Looking for Loans

Loans to $25,000

Loans to 150,000

Loans to $250,000

Alternate Monies: Online Angels

Venture Capital Firms

Other Funders

Bootstrapping

Raising Money The Smart Way

Raising Money The Smart Way

Corrections or additions?

The Money Game

These articles by Teena Chandy were published in U.S. 1 Newspaper on January 6, 1999. All rights reserved.

Top Of Page
Looking for Loans

Even though bank loans aren’t the only source of money

for your business, banks are probably the easiest and the safest place

to start. The "E Z Guide: Small Business Financing in Mercer

County," available free at the SBDC, summarizes the loan application

and business plan process; charts every imaginable kind of loan, city,

county, state, federal, technology, and contract financing; and then

has a roundup on what every bank requires. You can pick up a copy

at Mercer County College, at the Trenton Business and Technology

Center at 36 South Broad Street, or at any Mercer County branch

of Summit Bank, or order it from the SBDC at $5. Call 609-586-4800,

extension 3469.

Now you have to find a bank. SBA representatives at the SBDC can advise

you on where to go for a loan. They will review your business plan

and offer recommendations. The choices depend on how much you need,

and when you need it. Other factors include collateral and credit

history. The backing of an SBA loan gives you certain financial benefits:

Less Money Down: You can leverage your personal or investment

capital harder with an SBA-guaranteed loan. You can also get more

done with less up-front investment.

Longer Payback Terms: You can improve your cash flow with

lower monthly payments. And, where appropriate, you can fix a better

match between loan terms and the longer-term rates of depreciation

for capitalized equipment or real estate.

Lower Interest Rates: The bank can lend at a lower interest

rate because the SBA absorbs a significant percentage of the lending

bank’s loan risk. Paying less loan-service overhead not only improves

your cash flow, but the savings go straight to your bottom line.

SBA’s New Jersey district director Francis A. Marrero

announced the approval of a record number of government-backed loans

to New Jersey women and minority small business owners during 1998.

"I believe the effort the New Jersey district office has made

to marketing its programs and services to women and minority business

owners is reflected in the number of loans we approved throughout

the year," says Marrero. Loans to New Jersey women business owners

in fiscal year 1998 (October 1, 1997 through September 30, 1998) were

up 25 percent from fiscal year 1997. Women business owners received

a total of 338 loans for $52.3 million in 1998 compared to 271 loans

for $43.2 million in 1997. Loan approvals to minority business owners

were up 14 percent from last year. In 1998, 431 loans for $101.8 million

for minority small businesses compared to a total of 378 loans for

$79.5 million in 1997.

"We are continuing to streamline our lending programs to make

them more user friendly for both our lenders and the small business

borrowers," said Marrero. "The recent expansion of the new

SBALowDoc and SBAExpress programs will result in fast turnarounds

and with less paperwork for small loans under $150,000. We are also

expecting these enhanced programs to greatly assist us with our efforts

to provide opportunities to women, minorities, and new business ventures."

For information about any of the SBA programs call the loan officer

at 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.

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Loans to $25,000

Need from $1,000 to $25,000 to expand your business?

Consider an SBA Microloan. Under the MicroLoan Program, the

SBA makes funds available to qualified non-profit organizations, which

act as intermediary lenders. The intermediaries use the funds to make

loans to new and existing small businesses. The MicroLoan Program

is primarily designed to assist women, low income individuals, and

minority entrepreneurs who cannot obtain conventional bank financing,

yet have the capabilities to operate a successful business. The maximum

loan amount is $25,000.

If you are in Mercer or Burlington counties you can approach the Trenton

Business Assistance Corporation (TBAC) (609-396-8271; fax, 609-396-8603)

and, if you are in Middlesex or Somerset County, the Greater Newark

Business Development Consortium (973-242-6237, extension 228).

To get a MicroLoan you have to have some of your own money, says Deborah

Osgood, executive director of the TBAC. "And make your business

plan as strong as can be. Also be aware of your personal credit and

make an effort to rectify past problems." The TBAC aims at revitalizing

communities by creating viable businesses and greater self-sufficiency.

The New Jersey Economic Development Authority (EDA) also provides

financing for small businesses, minority owned, and women owned enterprises.

