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When the bank says no: alternative ways to fund your business

Today’s guest post comes from Gene Marks, author, columnist and small business owner. He regularly contributes to top US media outlets such as The New York Times, Forbes and Inc. Magazine. 

To learn more about how to finance your business in the US, sign up for Xero’s webinar on Sept. 4 at 1 pm Pacific Time  in which Gene moderates a discussion with representatives from the Small Business Administration (SBA) and Kabbage. 

Image courtesy of ddpavumba at

Image courtesy of ddpavumba at

There’s one thing that many of us forget about bankers: They’re businesses, too.

Banks have shareholders and owners — and they have a responsibility to make money. Of course, there’s nothing wrong with this. But ultimately it can impact your small business funding. Because when you take a step back and think about it, are you worth it? Is that $10K or $100K that you need worth the trouble to a bank? Will the earnings from your interest payments be substantial enough to justify the risk? Is it worth the banker’s time to monitor you, review your financials, look at your ratios? Do you really have enough liquid assets to collateralize that debt? Will you ever lose that extra ten pounds you put on since college?

Unfortunately, the answer is no (and not even if you work out a lot). A bank doesn’t want to lend me money unless it’s going to be a profitable deal for them. My company is too small. Being in the service business, we have no assets. Sure, I can get a car loan or a second mortgage — but those are personal. And I’ve been offered a small ($25K) line of credit but my cash (which would be used as collateral) has always well exceeded that amount.

For most of us — at least until we reach a certain stage of maturity — trying to get bank financing, just like losing weight, isn’t going to work. But that doesn’t mean we can’t try something else. In fact, there are ways — good ways — to lose those extra ten pounds. It’s all a matter of eating better. Oh, and there’s a few good ways other than banks to get financing this year, too. Here are three.

1. Micro-financers

If you want to lose weight, try eating more lettuce. And if you want some cash, try  Kabbage. It’s a well-known micro-financer for small businesses that will lend you money. Both go well with dinner, mainly because lettuce is delicious and Kabbage will help you pay for it. Lettuce, which is roughage, helps you digest your food quickly. Kabbage also likes to do deals quickly — preferably under six months. You can buy lettuce at your grocery store. You can get a loan from Kabbage off its website. A head of lettuce costs about $3. With a typical loan from Kabbage you can buy anywhere from 10 to 30,000 heads of lettuce. The people at Kabbage will look at your “real life” data, such as transactions on ecommerce sites or, as long as you allow, with Square, Xero, PayPal or your checking account and other online activities. This option is not as cheap as lettuce (or even a bank) but the cost may be worth it.

According to Kabbage’s website: “Fees are 1% – 13.5% of your selected loan amount the first two months and 1% for each of the remaining four months. No early payment fees. Every month, for six months, you pay back 1/6 of the total loan amount plus the monthly fee. You can pay early and save. Each draw is treated as an agreement between you and Kabbage. Draw against your line as often as once a day. Pay only for what you take. Add cucumbers and bacon bits.” OK, that last part I added.

2. Crowdfunding

Eating a lot of potato salad will not help you lose weight. But if a bunch of strangers offer you $55,000 to make it then what the hell, right? Kickstarter is one of many great crowdfunding sites. Crowdfunding lets you raise money from people all over the world that will help you do stuff — even make potato salad. OK … don’t make potato salad. It’s fattening and I’ve always thought it’s kind of gross. But use the site to raise money for special projects and then promise your “investors” something (not equity as the SEC may have an issue with that) in return. In fact, in what could be the most successful Kickstarter campaign ever a guy who asked for $125K to develop a cooler has raised $9 million.

Who can argue with a cooler that: “Includes a rechargeable blender to make mixed drinks with, a removable waterproof bluetooth speaker, a smartphone charger, a lid light, a tie down for additional gear, a cooler divider and cutting board, extra-wide wheels for convenient rolling, a bottle opener and integrated plates and a knife.” That sounds like one kick-ass cooler and I’m getting hungry! Other, less creative companies have used Kickstarter to finance special projects, research and development, marketing campaigns and product development. In the future, once the SEC wakes up, you’ll be able to offer equity too. And potentially coleslaw. That’s still being debated.

3.  MaryAnn

Yes, MaryAnn. That’s the woman in accounts payable at your largest customer. Oh, she seems nice. She has three nice kids. She lives in a nice house. She gives to charity. She recycles. And she’s big on healthy eating. But just try and get her to pay your invoice in under 30 days. Just try. Not so nice now, is she? “That’s not our policy,” she says. “We pay all our vendors in 897 days. We are BigCo. Have a nice day.” Don’t get mad at MaryAnn. She’s just doing her job.

