center office in Northern California, where she lived, for financial and technical assistance. "You want as many people rooting for you as possible," said Rosado Shaw, who visited Puerto Rico in June to be the keynote speaker at the Professional Women Entrepreneurs Network conference during the Puerto Rico Chamber of Commerce’s convention. "You can’t do it alone; it never happens that way." Like Rosado Shaw, many local entrepreneurs rely on the business advisory & counseling services of SBA partners such as the Puerto Rico Small Business Development Center, the Service Corps of Retired Executives (Score), the SBA Business Information Center, and the Women’s Business Institute, as well as on the resources of the Commerce Development Administration and other local institutions. CARIBBEAN BUSINESS interviewed several small-business owners on the island to learn their experiences and their secrets to success. Here are their inspiring stories. Copladet Tours Started by Hector Sanchez out of his home in 1987, Copladet Tours offers excursions, overnight trips, and daytime expeditions to places of magnificent beauty and ecological importance all over Puerto Rico. Copladet began as a firm of consultants specialized in tourism planning, development, and education. The business set out to protect areas of cultural and ecological value through responsible tourism development. When Sanchez noticed a scarcity of trained tour guides on the island, however, he was prompted to diversify Copladet’s services. First, he began operating his own National Center for Tourism Studies to train tour guides. Then he published a guidebook on tourist attractions entitled "Puerto Rico Turistico." Now in its fifth edition, the guidebook is used as a text at some educational institutions. In 1992, Copladet became a pioneer in nature and adventure travel on the island, when the concept of so-called ecotours was still new in the world. Endorsed by the Puerto Rico Tourism Co., Sanchez began offering ecotours in areas such as Toro Negro Forest Reserve in Jayuya, the phosphorescent bay in La Parguera, the Camuy River Indian Caves in Camuy, the Caguana Indian Ceremonial Park in Utuado, and El Yunque rain forest. Sanchez noted that all tours are managed by employees who have been trained to be sources of interesting facts and to lead safe and exciting activities that meet or exceed tourists’ expectations, whether local or foreign. The demand for Copladet’s services grew quickly, and Sanchez needed to make a sound investment in expanding and maintaining the company’s ground-transportation fleet. In 1997, Sanchez had only one full-time employee, four tour buses after acquiring Greyline Tours, and $90,000 in annual sales, yet he obtained an SBA-guaranteed loan for $139,500 and later another for $70,000. In 2001, Sanchez acquired Jucar Coach & Tours of Caguas, increasing the number of tour buses by six. A $250,000 small-business loan from Banco Popular helped to expand the fleet to 16. Today, Copladet has seven full-time employees, 13 part-timers, and more than $400,000 in annual sales. "Before 9/11 we were generating annual sales of nearly $600,000," said Sanchez. "The terrorist attacks struck a near-fatal blow to the entire tourism industry, not just hotels and air carriers." Thanks to a $102,900 Economic Injury Disaster Loan from the SBA, Copladet was able to continue operations after 9/11, said Sanchez. Copladet’s continued growth and innovation are the products of Sanchez’s philosophy. "We strive to identify our industry’s particular needs and then create a product that will enable us to fulfill and exceed expectations," he said. "You have to innovate constantly or your business is dead." Sanchez also strives to improve the quality of life of Copladet’s employees inside and outside the workplace. He has instituted a policy to recruit dynamic personnel who can grow with the company as individuals and as motivated team partners. "Our greatest challenge and greatest frustration has been trying to win acceptance and recognition for our products and services in the tourism industry, because tourism isn’t only about hotels," said Sanchez. "We have entered into agreements with several private and government organizations in Puerto Rico, among them the Department of Education, the Public Service Commission, the Hotel & Tourism Association, and the Tourism Co." The National Center for Tourism Studies, whose first class had only four students, today has some 25 students per course, for a total enrollment of 250 students a year. Now Sanchez aims to position Copladet as a leader in the industry and a benchmark for other companies. "We created a website, are expanding the National Center for Tourism Studies, and periodically overhaul the entire transportation fleet," said Sanchez, who still operates