EDA’s Tech Loans


SBA Loans

Herb Spiegel’s Biz Planner

More Loans

Angel Matchups

Meetings For Money

Stephen Shaffer: What VCs Look For

Corrections or additions?


<B>Abhay Joshi, founder of Discovery Semiconductors

at 186 Princeton-Hightstown Road, has acquired so many overseas


in 1999 that now 40 percent of his output is shipped abroad. And this

fits in with Joshi’s current advice.

The genie of the information revolution is out of the bottle, he says,

and we can’t put it back. Global competition is here. "I think

in the next 10 years we will face competition not just from Japan

and Western Europe but from all over the world. There will be a much

more level playing field between different world economies," he

says. Companies in the so-called "Third World" will have


of affluence and be able to compete against companies like Microsoft.

And there will be pockets of deep poverty in the wealthier nations.

Result: "There will be opportunity but there will also be anxiety

for a lot of people. I don’t think Americans are ready for it yet,

as you saw in Seattle," says Joshi, referring to the trade


demonstrations. "There is a genuine fear that companies with low

wages can compete."

His prescription: "America has to be an inventor/investor nation.

If it starts fighting to keep its logging and textile jobs it is going

to lose. America has only 250 million people out of 5 or 6 billion

in the world, and the rest of the world will not be stupid forever.

The major problem in the United States is the poor public education

system. If the kids are not educated properly, other countries are

going to get ahead of us."

Joshi’s firm produces monolithic opto-electronic integrated circuits,

costing from several hundred to tens of thousands of dollars, for

the microwave and fiberoptic components of the telecommunications

industry, as well as for the defense and space industries. Since


of 1999, when he spoke at the New Jersey Entrepreneurial

Network meeting, he has added four workers for a total of 14. He


by the advice he gave then (U.S. 1, April 28, 1999).

Following his own tip — that entrepreneurs should network to find

resources — he recently leveraged his contacts to land a $360,000

low-interest loan for working capital and equipment purchase from

the New Jersey Economic Development Authority (EDA) and Summit Bank

(see story below). But overall, Joshi says, success depends on faith

in one’s vision:

Start while you are young. Joshi, now 35, grew up 100

miles south of Bombay, and came to the United States in 1986 for


study at New Jersey Institute of Technology. He founded his company

in 1993, at age 28.

Be blessed with supportive relatives. Joshi cites his

wife, Sharon, for her emotional support and also his father, who gave

both moral support and some money at crucial moments.

Save as much as possible before you start. For almost

one year Joshi was without a paying job.

Reach out to those who can help. "When the chips were

down, I was fortunate to have really nice people helping me,"

he says.

Early in the learning curve, attend meetings and classes.

"Randy Harmon of the Technology Help Desk was a good resource

in the early stages and he keeps on helping us. He tries to bring

information on doing business to the entrepreneur," says Joshi.

Believe in the vision, no matter what. "During the

early days of the venture, that is when you get really cold feet,"

he says. "You are an untested guy and nobody believes in you.

That is why you need to have a strong ambition and a strong faith

in the vision."

Evaluate the odds for getting capital. An early option,

to leverage the Small Business Innovation Research program, worked

for him. "The chances of winning with a proposal for the SBIR

were one in ten. The chances of winning with a business plan for a

venture capital guy were probably 1 in 100."

Build brick by brick but move toward doing everything


Citing "Only the Paranoid Survive" by Intel founder

Andy Grove, Joshi says he does not wish to be thought of as

successful. Says Joshi: "The business of semiconductors and


is cutthroat competitive. Don’t call me a success. Don’t praise me

too much. You cannot sit on your laurels."

Top Of Page
EDA’s Tech Loans

First and second stage companies often need professional

help getting capital. One of the less well-known sources is the New

Jersey Economic Development Authority, which has two capital


Abhay Joshi obtained $360,000 from EDA’s Technology Funding

Program for second stage companies with high tech products. This

program, which can yield from $100,000 to $3 million in low-interest

loans, pairs the EDA with commercial banks. EDA’s participation will

be at a below-market rate with the bank lending at its normal lending

rate. The EDA will review and consider companies that have:

Received venture capital or private investments.

