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These articles by Kathleen McGinn Spring were prepared for the

March 28, 2001 edition of U.S. 1 Newspaper. All rights reserved.

Getting a Loan For That Start-Up

It often doesn’t take a lot of money to get a small

business off the ground. "They don’t need $200,000," says

James Smith, director of the Skylands Small Business Development

Center. "It’s usually $10,000 for computers or $20,000 to stock

a deli." But coming up with that small loan is not easy. Many

lenders don’t want to bother with the under-$25,000 loan, because

it just isn’t cost efficient. And besides, says Smith, it’s more


"Big businesses have certified financial statements," he says.

"Small businesses don’t."

Often the best way for a start-up to go is through a microloan backed

by a government agency. In this area, the loans can be arranged


the Trenton Business Assistance Corporation. Smith will give potential

small business owners advice on securing one of these loans when he

speaks on "How to Finance Less than $25,000" on Thursday,

April 5, at 6:30 p.m. at a Raritan Valley College workshop at


Borough Hall. Cost: $22. Call 908-526-1200.

Smith has been a banker, a small business owner, and an educator.

He graduated from Fairleigh Dickinson University in 1975 with a


degree. He holds an MBA from Rutgers and has studied at the National

Commercial Lenders School at the University of Oklahoma. Beginning

his career in big banking with Citibank on Wall Street, he went on

to work in community banking before starting a consulting business.

Six years ago, he took the position at Skylands. He is now helping

Raritan Valley Community College get its small business development

center up and running.

Smith has seen big changes in banking. Some developments, the savings

and loan scandals, for instance, made it more difficult for small

businesses to get loans. He was a consultant for the Resolution Trust

Corporation, the entity that dealt with the fallout after a number

of banks, swamped by bad loans, went out of business. As a result

of that costly government bail out regulatory control over banks has

tightened considerably, cutting out some leeway bankers may have had

in making loans. At the same time, there has been an unexpected surge

in community banks, institutions that tend, he says, to take a more

personal interest in clients.

"The theory 20 years ago was that there would be just four banks

in the United States," Smith says. This didn’t happen, he says,

because of technology. "I bank at a small bank,


he says. "Last weekend I went down to Virginia to visit my son,

and I was able to get money out of my bank." Even the smallest

bank can offer ’round-the-world, 24-hour banking, he says. Technology

has also made it possible for small banks to handle back office



Some banks actually like to lend to small businesses, Smith says,

and it’s the job of New Jersey’s small business centers to prepare

these businesses to make a pitch that will win a check. Here is his

advice for getting the money:

Put it down in writing. "Small business owners are

enthusiastic and hard working," Smith says. "But they often

charge into it without completely thinking through what they want

to do. They make dumb mistakes and waste time and money."


alone won’t win over a lender. They want details. The best way to

turn a business idea into a reality that will attract money is to

put it in writing. Possible problems — and solutions, too —

will start to show up when the business is sketched out on paper.

Get personal. When lenders make a decision on the chances

a new business has for survival, they are looking at more than the

prospects for pizza parlors in Princeton or hair salons in Hamilton.

They look at the woman behind the business. Personal finance is an

issue, and so, says Smith, is lifestyle. "If you’re a single mom

with two kids, that’s an immediate concern," he says. In preparing

a business plan, you have to state how much you will have to draw

out of the business to live.

Business owners with a working spouse whose job comes with benefits

have an edge. "It’s called a differential advantage," Smith

says. He himself enjoyed this advantage when he started his business.

He had children in high school, but his wife was employed and he had

an Army pension. Small business owners without cushions like this

need to be prepared to explain to lenders how they will support


while the business is getting started, and should put that information

into a business plan.

This is true even for single people who live at home. "You can’t

live on zero dollars," Smith says. "You can cut your


yes. But you have to eat."

Anticipate objections. Some businesses are just harder

to fund. "Restaurants historically are very difficult," Smith

says. "A lot of people think a restaurant is an easy way to make

money. It isn’t. Margins are razor thin." Financing is also


for any business with environmental issues. Pool cleaners,


dry cleaners, photo processors, and anyone else who plans to work

with chemicals that are regulated under environmental protection laws

needs to be prepared for lenders’ concerns over liability.

Meet these concerns head on, Smith advises. Be prepared to show


how you plan to achieve above average margins in your restaurant or

how you will handle pesticides safely in your landscaping business.

Whatever the business, figure out the obstacles, then clearly state

how you will overcome them.

Prepare to work hard to secure financing, Smith says. If nothing

else, the process is a fit prelude to life as an entrepreneur. "If

you like working eight hours a day, don’t start your own


he says.

A client at the small business development center who impressed Smith

with her willingness to work hard to secure financing was a young

woman who wanted to start a business that chauffeured children. The

idea came from her own experience in trying to juggle a job with the

need to get her child to school, appointments, and activities.

"I gave her a list of 25 things to do," Smith says. Among

other things, she was to look into insurance, state and local


and potential clients. The woman quickly returned, her research nearly

complete. She is now on the verge of buying her third van and is


ready to franchise her business. "She’s working twice as many

hours," Smith says, "but someday I expect she will drive up

to see me in a new Mercedes."

Top Of Page
More Loan Sources

The Trenton Business Assistance Corporation (TBAC) is

set to receive $750,000 in its fifth round of funding to provide area

small business owners with MicroLoans of up to $35,000. The U.S. Small

Business Administration developed its MicroLoan program in 1993. In

1994, TBAC became an SBA MicroLoan intermediary and since then has

expanded its territory from the City of Trenton to Mercer, Burlington,

Hunterdon, and Warren counties. In 2000 TBAC approved 40 MicroLoans

for $700,000.

In addition to the $750,000 for new loans, TBAC will receive $150,000

for the SBA to provide technical assistance to area small business


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