Corrections or additions?
This article by Kathleen McGinn Spring was prepared for the
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
lender with offices in 300 Alexander Park.
Kompa speaks as part of a panel discussion, "Your Company is
Out of Cash — Can You Get a Second Chance?," on Tuesday,
20, at 11:30 a.m. at Venture Association NJ at the Westin (formerly
the Governor Morris Hotel) in Morristown. Cost: $45. Call
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:
assets, including inventory, equipment, and accounts receivable. Other
lenders, he says, will look at intangibles such as patents,
contracts and intellectual property. Banks may not be open to making
loans to businesses without a track record, but other lenders may
take on the risk, he says. "Our loans are bridge loans," Kompa
says of the financing asset-based lenders like his company typically
provide. Generally, the term is 18 months to three years, just enough
to get a company over a difficult period. Rates, he says, are above
those charged by banks, because the loans are riskier and also because
they are more labor intensive. "Each company has an account
who works with them daily, monitoring collateral," he says.
looks carefully at management. Experience is important, and so is
a firm grasp of reality. Anyone can make a mistake, Kompa says, but
it is important to recognize where the mistakes are. "We’ll
their plan," he says of the process of evaluating a company.
they don’t have a plan, that’s our answer."
If there is a plan in place, Kompa says there is no extensive number
crunching, but rather "we listen to their assumptions for their
numbers. In that process, we get a very good idea if these people
have their feet on the ground and understand their problems."
reasons that companies go under, Kompa says. There often comes a time
when companies realize they should have gotten financial help six
months ago or a year ago, he says. When a company is losing market
share, sales are declining, and it is getting difficult to cover
management needs to act. Companies need to seek help before they start
to 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 itself
up, it is probably too late to obtain additional financing.
in cutting costs. This is not easy to do, Kompa acknowledges,
when lay-offs are involved, but it is essential. "These people
will be the winners when the economy gets better," he says of
those who cut business expenses. And it’s not just personnel costs
that have to be examined. "A lot of things creep into the budget,
and you just carry them from year to year," Kompa says. That may
be fine when times are good, but when sales slow, he says, it’s
to look at every line item.
"That’s the way the cycle goes," Kompa says of periodic
"If you don’t react, you’re a statistic."
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