Richard GoldsteinRichard Goldstein

Consider an SBA loan

Funding capital to support your PR agency’s growth is an ongoing challenge. When searching for funding for your PR agency, you’ll want to consider the loan programs offered by the U.S. Small Business Administration. The interest rates and terms can compare favorably with other types of loans.

To obtain an SBA loan, you’ll work with a bank, community development organization or other financial institution, because the SBA itself doesn’t actually make loans. Instead, it guarantees repayment of funds these financial institutions lend, which helps keep interest rates low.

Your PR agency generally will need to meet a few criteria to qualify for an SBA loan. You must operate for profit in the United States or its territories, and you must have tried to use other financial institutions' resources, including your own assets, before applying for a loan. Your agency also may need to meet specific criterial regarding the amount of income it earns or its size.

Although you’ll negotiate the interest rate with the lender, it can’t exceed the maximum rate established by the SBA. This is calculated from a base rate, such as the prime rate, plus a markup. Lenders can also charge fees.

There are many SBA loan programs. For example, SBA 7(a) can be used to fund startup costs, buy equipment and refinance existing debt, among other uses. To qualify for this type of loan, your agency must fall within SBA size standards. In general, this means your agency must be considered “small” within your industry, which is usually expressed either by the number of employees or annual income. The loan is usually repaid in monthly payments of principal and interest.

Most lenders ask for information on a business before they’ll lend money, and the SBA is no exception. You may need to provide a current income statement, balance sheet and cash flow projection (your CPA should already be providing you with all the above). Agency owners with a 20 percent stake or more in the agency may need to sign a personal guarantee.

To choose a financial institution with which to partner on an SBA loan, ask how many SBA loans they’ve completed. For the most part, the more loans they have completed, the better they can guide you through the process.

Are your clients profitable?

Every business needs customers to survive. (Note: you may call your customers “clients,” but they’re actually your customers!)

Agency management spends a good deal of time trying to attract customers to their agency and keep them, while rarely asking whether those customers are desirable ones. If you truly want your agency to survive, you must evaluate whether your newfound customers are raising your business or dragging it down. It may make financial sense to drop those that fall into the latter category.

Track data

Determining individual customer profitability should be your first step when considering which customers to drop. Your accounting system may be able to perform this already. If not, send an email to me at and perhaps I can follow up on this subject in a future column. Note, it should be obvious there’s a problem if your fee is $25,000 and the cost to complete the engagement is $50,000.

Sort your customers

After you’ve assigned profitability levels to each customer or group of customers, sort them by that level. Highly profitable customers would be in the A group. The B group would be made up of customers who aren’t extremely profitable, but who still positively contribute to your bottom line. The C group would include those customers who are dragging down your profitability. These are customers you can’t afford to keep because, for example, they’re overdemanding or abusive to employees, expect special service or constantly request more time to pay your invoices. In other words, they’re in the “no longer profitable” category.

A caveat: you may have a client in the C category that’s a marquee client that you may want to nevertheless put up with. This obviously is a business decision!

Create differing objectives

With the A group, your objective should be to grow your business relationship, because they’re worth the extra mile. Spend time learning why they’re your best customers. Identify what motivates them to use your services, so you can continue to meet their demands. Your B group customers may be OK, but just by sitting in the middle, they can slide either way. Try and identify those who have a lot in common with your best customers. Focus your marketing efforts on them and track the results.

When it comes to the C group, spend a nominal amount of time to see if any of them might move up the ladder. If not, the C group just aren’t a good fit for your agency. You may not want to fire these customers outright. Just stop focusing on them. They’ll soon get the message and move on. Why not let them torture your competition?

Prune for growth

It may seem counterintuitive to intentionally let go of customers. But as with any shrub or tree, by pruning and getting rid of deadwood, you will create space for a healthier company to grow. You will be better able to focus on and serve the best and profitable customers, ensuring that your agency will continue to stay loyal to your business over time.


Richard Goldstein is a partner at Buchbinder Tunick & Company LLP, New York, Certified Public Accountants.