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Published in U.S. 1 Newspaper on March 29, 2000. All rights reserved.

Progress in Banking For Entrepreneurs: Kathleen Coviello


As banks merge and get bigger, the second tier banks

— usually not involved in the mega mergers — are fond of the

mantra "Smaller is Better." When it comes to lending money

to entrepreneurs, smaller is especially helpful, say many in the venture

capital ranks.

Representing one of these smaller banks is Kathleen Coviello,

vice president of Progress Bank’s specialized lending unit for emerging

growth technology and healthcare companies. Coviello will open a Princeton

office for this unit in June. She and Steve Hobman, senior vice

president of the unit, have been invited to speak at the New Jersey

Entrepreneurial Network (NJEN) on Wednesday, April 5, at noon at the

Doral Forrestal. Cost: $45. Call 609-279-0010.

The big banks, encumbered as they are with mergers and shuffling around,

just don’t "get it," says Dan Conley, known as a "venture

catalyst" with Silicon Garden Angels + Investors Network (E-mail: In fact, many banks managed to make enemies

in the entrepreneurial community: "The banking industry underwent

such terrible fractures that it seemed to the entrepreneurial community

that — because of bank instability — bankers always lied."

That may be why the NJEN podium has seen few bankers. "Many have

asked, but none have been called," says Conley.

"The big banks got bigger and left lots of room in the middle

for small and medium-sized banks to fill," says Hobman, an alumnus

of Franklin and Marshall, Class of 1983. Based in Blue Bell, Pennsylvania,

Progress Bank is known for its ability to work with venture-backed

emerging growth businesses.

Progress has its roots in Norristown, Pennsylvania, from a century

ago; it went public in 1983, and until four years ago was known as

Progress Federal Savings. As a thrift bank it has an unusual focus

on banking services for small to medium businesses and entrepreneurs,

and it qualifies as a New Jersey Economic Development Authority approved


Progress loans range from $250,000 on the low side to the high side

of $5 or $6 million, but they average $1 million. The bank likes to

loan money to companies that have started to generate revenue. These

firms don’t have to be making a profit yet, but they should have from

$1 to $3 million in revenue, and they probably have had at least one

round of angel financing and one round of venture capital financing.

Of the 80 companies that currently have Progress loans, 10 are in

New Jersey, including Immedica in Chatham, Call Processing Solutions

in Randolph, and M Corp. in Edison. Its major competition lending

to young high tech companies is the Philadelphia branch of a California

institution, Silicon Valley Bank.

The time it takes to make a loan depends on how available the information

is. "It can go as quickly as three to four weeks or as long as

two years," says Coviello. "If we like a deal and we are in

a good position we can turn things around in a matter of days. We

don’t hand deals off. One person handles a deal from start to finish,

and for all New Jersey clients, that is myself."

Coviello majored in business administration at Albright, Class of

1988, and focused on finance and accounting for her MBA at LaSalle.

Her mother was a bank teller and her father was the vice president

of an international plastics distribution firm. She is part of Hobman’s

seven-person unit.

"We understand the dynamics of the VCs (venture capitalists),

but we are not VCs," says Coviello. "We still take collateral,

still expect to be repaid, and we still do senior debt financing"

(meaning that the bank gets repaid before the investors do). Loans

to early stage companies cost more than to established companies because

they carry more risk, but sometimes Progress can structure a loan

so that part of the payback includes warrants (options to buy stock

if the company turns successful).

If the company has raised any institutional venture capital money,

that is a testimony and part of the process. If the company has no

revenue and its business model is still in development, Progress bankers

are still willing to get started with the company and provide helpful


In the meantime, Progress can provide other services, such as electronic

deposit, leasing equipment, and investment management. Progress Bank

has another subsidiary that does venture capital investments of from

$1 to $4 million. In 1997 Progress Capital Management began one fund,

Ben Franklin Progress Capital Fund, and its newest fund is in healthcare

and information technology, NewSpring Venture.

Coviello says she likes to watch a company grow from early stages

to a successful IPO — "especially when you see a management

team enjoy the fruits of the labors." To pick winners, she says,

"we look at the management teams, at who their investors are,

and their track record. Management is key. We want to know how much

money management has put into the company."

The worries for her job are "whether I am going to get repaid,

whether I will keep my reputation in the organization." So far

Coviello hasn’t had one go bad.

But some investments have endured a roller coaster ride. "We’ve

been fortunate with working through these companies — by being

patient, sometimes lending them more money, or opening up doors to

investors, or by giving them alternative suggestions such as selling

the company," says Hobson. "We don’t get involved in managing

the company, but we have had enough experience so we can help. If

you are working with good management teams and good investors in those

companies you will work through those issues."

It all hinges on the honesty of the management team. "It’s a matter

of communication," says Coviello, "whether they will call

and tell you about the problem." Deciding whether someone is honest

is partly just common sense, she says. For starters, if someone does

not return phone calls, that’s a bad sign.

Every banker can respond to good situations, but Conley recalls one

deal that was less successful. In spite of this, he says Progress

Bank did a good job of working with the entrepreneurial team. "They

stayed above the fray of the battle when things got bad. They are

sophisticated lenders with passion and compassion. That’s why we are

opening the door for these guys."

— Barbara Fox

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