Obtained or are close to obtaining FDA approval for their


Licensing arrangements with established companies for

their products.

Historical financial statements showing same cash


Another EDA program, the Seed Capital Program, is for

earlier stage technology businesses that have risked their own capital

to develop new technologies and need additional funds to bring their

products to market. Businesses may apply for financing from $25,000

to $200,000 if they meet most of the following requirements:

Have a specific technology that exhibits a strong potential

for commercialization.

Have a formal business plan and strong management team.

Operate within emerging technology sectors.

Have an established business location.

Have begun product testing.

Have obtained funding from the New Jersey Commission on


and Technology.

Qualify for research & development credits.

The New Jersey Economic Development Authority (EDA) has a


of loan programs. For details, contact EDA’s Commercial Lending


at 609-292-0187 or E-mail cld@njeda.com

Top Of Page

Another funding option is for very young businesses

of all sorts — they do not need to be technology-based. New


can attend the Entrepreneurial Training Institute (ETI)


by the New Jersey Development Authority for Small Businesses,


and Women’s Enterprises (NJDA).

All EDI students develop a business plan, and these plans are


to a "panel review" by lawyers, bankers, and accountants.

They are prime candidates to qualify for $20,000 to $100,000 loans

from the Trenton Business Assistance Corporation (TBAC) or NJDA.

TBAC has a MicroLoan program that is funded by the Small Business

Administration, whereas the NJDA’s fund is derived from casino


David W. Schafer, for example, read about the Entrepreneurial

Training Institute in U.S. 1. He took the course, did his business

plan, and had his business funded to the tune of $21,000 by the


Business Assistance Corporation (U.S. 1, September 22, 1999). Then

he quit his day job to launch a home-based business on Clover Lane,

a golf portal with a database that keeps and calculates handicaps


Entrepreneurial Training Institute. The seven-week course,

given in 10 locations around the state, costs about $225, including

the textbook. Call the NJDA at 609-292-1890 or E-mail:


for an ETI schedule.

Trenton Business Assistance Corporation (TBAC)


E-mail: tgacsba@earthlink.net) offers SBA Microloans from $1,000

to $25,000 to qualified non-profit organizations. TBAC, acting as

the intermediary, assists women, low income individuals, and minority

entrepreneurs who cannot obtain conventional bank financing yet have

the capabilities to operate a successful business.

New Jersey Economic Development Authority (EDA) also has

a microloan program for mall businesses, minority owned, and


enterprises. The average loan size is $40,000 to $50,000. For details,

contact EDA’s Commercial Lending Division at 609-292-0187 or E-mail


Top Of Page
SBA Loans

The backing of a loan from the United States Small Business


(SBA) offers certain financial benefits: less money down, longer


terms, and lower interest rates.

The SBAExpress and the SBA LowDoc programs address small

businesses’ need for business loans under $150,000. The SBA LowDoc

program has a one-page application which to be forwarded to the SBA,

and applicants provide additional information to the banks as they

require them. Both programs assure a 36-hour turn-around on loan


simplify the process for participating lenders and borrowers, and

provide systematic reconsideration of all loans that are not approved

as submitted.

SBA’s Women’s Prequalification Loan Program can be applied to

woman-owned, for-profit small business concerns or those owned by

minorities and veterans. The maximum loan amount is $250,000. For

information about any of the loan programs call 973-645-2432.

In addition to its lending activities, the SBA New Jersey District

Office provides business counseling through its network of Service

Corps of Retired Executives (SCORE) chapters (973-645-2434) and

New Jersey Small Business Development Centers (SBDCs, 800-432-1565).

You can also make use of the state-of-the-art facilities and research

libraries at the SBA’s Business Information Centers (BIC) in Newark

and Camden. BICs also frequently conduct workshops. Call 973-645-3968

for more information.