the business from his home. Mech-Tech After a decade of living abroad, Edwin Colon returned to his native Puerto Rico in 1989. Soon after Colon and his wife, Maria, got settled in, he took over the administration of the Caguas Institute of Mechanical Technology (Mech-Tech), an industrial / technical school founded by his father in 1982 with campuses in Caguas and Bayamon. Colon called upon his background in electronics and information technology—he had worked as a systems mainframe analyst for Lockheed Martin—to recommend and implement accounting systems with an eye to controlling costs and growing the institution. He installed computer systems to handle the school’s management and federal Title IV recordkeeping requirements. He also restructured maintenance schedules, assets inventory, and other reporting requirements. "I wanted to make sure the management and curriculum were up-to-date so graduates would be well-prepared to succeed in their careers," said Colon. In 1995, Colon applied for a $1 million loan under the SBA’s 504 program and became the sole proprietor of Mech-Tech. At the time, the institution had fewer than 500 students and less than $2 million in annual revenue. The institution has since expanded to Mayaguez, Vega Baja, and Ponce. Student enrollment has increased to 2,500 and annual revenue has surpassed $7 million. Mech-Tech is the only school in Puerto Rico to offer associate degrees in tool & die making, auto mechanic technician, and electricity with program logic control (PLC). It also confers degrees in electromechanical engineering and industrial maintenance. Other courses include refrigeration, electronics, welding, marine mechanics, and computer networking. Colon’s effective leadership and enthusiasm have helped him to attract and retain a staff of 200 loyal employees. Colon said his strategies and decisions are to be credited for Mech-Tech’s prominent position in academia. For instance, Colon has endeavored to open the field where 99% of the graduates are men. "It has been difficult to convince women to go into a nontraditional occupation," he said. "Women are actually the best tool & die makers because they have patience and creativity." The Mech-Tech owner said it also hasn’t been easy to convince parents that not all children should grow up to be attorneys, physicians, or architects. "There are great benefits to working in mechanical technology," he said. Under Colon’s leadership, Mech-Tech has developed long-term training relationships with industry leaders such as Pep Boys, DaimlerChrysler, Honda, Acura, and General Motors. He is also proud to have built the fastest drag-race Toyota vehicle in the world. The institution sponsored Puerto Rico’s first national drag-racing team, which belongs to the National Hot Rod Association and won a Summit Championship in 2001. As part of its mission, and as required by the Accrediting Council for Continued Education, Mech-Tech helps to find employment for its graduates—and has a commendable 70% success rate. "We have to prove ourselves year after year, but there is one thing that makes the journey much easier," said Colon. "I look out the window and see people who will have a job; heads of families who will make great contributions to society." Abremar Computer Learning Center Maria Abreu was diagnosed with multiple sclerosis (MS) while living abroad in 1993. It hasn’t been easy for Abreu to cope with MS, a disorder of the brain and spinal cord caused by progressive damage to the outer covering of nerve cells (myelin), which leads to decreased nerve functioning. Shortly after being diagnosed, Abreu experienced a severe MS attack that confined her to bed for almost a year. Two years later Abreu returned to Puerto Rico to be near her family. Feeling much better and up to a fight, in 1996 Abreu returned to the labor market, engaging in her favorite task: teaching. Abreu provided computer training and earned an excellent reputation among her students, who didn’t hesitate to recommend her to others. Soon her phone was ringing off the hook, and she realized the opportunity at hand. Abreu then decided it was time to open a business of her own. That’s when she paid a visit to the Women’s Business Institute in Santurce’s Sagrado Corazon University and began taking some short courses for entrepreneurs. "They [the institute] were there when I needed them, even helping me to develop marketing strategies and prepare the loan documents," said Abreu. "Without them, I wouldn’t have a business." However, obtaining the financing for her business wasn’t as easy as Abreu thought it would be. The bank didn’t believe in the project and was reluctant to approve the loan. "Although I believe women are better qualified for business, I think that being a woman entrepreneur in Puerto Rico is extremely