VEGAS INC Magazine - Latest Las Vegas business news, features and commentaries about gaming, tourism, real estate and more
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IN BUSINESS " The money is there, but the profile of the borrower has definitely changed." hundred twenty SBA loans worth $121.6 million were written during the first nine months of the current budget year ending September 30, but the numbers remain below the 2007 high. "The money is there, but the profile of the borrower has definitely changed to a certain extent because of the economic downturn," said Jim Valley, SBA regional sales manager for Wells Fargo Bank. "We're actively considering and actively pursuing loans in support of small-business owners in Nevada and throughout the country. Our appetite to make loans is there." The average cost to start a business is about $30,000, according to a 2009 study by the Kauffman Foundation of Entrepreneurship. Many require much less money, just a few thousand dollars, with some Internet-based operations requiring little overhead or labor. At the start of the recession in 2008, 92 percent of small-business loans in the United States were valued at less than $100,000, with the bulk coming from business credit cards, according to the Kauffman study. Small businesses with one or two employees are the most likely to tap into credit card debt, with the average startup cost being $31,150, according to Kauffman's figures. Credit cards are still easier to get for small-business operators than traditional bank loans or government grants. And they certainly don't require business plans or a lengthy loan approval phase. "The main problem with credit cards is that they are an expensive way to finance a business," the Kauffman study said. "Interest rates on personal and business credit cards average around 15 percent and can be above 30 percent in extreme cases." Businesses that rely on credit cards are more likely to fail than those that tap other lines of credit, the study said. The implication: Credit card borrowing remains a final option for fledgling entrepreneurs who lack other potential sources of financing. On a recent evening, 500 potential entrepreneurs gathered at the Orleans for seminars on how to write a business plan, market a company and rebuild personal credit. Outside, lenders from Nevada State Bank, US Bank and Wells | 29 AUGUST 2011 | Fargo touted their small-business lending programs. "SBA 7A Loan Program, Up to $5 million/$250,000 minimum," one brochure said. "Because businesses needed space to grow," read another with a picture of what appears to be a young banker shaking hands with a pair of equally young and attractive entrepreneurs. Representatives of state government touted a recently created $13 million investment fund that will be used to leverage $130 million in bank financing to spark business creation. Eager business operators wound their way around the cavernous hall in search of opportunity. Most possessed a great deal of hope. A decidedly smaller number carried out their actual business plans. It was unclear how many were credit worthy. "It's tough, very tough," said Mary Anderson, a former casino worker who was seeking to start a business. She had some ideas—elder care, home cleaning, possibly a bakery. Anderson wasn't certain, but she knew this much: She had lost her job and wanted to take charge of her life and career. "I don't want to leave it to other people. No one else will look out for you." Antill, the iron fence builder, wasn't at the Orleans. He was rather busy working at one job site and preparing for another. He sounded tired. The days can be long, he said and he has the pressure of raising a family while nurturing a business in the midst of the worst economy in 70 years. Yet in that exhaustion you hear the optimist of the entrepreneur, someone who is attempting to make a go of it with the help of his wife, children and occasional friend brought on for day's work. "There's honestly a lot of work out there," he said. "Almost 90 to 95 percent of this iron work is for security reasons. Times like this, people are seeming to want to secure their house, their gates. They're putting up window bars to protect themselves." Antill acknowledges that demand for such work can be a stark reminder of modern-day reality, but he recognizes that amid his job loss has come genuine opportunity. He now only hopes that the workload and the capital are out there to help him achieve his financial and personal career goals. GROWTH NDA CAMPAIGN SEEKS TO BUILD CREDIBILITY By Buck Wargo staff writer Call it the soft-sell approach to lure companies to Nevada. The Nevada Development Authority has turned away from the chimpanzees and to Nevada business executives and entertainers to pitch relocation to California companies. The private economic development agency this month launched an advertising campaign in Southern California that features testimonials from prominent people who live and do business in Nevada. The advertising spots show high- profile Nevadans explaining why this is a prime spot to reside, said Somer Hollingsworth, president and CEO of the NDA. Among those featured are Tony Hsieh, CEO of Zappos.com; Rick Moonen of RM Seafood; UNLV President Neal Smatresk; entertainers Wayne Newton and Terry Fator; and Applied Analysis Principal Jeremy Aguero. The NDA, which gets $1.1 million a year from the state to pitch for business development and relocations, has traditionally focused mainly on low taxes as a selling point to lure California companies. In a 2009 ad campaign, California legislators were compared to chimpanzees to focus on Nevada's lack of income taxes and lower workers' compensation rates. In the new campaign, testimonials focus on Nevada's positive lifestyles, schools, community activities and business support, Hollingsworth said. The goal is to build third- person credibility among California residents who might be uncertain about relocating here, he added. "It's a complete 180 on how we have been doing this in the past," Hollingsworth said. "Our research in talking to clients shows they don't have any idea of the business side of Las Vegas and how people live here." Hollingsworth said there's a deep misconception about Las Vegas—that it's all about resorts and hotels, great restaurants and having a good time. The advertising campaign aims to show that Las Vegas is business- and family-friendly. It's quite a challenge to go against the image portrayed nationally and worldwide by the Las Vegas Convention and Visitors Authority MONKEY BUSINESS? NO MÁS: The Nevada Development Authority has used chimpanzees to promote Nevada in the past, but its new ad campaign uses high-profile Nevadans to entice out-of-state businesses. about Las Vegas being solely a resort destination, he said. "I don't think they should change one thing because that's our core revenue, and it's always been good to us," Hollingsworth said. "We just want to do the other side and show there is more than just this. It's not just about gaming but a great place to do business. That it's a wonderful place to live, work and play." Hollingsworth said the campaign will run through mid-November in California and may be extended depending on its success, which will be closely monitored. He said previous campaigns, including ones using chimpanzees, have been successful in luring companies to Nevada. But, he added, it was time to change the strategy. Those advertisements generated national and international publicity that made the ad buys more valuable than the money that was spent, he said, but the softer sell is needed if Nevada wants to target several states across the country with a campaign to lure companies. "We always said that if we got a lot of serious marketing dollars to do a nationwide campaign we would have to go softer and have local people talk about the other side of this town," Hollingsworth said. Southern California from San Diego to Los Angeles to the Inland Empire have been targeted by the NDA's advertising campaign. It's too expensive to include Northern California, he said. The ads will air on cable networks such as CNBC, ESPN, The Golf Channel, USA, CW, The History Channel and FOX News. 19