Top Of Page
Herb Spiegel’s Biz Planner

One way to get a good loan is to write an excellent

business plan, and the way to do that is to use Herb Spiegel’s

Biz Planner, a workbook and matching spreadsheet template diskette

that sells for $10. Add $5 if you are requesting it by mail.

On his home page (http://www.mccc.edu/~hss) Spiegel, director of

Mercer College’s Small Business Development Center, has links and/or

actual information on literally everything you need to know about

starting a business. His Frequently Asked Questions on small business

loans are particularly pertinent.

Q. Can I get a small business loan to open my business?

A. Probably not. Banks rarely loan money to start-ups.

More than 95 percent of all people who want to start a business obtain

their starting capital from their own pockets and from relatives,

friends, and acquaintances.

Q. Well then, who gets small business loans?

A. Business loans are for businesses, not for start-up

ventures who are affectionately called "wannabees."

Q. What is the main criteria for banks when they loan


A. The ability to PAY BACK. Spiegel puts this warning

in flashing red letters.

Spiegel and his SBDC advisors can do business feasibility


but they don’t tell you what kind of business you should go into.

They can help you evaluate whether to buy a certain business, but

they don’t do career counseling. They can recommend sources of


but they don’t locate or provide your financing. They can give you

a blueprint for writing your business plan and review your plan step

by step, but they don’t write your business plan.

Other services offered by the SBDC counselors include procurement

counseling, site evaluation, business liquidation help, recordkeeping

recommendations, and legal formation advice.

Mercer County Community College Small Business Development

Center , Box B, Trenton 08690. 609-586-4800, extension 3469.

Top Of Page
More Loans

Mercer County Loan Consortium Program. The county program

can provide loans ranging from $20,000 to $100,000. Call the Mercer

County Division of Economic Development at 609-989-6555.

The New Jersey Community Loan Fund makes loans from


to $250,000 to both for-profit and not-for profit businesses. Loans

are to emerging and existing businesses that are committed to create

employment for low income citizens and develop skill-sets as a means

for livelihood. Call 609-989-7766.

New Jersey Commission on Science and Technology, Box 832,

Trenton 08625. John Tesoriero, executive director. 609-984-1671; fax,

609-292-5920. E-mail: njcst@scitech.state.nj.us.

This commission offers from $50,000 to $250,000 in technology transfer

funds for projects that will be completed in 12 months or less,


those that also have outside investors. Recipients are expected to

match state dollars and pay royalties on successful technologies but

are not going into debt (which must often be repaid independent of

the company success) or giving up equity (which gives the investor

certain ownership and management rights). Eligible companies will

be located in New Jersey or be willing to move here and stay five


Top Of Page
Angel Matchups

Angel Capital Electronic Network (ACE-Net), an


system, matches entrepreneurs with angel investors. Stash R. Lisowski

directs ACE at the NJIT Enterprise Development Center, 240


Luther King Boulevard, Newark 07102, 973-643-5740; fax 973-643-5839,

E-mail: Lisowski@admin.njit.edu.

Entrepreneurs can get on ACE-Net by completing a standardized form

to enter a prospectus. The system is on the Internet, and the deal

listings can only be perused by obtaining a password (for a $450 fee).

General information on ACE-Net can also be found at its website,


Investors can sign in from home, and the system can be set up to


the investor information on pertinent companies from pre-selected


Top Of Page
Meetings For Money

Business Owners Institute, 676 Route 202/206 North,


08807. Al Warr, director. 908-526-1500. Countrywide assistance for

assisting businesses at any stage of growth and development, including

start-up, fund raising, and tax problems — employing client


meetings, seminars, presentations, and other means of assistance.

Free classes on Wednesday mornings at 10 a.m.

New Jersey Entrepreneurial Network (NJEN) meets on first

Wednesdays at noon at the Doral Forrestal, $45. 609-279-0010. Venture

capitalists, angels, investment bankers, bankers, entrepreneurs, and

would-be entrepreneurs meet here.

