It's no secret that some of today's largest and most successful businesses started out of small businesses, often in someone's home. In 1950, for example, Ewing Marion Kauffman started pharmaceutical maker Marion Laboratories in his basement with an investment of $5,000. In 1989, 39% of the company was sold to Merrill Dow Pharmaceuticals for $2.2 billion. And both Hewlett-Packard and Apple Computer started in garages -- the former in a Palo Alto, California garage rented by Bill Hewlett and David Packard (in the photo at the right), and the latter in Steve Jobs' parents' suburban Los Altos, California garage.

Garages are traditionally the place where inventors tinker. However, increasingly, garages are the place where manufacturers are manufacturing. But these aren't just any manufacturers -- these are a new breed of micromanufacturers, designing and manufacturing small batches of products in their home-based microfactories. And for those micromanufacturers who have dreams that are too large to fit within their garages, it's now easier than ever to create high-precision prototypes at home that can then be outsourced to regular factories in China or elsewhere for large-quantity production.

How is it now possible for microfactories to exist -- in a garage, of all places?

What's happened is that the tools needed to design products, create prototypes, and manufacture small batches have become far more affordable than ever before. 3-D digital models can now be created on Google SketchUp -- for free. Prototypes can be built using 3-D desktop printers (MakerBot, which costs less than $1,000, actually squirts out a 0.33 mm-thick thread of hot, molten plastic instead of ink). Desktop CNC routers or mills (which also cost less than $1,000 a copy) can then be used to produce molds used in the manufacturing process.

BrickArms is a successful micromanufacturer that builds Lego-compatible weapons that Lego would never dream of producing, including stun grenades, RPG missiles, AK-47s, and much more. The company has outgrown its garage origins and now works out of a modest industrial building in Redmond, Washington. Owner Will Chapman and his wife and three young sons are all involved in the business. Chapman designs his products using SolidWorks 3-D software, creating a reverse image which is sent to his desktop CNC router, which fabricates the aircraft-grade aluminum molds he uses for making his plastic products. Once he's happy with a prototype product, he ships the molds to a U.S.-based injection molder who makes a few thousand copies at a time. These are then retailed by BrickArms and its worldwide network of distributors. The company is so successful that Will Chapman was able to leave behind his career as a software engineer -- trading it in for life as a micromanufacturer.

What's in your garage? Instead of dusty bikes, lawn tools, and boxes full of who knows what, you might just have a gold mine waiting to be discovered.

Small business owners are some of the brightest and hardest working people on the planet.  They have to be because they now find themselves competing in a global environment for customers, employees, suppliers, and distributors.  And their competitors are coming from places they had never even heard of.  It's not your grandma's small business anymore.  So are SB owners going to rush out to grab up the announced government subsized loans through the SBA?  I'm not so sure.

First off, this is not a gift to you with money the government actually has.  It is $33 billion of the TARP funds that were repaid by the banks who received them from the government whether they needed them or not.  Where did the government get the money in the first place?  From you, me, and all those other small business owners out there who pay taxes (and China who bought our bonds).  So we're essentially getting back our own money, only now with government strings attached. Some people are arguing that the repaid funds should go to pay down the deficit.  Others like Pres. Obama prefer to recycle it.

I've talked to many entrepreneurs who've taken or considered taking SBA guaranteed loans from their community banks.  To a person, they all complained about the hoops they had to jump through to apply and then the time and paperwork that ate up their precious work days after they actually got the loan. Many SBOs are turning to asset-based lending, which has grown enormously in the past few years.  Asset-based lenders are concerned more with collaterol than credit-worthiness. Their rates are higher and they can seize your assets if you don't pay, but you can get the loans quickly and more easily and that may mean a lot when an opportunity is sitting there. As Kyle Stock reports in a recent article, Weezabi LLC saw an instant opportunity when the University of Alabama football team found itself heading to the national championship.  He needed 60,000 Crimson Tide t-shirts fast, so he went to asset lender FTRAN and secured his loan with future revenue.  The opportunity was right in front of him and he didn't have the time to raise money by any other means.

Nothing that sounds too good to be true ever is, and there's no guarantee that banks will lend under this new government program because they're a little gunshy about the restrictions. Ed Yingling, chief executive of the American Bankers Association noted,  " If you are a bank with plenty of capital, then you won't be interested. If you are a bank that could put some extra capital to use, will the regulators approve it or will they be concerned about even one such bank eventually failing and making them look bad?"  

In a separate $33 billion proposal, Pres. Obama wants to provide up to $500,000 in tax credits for small businesses that hire or increase wages beyond the rate of inflation.  Given double-digit unemployment and no reliable economic predictions for the next two years, small business owners are not likely to take the leap to add employees they will have to maintain after the tax credits run out.

If you do decide to line up for the new SBA loans or check out an asset-based lender, do your homework and read the fine print.  You don't want to end up worse off than you started.

As I mentioned in my January 27, 2010 post, it was looking increasingly likely that President Obama would soon announce help for America's small businesses. That day has finally come. According to a White House press release, Obama will today announce a new Small Business Lending Fund, funded to the tune of $30 billion redirected from TARP. Interested? Check out the press release, then drop by your banker's office and get in line. I suspect this will be a VERY popular program.