The average loan size is $40,000 to $50,000. Call EDA at 609-292-1800.

Top Of Page
Loans to 150,000

Mercer County Loan Consortium Program. The county program

can provide loans ranging from $20,000 to $100,000. This is not an

SBA program; the loans are spread out among four or five of the banks,

and each bank decides which loans they want to take. The banks serve

as a referral service, and applicants use Herb Spiegel‘s The

Biz Planner to apply. Loans cannot be used to refinance existing debt,

to pay franchise fees or to buy real estate. Loans are payable in

five years. Call the Mercer County Division of Economic Development

at 609-989-6555.

The SBAExpress and the SBA LowDoc programs address small

businesses’ need for business loans under $150,000. Businesses that

qualify for conventional financing can apply for loans under the SBAExpress

Program. Banks use their own documentation and apply an SBA guarantee

to a loan without prior credit review by SBA. The SBA guarantees up

to 50 percent.

The SBA LowDoc program, which increased its loan ceiling from $100,000

to $150,000, continues to feature a one-page application which must

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 applications, simplify

the process for participating lenders and borrowers, and provide systematic

reconsideration of all loans that are not approved as submitted.

Top Of Page
Loans to $250,000

In addition to doing direct lending for the SBA Microloan

program, both Trenton Business Assistance Corporation (TBAC) and Greater

Newark Business Development Consortium are intermediaries for the

SBA’s Women’s Prequalification Loan Program. This program —

initially intended for woman-owned, for-profit small business concerns

under $5 million in sales — now also can include minorities and

veterans. The maximum loan amount is $250,000.

The TBAC (609-396-8271; fax:609-396-8603) also participates in lending

partnerships for the Merchant Loan Program. In addition to direct

loans to Trenton businesses, it joins with area banks and the New

Jersey Economic Development authority to allow loans up to $250,000

to be packaged for pre-approval by the SBA.

The New Jersey Community Loan Fund makes loans from $25,000

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

can lend even more," says Herb Caesar, program director.

Business start-ups are no problem. Eligibility depends on the five

Cs — character, credit history, capability, cash flow, and collateral,

says Caesar. "We make loans 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 Caesar at

609-989-7766.

The New Jersey Commission on Science and Technology offers

from $50,000 to $250,000 in technology transfer funds for projects

that will be completed in 12 months or less, preferably 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 years.

Call for a "request for proposal" (RFP) at 609-987-1671 or

fax 609-292-5920, or E-mail njcst@scitech.state.nj.us. Proposals

are due on Monday, January 25, and after peer evaluation the awards

will be announced on April 27.

Top Of Page
Alternate Monies: Online Angels

If you ran a dating service one of your critical objectives

would be to maintain an equal ratio of men and women. The same goes

for the world of angel investment. Often the ratio of entrepreneurs

to angels (individuals of high net worth with significant business

experience) is lopsided.

This is illuminated in the experience of the Angel Capital Electronic

Network (ACE-Net). The Internet-based system that matches entrepreneurs

with angel investors is "very much like a dating service,"

says Stash R. Lisowski, with the incubator acting as a regional

host for the New Jersey/New York area. Lisowski directs the NJIT

Enterprise Development Center, 240 Martin Luther King Boulevard,

Newark 07102, 973-643-5740; fax 973-643-5839, E-mail: Lisowski@admin.njit.edu.

The angel investors have to meet certain criteria — an income

of at least $200,000 a year or a net worth of at least $1 million.

"These individuals tend to be corporate investors, savvy investors,

entrepreneurs themselves who know how to deal with small firms,"

says Lisowski.

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, http://www.sba.gov/advo/acenet.html.

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

the investor information on pertinent companies from pre-selected

criteria.

Top Of Page
Venture Capital Firms

Cardinal Health Partners LP, 221 Nassau Street,

Princeton 08542. John Clarke, general partner. 609-924-6452; fax,

609-683-0174.

Early Stage Enterprises LP, 995 Route 518, Skillman

08558. Ron Hahn/Jim Millar, general managers. 609-921-8896; fax, 609-921-8703.

E-mail: rrhahn@aol.com. Venture capital investor in seed and early

stage companies.