New Jersey Entrepreneurs Forum meets on second Thursdays

at McAteer’s Restaurant, Easton Avenue, Somerset, 908-789-3424. $45.

This forum (NJEF), held the week after NJEN, often continues the


topic for the month with in-depth practical information on how to

establish and capitalize a business.

Venture Association of New Jersey meets on third Tuesdays

at 11:30 a.m. at the Westin, Morristown, 973-631-5680. $55.

Top Of Page
Stephen Shaffer: What VCs Look For

Entrepreneurs don’t have to be making money now to gain

the confidence of investors, says Stephen Shaffer of Penny Lane

Partners LP of 1 Palmer Square. "What we look for are companies

that have a strong management team in place and a compelling story

— a proprietary feature that we feel certain can capture a


share of a very large market" (U.S. 1, March 24).

By definition a Small Business Investment Company (SBIC), Penny Lane

is limited to investments of up to $2 million in any given deal. In

addition to stock, investors typically claim a seat on the board of

directors. This means entrepreneurs have to be ready to give up a

portion of their company.

"Venture capitalists are expensive people," Shaffer concedes.

An alumnus of Dartmouth (Class of 1967) with an MBA from Cornell,

Shaffer did leveraged buyouts for Prudential and was an intermediary

for private placements for a New York-based broker-dealer before


his venture capital firm. "But investors not only bring money

to a company, they bring experience, useful connections, and strategic

focus because they’ve been in the business." He offers the


suggestions to entrepreneurs thinking about ways to help their



Approach the right investors. A company is eligible for

different sources of funding depending on its size, history and stage

of development. "You can save yourself time by knowing which


will take the risk, and for how much," says Shaffer. At the


stage, an idea or concept may be enough to attract initial investments

of up to $500,000 from "angel" investors. An SBIC like Penny

Lane usually enters the picture once a company has established both

history and a viable product. Large investment firms, banks and


capitalists typically enter at a much later stage.

Demonstrate a potentially sizable market share. Investors

are accustomed to looking a few years down the road, but they want

reassurance nonetheless. "At this stage of investment, venture

capital firms aren’t necessarily looking at the immediate profit


so much as what amount of the market the company can seize once the

company is fully developed."

Establish management history. Investors are looking at

the integrity of the people in a business, not just the product.


I see a management team in place that I don’t like, I won’t do the

deal," says Shaffer. "We like to know the management team

has worked together and can function well together," says Shaffer.

For him, that usually means at least three years of company history.

Know your company’s worth. Entrepreneurs occasionally

sabotage efforts to gain financial backing by clinging to unrealistic

expectations. "We turn down a lot of deals because the


think it’s worth a whole lot more than we think it’s worth," says

Shaffer. On the other hand, if investors are scrambling to get stock,

that could mean a company has been undervalued. The best way to avoid

either situation: work closely with someone who knows the financial


Recruit a professional advisor. A concise, intelligible

business plan, Shaffer urges, should be drafted under the guidance

of a professional before it reaches investors. "We’d almost prefer

that the plan come to us through somebody else," says Shaffer.

"It tells us that at least somebody has looked at it and has


judgment on it that it belongs in the venture capital community."

Attorneys, investment bankers, and intermediaries can all help get

your plan in the right hands.

Although the competition for funding is rigorous, promising businesses

benefit from what Shaffer describes as a "cooperative" rather

than competitive attitude within the SBIC community. "I’m just

as happy to do a deal with other venture capitalists as not,"

says Shaffer. Attractive businesses will often pull in multiple


which means both more money and a better chance for success. "We

all get together and share ideas about how to do things: how to raise

your own money, what to look for in companies, how to hire staff,

how to bring partners in. The more minds, the better."

Previous Story Next Story

Corrections or additions?

This page is published by PrincetonInfo.com

— the web site for U.S. 1 Newspaper in Princeton, New Jersey.

Facebook Comments