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SDBJ INSIDER: Diversifying Can Help Insure You Against Politics

About two weeks before Jennifer Barnes was going to get a $100,000 U.S. Small Business Administration express loan, she got some bad news: Because of the partial government shutdown, her loan wasn’t going to fund.

“It was like what now do we do with the government shutdown,” said Barnes, who needed the money to grow Optima Office, the new company she launched about three months ago offering part-time, fractional accounting and financial services to businesses.

The options were limited.

According to a Washington Post report, the shutdown prompted the SBA on Dec. 22 to halt its popular loan programs for small and midsize businesses, dealing a setback to entrepreneurs. The newspaper reported the agency typically handles almost 200 loans for working capital and about 120 loans a day for commercial properties, dispensing a combined nearly $200 million in loans a day to businesses.

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Barnes, previously the CEO and co-founder of Pro Back Office in University City, has hired 30 people in eight weeks for her new company and says she expects to do $2 million in revenue in 2019.

Turning to Line of Credit

Because Optima Office took off quickly, Barnes needed the additional money fast. She had $300,000 in equity in her University City home and ended up getting a $100,000 line of credit from a bank secured by her home. She can elect to pay a $1,500 origination fee and refinance the loan with the SBA once the government fully reopens. As of Jan. 17, the partial government shutdown was already the longest in history and careening toward a month, with its impacts reverberating throughout the nation, frustrating businesses. No matter when it ends, the effects have already been very real.

“I have some clients in difficult positions because they rely on government funding for general funding of their organization and even for their own payroll needs,” said Barnes, adding that 10 percent of her 60 some clients are nonprofits, which are probably the most impacted by the shutdown. Her other clients fall in various categories, including manufacturing, distribution, agriculture and software services.

Need to Diversify

“If they need funding and are expecting an SBA loan, we’re really cautious right now in making sure that they have a good cash flow forecast and enough capital to get them by,” she said. Barnes advised that businesses need to diversify to non-government sectors to weather shutdowns, have cash flow forecasts and resources lined up. Always have a plan B, as she put it.

Editor-in-Chief Vik Jolly can be reached at vjolly@sdbj.com or 858-634-4623

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