difficult, especially if you’re dealing with another woman," said Abreu. "The loan officer who was handling my case definitely felt more comfortable when she saw my husband walk in with me." In the end, Abreu got a loan from the bank, guaranteed by the SBA. In July 1997, Abremar Computer Learning Center in Guaynabo opened its doors to the public with two employees, including Abreu. Abreu recalled that business was a little slow at first; the company generated some $5,000 a month, but it survived. Six years later, Abremar not only provides computer training but also sells and repairs computer equipment. The business now has six full-time employees and averages $30,000 a month in sales. In 2000, Abreu established Cyber Corner, a retail shop that sells computer hardware and software. "Nobody believed in it, but in one year I sold 465 machines to just one client," said Abreu, proud that one sale almost tripled the company’s revenue in one year. Although Cyber Corner—a small concession within Pitusa Muebles & Enseres, one of the island’s largest retailers of home furniture and appliances—no longer exists, it served as a testing ground for Abreu’s next project: a major computer manufacturing plant. "It is going to be the first large-scale manufacturing facility for home computers in Puerto Rico, competing with Dell, Gateway, and Hewlett-Packard / Compaq as a direct computer manufacturer & retailer," said Abreu. "Our systems will have equally good or better components, and we will offer marketing, customer service, and warranty programs throughout the island." Abreu noted that in 2002, the Puerto Rico government spent more than $1 billion on computer hardware and related systems while individuals mail-ordered $14 million in preassembled computers from stateside companies. She is confident her unnamed manufacturing company could grab a sizable piece of that pie. Abreu is working to obtain SBA HUBZone certification in order to participate in federal procurement programs. She recently got the green light from the U.S. Department of Defense to participate in its contracting programs. The SBA’s HUBZone certification program stimulates economic development and creates jobs in urban and rural communities by providing federal contracting preferences to small businesses. Abreu is also negotiating with the Puerto Rico Industrial Development Co. (Pridco) for tax incentives and a site for the manufacturing facility, which will probably be in the northern region. She estimates that the plant could begin operations in January 2004, initially providing 100 to 125 new jobs. In the meantime, she is forming strategic alliances with Intel, Microsoft, and other computer companies. Proving to herself and to others that there are no barriers, in 2001, Abreu obtained Working Woman magazine’s Excellence Award and was a regional finalist in the Overcoming Obstacles category. "I am not one to say I can’t. There is always a way," she said. Roritz Auto Distribution / Best Car Mats Jose Rodriguez became the head of his family at the tender age of 15, when his mother passed away from cancer. He stayed in school, though, and worked the night shift at a fast-food restaurant, cleaning the oven grills. While in college in 1990, Rodriguez began selling and distributing chemical industrial products to retail auto-parts stores, gas stations, and others. His salary was the family’s sole source of income. He realized then the market potential for luxury automotive parts and ventured to start his own business. "I had to be moderate with my expenses," said Rodriguez. "I didn’t want to get in way over my head." The young businessman slowly began purchasing high-fashion automotive products with the little money he could save. He managed to attend a trade show in Las Vegas where he made contact with suppliers and manufacturers. With only a $500 investment, Rodriguez acquired his initial inventory directly from the manufacturers and got his business up and running. In December 1994, Rodriguez founded Rortiz Auto Distributor Inc., operating from a small facility in San Juan with limited economic resources and few employees—only two, really. Rodriguez was not only the owner but also the salesman and administrator, while his younger brother Alexis made deliveries. Things went well and by 1995 Rodriguez had acquired a 23,000-square-foot building on Hato Rey’s Barbosa Avenue with all the elements needed—space for storage, loading and unloading, offices, and a showroom—to take the business to the next level. While the company grew, Rodriguez completed his bachelor’s degree in business administration with a major in marketing at Inter American University. Just two years later, Rortiz Auto Distributor was generating $1.7 million in annual sales. Witnessing this tremendous growth, Rodriguez acquired larger lots of