Instead, learn from her. Ask her about her diet. And ask her about cashflow. Why? Because your customers, just like BigCo, are getting their financing from … little old you. And every penny counts. Hmm … maybe you should be doing the same? Of course you should! Just turn to your own accounts payable clerk. Oh, can’t afford one, sorry. So you turn to Xero. And you schedule your payments out just a little bit longer. Maybe not 897 days. But how about 45 or even 60? Stretch your payments. Get a little tougher with your suppliers. Try not to annoy them too much. It’s a slow economy. And as long as you ultimately pay your bills without them harassing you then they’ll let you slide. Don’t your customers do the same to you? Getting financing from your vendors is the easiest and most effective way to stretch your cash. No bank required. MaryAnn knows this. And she sleeps like a baby at night.

Losing a few pounds? You can do it. Banks? You’ll need one someday. And they’ll need you, too. That’s when your company is big and successful and profitable and you can both work out a mutually beneficial relationship. But for now? Don’t worry. When it comes to losing weight, or getting small business funding, you’ve got options.


Xerocon Australia 2014 Day 2

We’re back at Xerocon Day Two, and Xero Australia MD Chris Ridd kicks off the day by telling the crowd about how Xero is investing in its partnerships.


Chris revealed Xero’s new head of accounting – James Solomons, a director of Sydney-based EFS Strategic, who said he was humbled by the appointment.

Chris also announced a new Partner Advisory Council, made up of accountants and bookkeepers from different states who will be tasked with giving Xero input and feedback to make sure it’s making the right decisions on things that affect partners.


“Partners – you guys – are absolutely baked onto our business model.” Chris Ridd, Managing Director, Xero Australia

Chris finished by outlining Xero’s inspiring work with the Foundation of Young Australians, which helps demystify the world of work for young people and supports them to become ‘work-ready’ by spending a week at the Xero head office.


Adam Ferrier – Understanding consumers: Don’t listen to a word they say

Adam Ferrier, Chief Strategy Officer at advertising agency cummins&partners, explained how to change people’s behaviours.

He said there are two factors that will allow their behaviour to change – their motivation to change and the ease with which they can change. So getting people to do what you want them to do involves two things – increasing their motivation or making it easier.

The best way to get someone to like you is to get them to do something for you and businesses should use that strategy, Adam said.

“We’re all in the behaviour change business - whether it’s getting your kids to eat their spinach or whether it’s trying to get you clients onto better accounting software.” Adam Ferrier

“We’re all in the behaviour change business – whether it’s getting your kids to eat their spinach or whether it’s trying to get you clients onto better accounting software.”
Adam Ferrier


All communications can be interactive. If you’re a small business you can build you business by asking your customers to help build your business and they’ll end up liking you more. Adam suggested doing research with clients.
“As soon as they’ve done you a favour they’ll change their thoughts and feelings to help them understand their behaviour,” he said.


The great debate: That you must outsource to survive

xerocon 19

The great debate kicked off after morning tea and considered the statement: you must outsource to survive.


The affirmative argued that outsourcing increases economic viability and efficiency. Even if you can do something cheaper in house, if it’s a low value activity you should still outsource it, because there’s an opportunity cost of a higher value activity.

Tanya Titman of Consolid8 explained how her business had established a team in the Philippines to do the repetitive process work like administration and data processing, freeing up time for activities that add more value to the practice.


The negative argued that accounting practices should automate first and offshore later.

They questioned whether some low value tasks needed to be done at all with automation. Paul Meissner of 5Ways said the rise of the cloud means that even the smallest businesses can use cloud technology to automate and eliminate business processes.

The two teams battled the topic back and forth before the audience cast their votes.
And the winner is…the negative – automation trumps outsourcing.



After lunch and it’s time to tackle banking.

Banking is key to Xero and so Xero puts a lot of work into getting the relationship right, Xero Product Manager, Banking, Matt Vickers told the audience.

In fact,  Xero has recently increased its banking team from 5 to 19 and will bump it up to 24 people next year.

Xero is aiming to get more banks and credit unions on board and increase coverage to all of the types of accounts and financial institutions on offer, Matt said – and he asked the audience to help Xero out by telling banks when they want additional feeds. He also wants to make gaining access to bank feeds a more seamless service – no more filling out forms!

Ultimately Xero wants to let small businesses share more data with the banks to help them get easier access to financial services and products. It’s a process that’s just getting underway in Australia, but Xero has already had some success with this in New Zealand and the process is now getting underway in Australia.

Matt explained that it’s all part of Xero’s aim to put small and medium-sized businesses at the centre of a range of digital services – the government, banks and other financial institutions, suppliers and employees – and ultimately work together to make them more productive.


