It goes without saying that today we are in an environment where it is extremely challenging for small businesses to borrow money. Despite three consecutive quarters of GDP growth, everyone seems to continue to find reasons to be pessimistic about the economy. The naysayers will point out that GDP growth means nothing without job growth (just like they did after the last recession). They will also say that there has been a considerable of one time hits that won’t spur long term growth like last summer’s “Cash for Clunkers” program or other government spending. It is if an entire segment of our population has decided that each piece of positive news should be struck down immediately, and we should commit to being stuck in a sluggish economy.

All of this negative talk does nothing for our psyche, and only adds fuel to the “anti-lending” fire. The government then blames the banks for not lending, and the banks blame the regulators for being too restrictive about the types of loans they can write. At the end of the chain are all of us small business owners who are struggling to meet payrolls, because we can’t find new sources of capital. No one really seems to understand what the new normal is. We all want to go back to the way it was before the crash, and yet, we all blame the loose credit environment for the mess we are in today. The bottom line is that business owners need to get more creative when raising capital, and they need to be prepared if they are headed off to the bank to get a loan.

Today’s New York Times has a good article on how small business is covering the gap. Recently I learned of a local restaurant owner who needed to raise $70k for repairs to his building. The bank refused to lend him any money so he went to his best customers and offered a prepayment/investment opportunity. If you do find yourself in the position of needing to raise capital, and you plan on heading off to see your local banker, there are some things you need to be prepared for.

1) You will need collateral – In today’s business lending environment banks want collateral. The old standards of machinery, equipment, real estate, inventory and AR just won’t do. They want cash, stocks, and bonds. They want to tie up your personal capital. It seems to me they are creating their own problems when they do this. By tying up the entrepreneur’s liquid assets they prevent that same entrepreneur from accessing those assets to grow their business. This really impacts the business owners ability to take risk and invest.

2) Personal guarantees are the norm – In today’s environment personal guarantees are no longer something that can be negotiated away. The bank wants the business owner to not only have some skin in the game, they want them to have all their skin in the game. This means guaranteeing every loan with personal assets, not an attractive proposition to many entrepreneurs.

3) Real estate is not what it used to be – Many business owners have used the equity in their home or commercial real estate as a source of leverage when borrowing. Although these assets are not viewed as totally worthless by banks today, they are viewed as not attractive. Borrowing against your house to invest in your company is no longer something that can be done easily. So all of these years you thought you were building equity in real estate have been washed away.

4) Personal credit must be spotless – Those bumps in the road from your past can no longer be explained away, your need to have a clean credit history. Banks are no longer willing to take chances on riskier borrowers, they want risk free opportunities. There are not many of those out there.

5) You must make your case – Making the business case for the loan is more important now than ever. If it makes good business sense you need to spell it out for your banker. They are under a great deal of balance sheet pressure, and as a result are doing fewer new deals. In the past banks competed for your business, now you may be competing with someone else to get a loan. Be prepared to make a strong business case, otherwise you make walk away empty handed.

I have been through the lending challenges several times over the last eighteen months as my business partners and I have raised capital for a new acquisition and a real estate expansion. Our expansion opportunity was initially rejected, but then approved after we demonstrated that our business, while down, was improving dramatically. For our SBA 504 loan we had to find an outside party to act as an interim lender, because our bank wanted to keep us under the local threshold for money borrowed. We have proven that it is not impossible to borrow money in today’s environment, but you may swallow a lot of pride and Tums along the way!

The U.S. Commerce Department reported Friday that the U.S. economy grew at a rate of 5.7% in the 4th quarter of 2009, this is the fastest rate of growth in six years. The preliminary GDP number was above analyst’s expectations, and is an indicator that the economy has managed to pull itself out of recession. The big economic challenge we face now is new job creation, if history is a guide it will still be a few months before the job market begins to rebound.

The Rough Air Demand and Cost Indexes continue to remain stable despite a disappointment in December’s job numbers. Most economic indicators point to an economy that has bottomed and is recovering slowly. The primary concern from analysts is how quickly the overall job market will cover, a slow recovery in job creation will likely translate into a slow overall recovery. Inflation also continues to remain in check, oil prices have risen slightly in the past few weeks, and there is an overall expectation that oil prices will continue to climb through 2010. Despite this, overall inflation remains in check, which means interest rates are likely to remain stable for the near term. Check out the indexes on on our home page at www.rough-air.com.

During the middle of 2006, while I was still CEO of Hyde Park Electronics, I had a discussion with my wife about what I wanted to do next. Working together she and I, and and the rest of her family, had successfully grown and then sold our family business. After the sale to Schneider Electric in 2003, I stayed on to manage the integration of the business into Schneider, and to help grow the automation business for Schneider in the United States. It was more than three years after we had sold the business, and I had determined it was time for me to start something new, it was time to move on.

So in the middle of 2006 my wife and I started a new venture, Rough Air Associates. We had two goals in mind, one was to do consulting and coaching for family concerns, and the other was to find small businesses in the Dayton, Ohio area we could acquire, manage and grow. That first year we did $1,000 in total revenue for Rough Air, and we lost $6,000. We continued to put capital into our new venture, and as of today Rough Air and its affiliates operate out of two locations with 20 employees and more than $2 million in sales. We are by no means a large company, and I am sure there are more interesting entrepreneurial growth stories out there, but we have certainly built something we can be proud of, again!