merchandise and began negotiating better prices and terms with suppliers. He also obtained the rights to distribute exclusive brands in various parts of the island. Rodriguez added a manufacturing subsidiary and paid $35,000 for molds to manufacture luxury tire wheels for 1996 to 1999 Toyota 4Runner Limited sport utility vehicles (SUVs). It was the only outlet for the product in Puerto Rico, putting the company in an enviable position in this highly competitive market. In 1997, Rodriguez established Best Car Mats, a second small business for the custom manufacture of car mats. In his continuous search for business opportunities, Rodriguez began pondering the possibility of selling his products in other markets. He began exporting to the Dominican Republic, Aruba, and the U.S. Virgin islands after participating in various trade missions with Promoexport, but he wanted to explore farther afield. "With assistance from the International Trade Center [ITC] of the Puerto Rico Small Business Development Center, I was able to define marketing strategies and determine financing needs," said Rodriguez. Rortiz Auto Distributor is now exporting to Central America. The ITC counselor helped with trade financing and analyzed the types of transactions to be performed through financing and insurance brokerages. Ex-Im Bank provided discretional insurance coverage, which allowed Rortiz Auto Distributor to add eight new jobs. The young entrepreneur also made contact with Mitsubishi Motor Sales Caribbean in Puerto Rico and was awarded a contract to manufacture car mats for the 1999 Galant and 1999 to 2000 Eclipse and Montero. "As the business continued to grow, I realized we needed to move into larger facilities," said Rodriguez. "In 2001, I obtained a loan through the SBA’s 504 program in the amount of $723,000 and purchased a building in the Caguas industrial park." Today, Rortiz Auto Distributor has 29 employees and annual sales of more than $3 million, twice what they were five years ago. Not bad for a man who once cleaned oven grills to support his family. "I think the key has been my desire to succeed in life," Rodriguez said. "That and many hours of dedication and effort to stay afloat." Pet Shop Boys While in college, Hector Perez decided that he wanted to go into business for himself. The decision wasn’t unusual since he was majoring in business administration. Perez gained invaluable experience as general manager from 1985 to 1989 of The Animal House, a large pet shop in Plaza Las Americas. He enjoyed his job, which made it easy to decide what type of business he wanted to establish. Almost immediately after obtaining his bachelor’s degree in 1990, the 20-year-old Perez went to get his first commercial loan, using his parent’s home as collateral. "My mother had no idea I was putting our home at stake, and was surprised when the bank presented her with the documents to sign," said Perez. "But she didn’t say no. After all, she was the one who taught me to be a go-getter." That first business loan went to lease an old building on De Diego Avenue in Santurce, where Perez opened Pet Shop Boys, selling pets, pet food and accessories, and specialty items. He had been trying to convince the owner of an abandoned building next door to sell him the property, but the man never paid much attention to Perez because he was so young. A few years later, however, the government told the owner that the building would have to be demolished if it wasn’t put to use. "Drug users were living in the building," said Perez. "As soon as the government threatened to knock it down, I was given the keys and told to do whatever I wanted with it." That’s when the SBA stepped in to help. In 1994, Perez had seen ads about the Economic Development Corporation for the City of San Juan (Cofecc by its Spanish acronym), the SBA’s microloan intermediary lender. He needed more money to make some improvements to and move into the leased building, so he applied for a $20,000 microloan. Soon, Pet Shop Boys was generating $200,000 in annual sales and outgrowing its space. In 1998, Perez went back to Cofecc, but not for another microloan. He walked out with a $320,000 loan under SBA’s 504 Certified Development Company program. He used the money to purchase the property and begin much-needed improvements. The three-year expansion process wasn’t what Perez had thought it would be. "It wasn’t easy," he said. "It involved a lot of sacrifice, hard work, frustration, and tears. The store was robbed, and we even encountered problems obtaining construction permits. We worked seven days a week nonstop." In 2001, Perez took a second 504 loan for $329,000 and his expanded business created three new jobs and added services such as pet grooming, a pet taxi, a pet hotel, free delivery in the metro area, a veterinary clinic, and