Xerocon Australia 2014 Day 1

Xerocon has kicked off and it is huge. We have 1300 delegates gathered at The Dome in Sydney Olympic Park to hear the latest news about Xero and 82 exhibitors showing off their clever add-ons and services. Xero founder Rod Drury has come well prepared – he’s zipping around the conference on a skateboard.

Rod Drury skateboarding around at Xerocon Australia

Xerocon venue in Sydney

After a quick welcome from comedian James O’Loghlin – who earned cheers from the audience with the news that there are rides on the dodgem cars outside the hall – it was down to business. Continue reading ›


Xero Developer Day 2014

This year’s Australian Xerocon conference in Sydney was also the venue for the global Xero developer conference, breaking another record for attendance with over 300 in the room. Add-on partners and developers from around the world are in town, many of them exhibiting at Xerocon on Thursday and Friday.

The crowd lines up for Developer Day

It is really humbling to see the amazing following the Xero ecosystem has – we announced over 18,000 developer registrations at the conference, but nothing brings home the vibrancy of the ecosystem more than meeting developers in person who have come from far and wide for developer day and Xerocon. We have attendees from various parts of the US & UK here in Sydney, but the prize for furthest traveller goes to Dublin based Transfermate, a distance of 17,203km!

Chris Ridd – Xero in Australia

Chris Ridd on stage at Developer Day

“I’m so stoked to be standing here today kicking off Dev Day,” – Chris Ridd, Managing Director, Xero Australia

Chris outlined Xero’s rapid growth in Australia – from 7 staff when he joined the company in 2011 to 161 today – but adds that the company is building sustainable growth. Xero in Australia has facilitated $54 billion in transactions, and processed $1 billion worth of payroll in July alone.

He told add-on partners & developers that Xero remains committed to having an open platform, and is forming great partnerships with developers and with accountants.

Cloud is still the most effective delivery model for software. The company is investing more in the cloud integrator channel – there are currently 27 cloud integrators – because a lot of accountants don’t have the skills to implement some of the Xero add-ons. Small businesses also need to be reassured about the safety and utility of the cloud.

Chris announced that an improved new add-ons directory will allow searching not only by function, but also by industry – news that was met with cheers from some of the developers in the room.

The company has 35 developers in Melbourne alone and has already released the first product developed there. That capability will only grow as Xero builds a facility for developers at the Melbourne head office and hires more developers. Continue reading ›


Award-winning customer experience team

Bronze Stevie® Award for Xero's Global Customer Experience teamIt’s awards season! Alongside the recent announcement that our Design team are finalists in NZ’s Best Awards, our Global Customer Experience team won a Bronze Stevie® Award in the 2014 International Business Awards™. The award is in the Customer Service Department of the Year Category – Computer Services and Computer Software.

We always feel the love from our customers, but it’s still great to get the recognition across our peers and to put an official stamp on what we do. We set out to be different and we take massive pride in helping our customers get the most out of Xero. We also take pride in having real Xeroes looking after our customers and it completely validates how Xero support just works.

The theme of our entry was on keeping Customer Support ahead of the game in the fast-paced environment we operate in. The way we train our very own Xero superstars on all things Xero and how important it is to deliver fantastic and timely service to our customers. Continue reading ›


General ledger integration and other updates to Australian payroll

As usage continues to grow rapidly we’ve released updates to Australian payroll today. We hope you’ll find them helpful.

Seamless accounting and Australian payroll

Since Australian payroll was released you’ve had to deal with the manual process of creating a draft bill to update the general ledger with payroll information. This introduces costly mistakes and makes the process confusing and overly manual. So we’ve fixed it!

From today, transactions from payroll will seamlessly flow through to and impact the general ledger immediately – the way it should be with payroll transactions represented as journals. This impacts the Profit & Loss and Balance Sheet, reflecting the impact of the approved payroll immediately.

We’ve added a new Wages Payable Account field within payroll settings to record the net wages payable amount of each pay run within the journal. This provides you the benefit of keeping your wages payable transactions separate from accounts payable.

Another frequently requested feature is the payroll expense journal. It contains the same transaction information you’re used to seeing within the draft bill. The net wages are not recorded against Accounts Payable but the new Wages Payable account. Reconciling your net wages will now require you to allocate the spent transaction to your wages payable account, instead of a payroll bill.

To assist you in learning the new process, we’ve created a short video demonstrating the change. Continue reading ›


Employee notes and other updates to US Payroll

Today we’ve released updates in US Payroll with a focus on the employee. This follows on from our recent release of the API for US Payroll.

Employee Notes

A frequent request in Community has been a place to store comments or notes against employees. We give you ‘Notes’.