Having spent the better part of my career working as, for, or with entrepreneurs I have come to the conclusion that successful entrepreneurs are a very rare breed, and possess several common characteristics that differentiate them from the pack. Although the ability to spot market opportunities and capitalize on them is a key, and “rat like cunning” can make a huge difference, there are some basics that will help you understand whether or not you have what is needed to be a successful business owner. If you wish to be an entrepreneur, and you don’t possess all of these characteristics, then I would suggest not leaving your day job. If you find yourself running your own business, and you lack these traits, I suggest finding a way to build them, quickly. Here are the traits that separate the successful business owners from the not so successful:

1) You need a high capacity for work – A successful entrepreneur has to be able to do a lot, and has to be willing to do a lot. Most of the time, especially when starting out, you will not be able to staff it out. If something needs done you will find that you may be the only person around to do it. Many look at entrepreneurship and relish the thought of being their own boss, most forget that while being your own boss comes with great benefits, it also comes with great responsibility. You have to be willing to roll up your sleeves and jump in to just about anything, and you need the mental and physical energy required to get things done. If you are not driven to get a great deal done on any given day, and if you don’t possess the energy to do it, then business ownership may not be for you.

2) An indifference to the time commitment required – Successful business owners are not clock watchers. I am up before 5:00 everyday during the week, in the office just after seven, and with the exception of meal times, and some social activities, I typically find myself working into the evenings. If you are of the mindset that working more than eight hours a day is a burden, then entrepreneurship is not for you. You have to be willing to work as long as it takes to get the job done. Some will say you just need to work smarter, not harder. I think you need to do both. Your will get out of your business exactly what you put into it. If the time commitment required comes as a hassle to you, then you should probably resist putting your capital at risk and taking the entrepreneurial plunge. You must have a strong indifference to the time it will take to create success.

3) A whatever it takes mentality is critical – A high capacity for work and an indifference to your time commitment really add up to being willing to do whatever is required to make your business successful. When you begin to restrict the amount of effort, capital or sacrifice you are willing to put into your business, then you will restrict the amount of success you will get back. Doing whatever it takes can be just about anything (within reason). It could be cleaning the bathrooms, taking out the trash, or going without a paycheck until you can afford to pay yourself. Once you say I am not willing to do that, then you create a self-imposed limit on how successful your business will be.

4) You have to enjoy the planned struggle – I have seen several entrepreneurs who seem to believe the company owes them something. They focus more on their paycheck than they do their business, and they don’t understand that sometimes business ownership is about planned struggle. My in-laws often tell me about eating “tomato sandwiches” when they were first getting Hyde Park started. In the lean times at Hyde Park, and when starting Rough Air, I have gone long stretches without getting paid, with my only satisfaction being the knowledge that I know I am moving my business forward. It has to be about more than just a paycheck, and you better be willing to sacrifice.

5) A persistent determination is required – You have to be determined to never give up your efforts to grow your business. If you don’t play you will have no chance of success, and if you quit in the middle you can never win. Whether times are great, whether times are bad, or whether they are just normal, you must possess a determination to see it through. You need to create a vision of what it is you are trying to achieve and remind yourself of that vision everyday. You then need to build up the determination that makes quitting unthinkable, and success the only option.

Entrepreneurship is not a game you can approach half-way. You can’t stick your toe in to test the water, and then back off if its too hot or too cold. If your desire is to be a successful business owner, then you need to go all in, all of the time. Like any endeavor in life, half-efforts equal half-results. You will get out of business ownership exactly what you put into it. Those that limit what they put in, will limit what they get back!

I cannot remember a time in my career when I have spent more energy questioning the decisions I have made recently in regards to my business and my career. I am sure it has a great deal to do with the challenging economy every business owner has faced over the last eighteen months, and the impact that economy has had on my business and the business’ of my Rough Air clients and Logos@Work customers.

Almost seven years ago at this time I was negotiating the sale of our family’s business, a business I had helped grow to be the world leader in ultrasonic proximity sensing, and sold to a Fortune 500 manufacturing company. Three years ago my wife and I made the decision to give up my six figure salary and corporate career to do our own thing. At that time it was just the two of us, today we have three operating entities, with 20 employees and three locations. We are one of the few companies in our business, in our area, that is actually making long term capital investments and gambling on continued expansion. Despite all of that, I am still spending a great deal of time questioning whether or not we are headed the right direction.

Some of this is the normal pulling of the mind an entrepreneur has, that gut feeling that you are missing something, or need to rethink your actions. I will admit that at times I find myself wondering if I even have the energy to do it all again. Then I remind myself that I don’t have much of a choice, the only direction I know is forward, I don’t have a reverse, so despite my worries I must press on. There are a million decisions to make, a million things to get done, this is the same universal problem every small business owner has. The only thing any of us can do is keep moving forward.

Moving forward is tough to do nowadays. The media keeps reminding us of how difficult things are in the business world, the government keeps finding new and interesting ways of making us focus on something other than growing our business, and it always seems the deck in the business world is stacked against us. Despite all of the challenges, many still do it. They still put their capital at risk, they still open themselves up to considerable stress and they still keep their eyes open for new entrepreneurial opportunities. Perhaps we are all inflicted with the same genetic flaw, or perhaps we all realize, that our country was built on entrepreneurship, and we are simply building on a foundation that was laid many years ago by our forefathers!