at-home feather trimming for exotic birds. The business grooms some 250 pets a month and receives another 300 to 500 monthly for specialized treatments. The store also sells an average of 25 to 30 dogs each month, said Perez. Today, Pet Shop Boys Inc. has seven employees (five of them full-time) and is generating $600,000 in annual sales, not including the sublet veterinary clinic, but Perez has more and bigger plans. "I want to buy the property next to Pet Shop Boys to build a parking lot, since there is a lack of parking in the area. I would also like to open more stores and leave something to my three children," Perez said. When the time is right, Perez will return to Cofecc and the SBA to finance the purchase of the adjacent property and convert it into parking. This parking space could be sublet to other area businesses when Pet Shop Boys is closed. Pet Shop Boys has sponsored the annual World Dog Show since 1990, offering products, services, and orientation to attendees. Perez and his employees have also participated in various local TV shows to promote the business and provide viewers with general information on pet care. Through its website, www.petshopboyspr.com, Perez serves all of Puerto Rico as well as the Dominican Republic, Jamaica, St. Thomas, St. Croix, and other Caribbean islands. Deborah Rosado Shaw: Success is within everyone’s reach For Deborah Rosado Shaw, the most important thing you need to do to achieve success in business as well as in life is to do what she does: dream big. Born in Spanish Harlem and raised in New York City’s South Bronx—the nation’s poorest congressional district—Rosado Shaw’s strategies for success have transported her from tough inner-city beginnings to award-winning entrepreneur and advisor to Fortune 500 CEO’s. She is the founder of Dream BIG! Enterprises and Umbrellas Plus, a multimillion-dollar wholesaler and importer of fashion umbrellas and sun accessories. Umbrellas Plus has delivered successful projects to accounts such as Costco, Kraft General Foods, M&M Mars, and Toys-R-Us. Today, her merchandise can be found in more than 2,000 Wal-Mart stores. Rosado Shaw became the first Hispanic author of a self-help book to get published by a major publisher when her first book, "Dream BIG!: A Roadmap for Facing Life’s challenges and Creating the Life You Deserve," was published by Simon & Schuster in 2001. A year later, the famous publisher added a Spanish language version of the book, entitled Soñar en GRANDE! On the island as keynote speaker for the Professional Women Entrepreneurs’ Network conference held during the Puerto Rico Chamber of Commerce convention last month, Rosado Shaw gave an exclusive interview to CARIBBEAN BUSINESS for budding entrepreneurs. Her first advice: Don’t do it alone. "Do your homework. Don’t take a leap of faith, that’s crazy. You don’t want to risk your family, your home, and your job before taking care of what you need to take care of first," Rosado Shaw told CARIBBEAN BUSINESS. "It’s critical to seek financial and technical advice, especially if you’ve never done it before. You need people who have been there, know about finance, where the money is, and how to structure a deal." Had she had not sought help, Rosado said she would have been out of business by now. Second advice: Get help from whomever, regardless of who it is. "As women, we think that only women will help us. We have to be willing to get and be mentored from wherever it comes. For most of us breaking new ground, the first ones, it is almost always going to be a man in business who’s going to help us," said Rosado Shaw. Third advice: Quit something regularly. "Sometimes we persevere so long, that we miss the opportunities," said Rosado Shaw. "In order to see a new possibility for your business, your career, or your life, you have to be willing to say it’s over and make space for something new to happen to you." Her business, said Rosado Shaw, has morphed many times in the last 16 years. If she had not been willing to change how she did business, she wouldn’t have succeeded, she added. Fourth advice: Grow your network of resources. "You’re only as good as the network of resources you have available to you. You have to grow those just as carefully as you invest money," said Rosado Shaw. "Almost always, those resources will come with some sort of initiative to help grow small businesses." Rosado Shaw said that through the years she discovered the keys to building a successful life, the kind of life she always wanted, by accident. "The more I started to look, the more I realized that people who are successful have a certain set of strategies that they have put to work for them. And I thought it shouldn’t be a secret," she said, explaining the reason for writing a self-help book. "This is something that everybody