Corrections or additions?
This article by Kathleen McGinn Spring was prepared for the
February 14,
2001 edition of U.S. 1 Newspaper. All rights reserved.
Second Chance Lending: Ted Kompa
A recession may be upon us. Businesses that want to
survive need to be ready to make difficult cost cutting decisions
if they want to get financing to see them through, says Ted Kompa,
co-founder, president, and CEO of Business Alliance Capital Corp. an
asset-based
lender with offices in 300 Alexander Park.
Kompa speaks as part of a panel discussion, “Your Company is
Running
Out of Cash — Can You Get a Second Chance?,” on Tuesday,
February
20, at 11:30 a.m. at Venture Association NJ at the Westin (formerly
the Governor Morris Hotel) in Morristown. Cost: $45. Call
973-631-5680.
Kompa, a 1964 graduate of Villanova who holds a master’s degree from
Drexel, is enthusiastic about the Venture Association, which provides,
he says, an unusual opportunity for entrepreneurs to meet investors
looking for promising new companies. At each meeting, Kompa says,
two or three entrepreneurs make presentations about their startups.
While he isn’t sure how much money flows into the young companies
as a result of the presentations, Kompa says the presentations often
do get the companies into discussions with prospective backers.
This is shaping up to be a challenging year for many young companies
as a slowdown in consumer spending collides with a backlash against
dot coms, but Kompa says financing is available for many companies
that have run out of initial funds from venture capitalists and angel
investors. He offers the following suggestions for keeping a company
attractive to investors:
Check assets. Kompa’s company lends based on tangibleassets, including inventory, equipment, and accounts receivable. Otherlenders, he says, will look at intangibles such as patents,copyrights,contracts and intellectual property. Banks may not be open to makingloans to businesses without a track record, but other lenders maytake on the risk, he says. “Our loans are bridge loans,” Kompasays of the financing asset-based lenders like his company typicallyprovide. Generally, the term is 18 months to three years, just enoughto get a company over a difficult period. Rates, he says, are abovethose charged by banks, because the loans are riskier and also becausethey are more labor intensive. “Each company has an accountexecutivewho works with them daily, monitoring collateral,” he says.Evaluate problems. In making loan decisions, Kompa’scompanylooks carefully at management. Experience is important, and so isa firm grasp of reality. Anyone can make a mistake, Kompa says, butit is important to recognize where the mistakes are. “We’lldiscusstheir plan,” he says of the process of evaluating a company.”Ifthey don’t have a plan, that’s our answer.”If there is a plan in place, Kompa says there is no extensive numbercrunching, but rather “we listen to their assumptions for theirnumbers. In that process, we get a very good idea if these peoplehave their feet on the ground and understand their problems.”Keep heads out of the sand. Denial is one of the mainreasons that companies go under, Kompa says. There often comes a timewhen companies realize they should have gotten financial help sixmonths ago or a year ago, he says. When a company is losing marketshare, sales are declining, and it is getting difficult to coverexpenses,management needs to act. Companies need to seek help before they startto lose money at a rate where bleeding is too rapid to stop, he says.When it is no longer possible to get financing to cover expenses,when a company is so over-leveraged that it can’t bootstrap itselfup, it is probably too late to obtain additional financing.Cut costs. As sales slow, companies need to be aggressivein cutting costs. This is not easy to do, Kompa acknowledges,particularlywhen lay-offs are involved, but it is essential. “These peoplewill be the winners when the economy gets better,” he says ofthose who cut business expenses. And it’s not just personnel coststhat have to be examined. “A lot of things creep into the budget,and you just carry them from year to year,” Kompa says. That maybe fine when times are good, but when sales slow, he says, it’snecessaryto look at every line item.”That’s the way the cycle goes,” Kompa says of periodicslowdowns.”If you don’t react, you’re a statistic.”Previous StoryNext StoryCorrections or additions?This page is published by PrincetonInfo.com— the web site for U.S. 1 Newspaper in Princeton, New Jersey.