US Payroll – Employee Notes

Notes allows you to store information against an employee. It could be used for emergency details, to record important conversations or literally whatever you need to store.  All notes are time and date stamped and only accessible to payroll administrators. We’ll be connecting this area to Files in the future so you can store important documents as well.

Employee setup

To process payroll for an employee there’s a minimum level of information we need to capture. We’ve introduced a quick setup guide to outline the three screens that need to be completed at a minimum. As each screen is successfully saved it will update and disappear once complete. Entering employees tax information results in a more accurate calculation of tax withholdings. If you have their information handy we suggest filling it in right away. If not come back to it later. Continue reading ›


Xero a finalist in NZ’s Best Awards

The Xero design team is excited and humbled to be on the shortlist of 2014 Best Awards finalists. These are the top design awards in New Zealand – the calibre of finalists each year is truly awe inspiring. Do yourself a favor and spend some time looking at past entries and winners. This is the first time we’ve submitted entries – normally we’re too overwhelmed with work to put together submissions. This year we made sure to set aside the time, so we’re especially pleased to have seven projects in the running!

Admittedly, we have mixed feelings about awards. Winning awards is not our focus and we don’t want it to distract us. We pour our hearts and souls into every project with our total focus on creating a better experience for the millions of people who visit our web site every day and work with our software every day. Empathy drives us to constantly push for better experiences and ultimately help small businesses enjoy building and running their business. This involves increasing our understanding of our audience and their needs, always challenging ourselves to do work that makes a difference and has impact – work that makes people smile – and constantly testing our solutions with real people. We’re always learning how to create better experiences and having heaps of fun along the way. It’s a thrill to look back on this work with pride, but also to realize that our best work is still to come.

Some of Xero's beautiful designs made the shortlist of 2014 Best Awards finalists


How to make a banker fall in love with you

Today’s guest post is written by Gene Marks, small business owner, author and columnist. He writes regularly for leading US media outlets such as The New York Times, Forbes, Inc. Magazine and Entrepreneur. Learn more at

I have a client named John and he runs a company near Philadelphia here in the US. And his banker has fallen in love with him. Now calm down, it’s not that kind of love. It’s a different kind. The business kind. In fact, John is quite popular with a few other bankers in the area.

Get the bank to give you a small business loan

Image courtesy of jesadaphorn at

John employs 80 people. He distributes cabling into the utility industry. And, as the utility industry recovers, he’s been growing. John’s company grosses about $12 million per year and nets around $700K, which is not bad. He owns the company with two other partners. He bought the company back in 1994 and has been profitable every year. He already owns two buildings, which he previously financed and now he wants to buy another down the street.

And the banks are falling over him. They all want to give him a small business loan. Why? Because John is the kind of small business owner banks in the US love.

He has assets. He has history. He has customers and contracts and enough cash flow to easily service the additional debt. He has personal collateral. He has two internal accountants. He generates monthly financial statements. He submits to a yearly review by an outside accounting firm. He pays his bills. He is growing. He is looking to hire more people. In other words, this is a guy that a bank can profit from. And why not? Banks are businesses too. They deserve to make money. Continue reading ›


RBS and NatWest Direct Feeds – An Update

single-ledger-EDM-1Two days ago we announced that customers with business current accounts with RBS or NatWest would be migrated to direct feeds, and that although this would be free for twelve months for people with existing Yodlee feeds, that ultimately there would be a £3.50 per month charge per RBS or NatWest business current account.

We believe that direct feeds provide better reliability, and that having a direct relationship with RBS and NatWest will give customers more assurance that the feed will continue to be available long-term. However we have been listening and we have taken on board the feedback and agree that you should have the choice between the feeds provided by Yodlee, and the premium feeds that are available directly from RBS and NatWest.

If you are happy to continue with the Yodlee feeds for your RBS or NatWest business current accounts, you do not need to do a thing, your feeds will continue as normal. If, however you would like to switch to the additional assurance of a premium feed, please review the instructions for NatWest and Royal Bank of Scotland in our Help Centre to begin the process of putting the more reliable feeds in place.

Whether you’re a new customer or a customer who already has a feed, we will offer the two alternatives in parallel so that you can make your own decision as to which feed you would like to use. With the direct RBS and NatWest feeds, your statement transactions come direct to us from the Bank, authorised by your signed authority placed with the Bank. There is no third party involved, and you do not need to provide your RBS / NatWest online banking security credentials to set up the feed.

Thank you for all your feedback over the last few days. It is essential that Xero provides customers with the best service possible and although we believe that feeds provided directly by the bank are more reliable and that there is a great deal of value in that, we accept that for some, cost is a consideration so we are pleased to give our customers the choice of source for the data feeds. We really do appreciate all your comments and thoughts. Your passion has made all the difference.