should know." Rosado Shaw said she wrote it to teach people how to grow upon creating wealth. She firmly believes we live in an abundant world where there are plenty of opportunities for everyone, and everyone is entitled to a piece. "The more conscientious, responsible, civic-minded people become wealthy, the better society we’ll have, assuming they invest in their communities," said Rosado Shaw. "I’d love to see lots of wealthy Puerto Ricans. I’d take 10% of their income and reinvest it in our communities, making sure we bring more people into the economic stream. The more we have, the better our community and our children will be." Rosado Shaw said she is part of a group of friends that want to produce 100,000 millionaires in the next 10 years. "I’d like to see a lot of those be Hispanics. Let’s see how many millionaires we can produce who will reinvest in their communities, because that’s what really creates a rich life," added Rosado Shaw. "Most people want to pursue the dream of having their own business, but also want a bigger house and a new car. You can’t have it all at once," Rosado Shaw noted. "It takes some discipline about what’s most important and where you are going to invest yourself." A recipient of numerous awards and recognition, Rosado Shaw serves on the Frito-Lay Hispanic Latino Advisory Board and the Office Depot Women’s Council. She was twice appointed a commissioner with the New Jersey Commission on the Status of Women. She is a graduate of Barnhard College and lives in New Jersey with her three teenage sons. SBDC adapts its services to meet entrepreneurs’ changing needs As the needs of local entrepreneurs and business owners change, so do the services of the Puerto Rico Small Business Development Center Network (SBDC). Hosted by the Inter American University of Puerto Rico, the SBDC is a resource partner of the U.S. Small Business Administration (SBA) that provides management and technical assistance, counseling, and training to existing and prospective small-business owners through its network of offices islandwide. "The SBDC commissioned a survey among our clients to better understand their present and future needs and their level of satisfaction of our services," SBDC Executive Director Carmen Marti told CARIBBEAN BUSINESS. "The results were very interesting and provided us with a guide as to what type of offerings we should focus on." The SBDC has branch offices in San Juan, Arecibo, Bayamon, Fajardo, Ponce, and San German, plus specialized centers in Caguas (Export Caguas) and San Juan (International Trade Center). The SBDC enhances economic development by providing small businesses with management and technical assistance to help them grow and expand, which in turn helps them create more jobs. During 2002, local SBDC’s assistance to small businesses translated into 2,454 individual, one-on-one counseling sessions totaling 20,000 hours, and 240 seminars for 5,768 attendees. Of the clients assisted last year by the local SBDC, 65% were start-ups and 35% were already in business, noted Marti. "Our clients have an average of 3.8 years in business and now they’re wanting to expand, and they’re looking into what additional services they can get from us," said Marti. In light of the survey results—and taking into consideration that each step in a business’ development stage has specific needs and requirements—the SBDC revised its mission and vision and is evaluating how it can provide services that are more integrated and multidisciplinary to satisfy the changing needs of its clients. "Our clients are telling us they want other services, more on international markets, more in the areas of engineering, accounting systems, human resources, environment, and so forth," said Marti, who is a former vice president of the Economic Development Bank for Puerto Rico and former vice president of finance & economics studies for FirstBank, as well as founder of consulting firm Marti & Associates. Responding to the call, the SBDC, said Marti, has focused on innovation and technology as tools that businesses can use to compete in a highly competitive and globalized market. "Last year, we worked very closely with the Techno Fair and Techno Steps forums and our alliance with Microsoft, and we will continue to do so, so that businesses can improve their productivity through technology," said Marti. "We also promoted the SBA’s Small Business Innovation and Research program, which helps researchers and inventors take their technological ideas from concept to production." In the area of multidiscipline, the SBDC, says Marti, has reinforced the counseling areas of financing by giving businesses new alternatives to better control their funds and cash flow, management of accounts payable & receivable, and inventory. Evening and weekend courses will be expanded to accommodate clients’ needs. To help develop an entrepreneurial culture and mentality among college students, the SBDC is involving third- and fourth-year engineering students from the Inter American University with startup businesses, helping them improve operations and maximize productivity through project analysis. "In one case, the students’ recommendations could increase a business’ cash flow by $700,000 to $800,000 a year if implemented," added Marti. "We’re offering a more technological, innovative approach and focus." In it efforts to promote export and the incursion of local products to international markets, the SBDC has continued to forge alliances with public institutions, such as the Commerce Development Administration, Promoexport, and the Municipalities of Caguas and Bayamon. The recent survey indicated that fewer than 8% of SBDC clients were exporting in 2001. Although 37% of the companies have exportable products, only 13% were doing it. Interestingly, more than one third of these (36%) import articles for their business. "Last year, the SBDC became a city-state partner of the Export-Import Bank of the U.S., and we implemented a pilot program called Export Caguas to cater to Caguas area businesses with export potential," said Marti. "Now we plan to bring the program to Ponce through Export Ponce." The SBDC’s export program identifies companies with export potential, then preps and certifies these for export. "We plan to concentrate in the areas of technology and international markets and expand our evening and weekend courses," said Marti. "Most of our clients (71%) have business and finance plans which they revise regularly, but few have a marketing plan. That’s an area we have to focus more on as well." With a staff of 45 employees islandwide, last year the SBDC provided $20 million in 168 small business loans, of which 61% were SBA guaranteed loans. A total of 129 or 77% of the loans went to women entrepreneurs. Business characteristics of SBDC clients
Source: Puerto Rico Small Business Development Center Quick reference to SBA loan programs The U.S. Small Business Administration (SBA) has numerous programs and services to assist entrepreneurs in almost every aspect of starting a business, including developing a business plan, obtaining financing, marketing the products and services, and managing the company. SBA loan programs are available through SBA-designated preferred lenders, which are commercial lending institutions that have the authority to approve SBA loans without having to submit applications to the SBA. Here’s a rundown of the SBA’s most popular loan programs: 7(A)Loans: The SBA’s primary business loan is generally used for start-ups and to meet the various short- and long-term needs of existing small businesses. Under 7(a), the SBA guarantees loans to small businesses that can’t obtain financing on reasonable terms through other channels. The maximum loan is $2 million, of which the SBA will guarantee 50%. SBA Loan prequalification program: This program enables the SBA to prequalify veterans, minorities, women, exporters, rural-mall business owners, and others for a 7(a) loan guarantee before going to the bank. The maximum loan is $250,000. 7(M) Microloan: Provides short-term loans of up to $35,000 to small businesses and nonprofit child-care centers for working capital or to purchase inventory, supplies, furniture, fixtures, machinery, or equipment. Proceeds can’t be used to pay existing debts or real estate. The SBA makes or guarantees a loan to an intermediary, which makes the microloan to the applicant. These organizations also provide management and technical assistance. The loans aren’t guaranteed by the SBA. 504 Loan: Provides long-term, fixed-rate financing to small businesses to acquire real estate, machinery, or equipment for expansion or modernization. A 504 project typically includes a loan secured from a private-sector lender with a senior lien, a loan secured from a certified development company (funded by a 100% SBA-guaranteed bond) with a junior lien covering up to 40% of the total cost, and a contribution of at least 10% equity from the borrower. The maximum SBA bond generally is $1 million, though it can be as high as $1.3 million. Export Working Capital (EWCP): This program was designed to provide short-term working capital to exporters. The EWCP supports export financing to small businesses when such financing isn’t otherwise available on reasonable terms. The SBA encourages lenders to offer EWCP loans by guaranteeing to repay up to $1 million or 90% of a loan, whichever is less. A loan can support a single transaction or multiple sales on a revolving basis. This Caribbean Business article appears courtesy of Casiano Communications.
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