Edison Venture Fund, 1009 Lenox Drive, Suite 4,

Lawrenceville 08648. John H. Martinson, managing partner. 609-896-1900;

fax, 609-896-0066. Home page: http://www.edisonventure.com.

Equity financing and guidance to growing companies with proprietary

technologies or unique services in emerging markets.

Johnston Associates Inc., 181 Cherry Valley Road,

Princeton 08540-7645. Robert F. Johnston, president. 609-924-3131;

fax, 609-683-7524. E-mail: jai181@aol.com. Focus on seed capital for

healthcare and biotechnology.

Penny Lane Partners LP, 1 Palmer Square, Suite

309, Princeton 08542. Stephen Shaffer, partner. 609-497-4646; fax,

609-497-0611.

Top Of Page
Other Funders

Business Alliance Capital Corporation, 300 Alexander

Park, Princeton 08543-5215. Ted Kompa, president. 609-514-1140; fax,

609-514-1137. Asset-based lending and factoring to manufacturers,

distributors, and service companies.

PrinVest Corp., 3 Princess Road, Lawrenceville

08648. Rudolf A. Tervooren, president. 609-844-9828; fax, 609-844-0449.

Collateralized loans based on receivables to small and medium sized

business, plus equity investments.

Q Financial Group, 457 North Harrison Street, Suite

100, Princeton 08540. William K. Robins, president. 609-924-9394;

fax, 609-924-3935. Financing for small- to medium-sized businesses,

formerly American Factors Group and Magazine Funding

Riviera Finance, 3635 Quakerbridge Road, University

Office Plaza 1, Suite 4, Mercerville 08619-. Kristin Dorfman, manager.

609-275-1399; fax, 609-631-7455. Nationwide factor of commercial accounts

headquartered in Redondo Beach, California.

Silicon Garden Angels + Investors, 32 Cedar Brook

Drive, Somerset 08873. Daniel J. Conley, capital specialist. 732-873-1955;

fax, 732-873-3237. Expansion capital, venture capital, creative leasing

to business owners, coaching entrepreneurs in business plans.

Sandra Soule, Box 504, Cranbury 08512. 609-655-0049;

fax, 609-395-1051. A diversified cash flow brokerage.

US Corporation Credit, 212 Carnegie Center, Suite

206, Princeton 08540. Frederick Williams, vice president. 609-520-8842;

fax, 609-520-8731. Expansion loans and venture capital from $750,000

to more than $10 million.

Top Of Page
Bootstrapping

Chances are, if you’re a starting a business you’re

probably bootstrapping in one way or another. Randy Harmon is

both director of technology commercialization for the New Jersey

Small Business Development Center and director of the Technology

Help Desk (800-432-1832), and he has some ideas on modern day bootstrapping:

Use more of your own money than you think you will need.

Harmon advises entrepreneurs to set limits on how far they should

leverage their personal finances, but also reports that the rule of

thumb for tapping personal accounts calls for a modicum of strain.

"How much of your own money is enough? The general rule of thumb

is `enough so it hurts,’" he says.

Tap your credit cards. This sounds cliched, but for a

good reason. "If carefully managed, credit cards can be a source

of up to $50,000 to $75,000 in financing when no one else will give

it to you." He also warns entrepreneurs to apply for new credit

cards before they quit their day job. It will be easier to qualify.

Borrow from friends and family. Because unpaid debts can

do wonders to relationships, do not let them lend too much and commit

all loans to paper. "Entrepreneurs should not let friends and

family invest beyond what they know the investor can afford to lose."

Form strategic alliances. Look for partners with capabilities

or resources that you don’t have. "The best prospective partners

can be those companies which are producing similar but non-competing

products, utilizing similar manufacturing technology, and selling

those products to the same customers that you have targeted."

Licensing is a common form of alliance for technology start-ups. But

remember not to negotiate your own licensing agreement, Harmon says.

Hire an expert.

Choose a cheap location. Trump’s Axiom (location, location,

location) applies to retail stores and casinos, but for a technology

start-up, choosing an attractive location may not be the best move.

Instead, use your home, a shared space, or a business incubator. Wait

until your successful IPO before you move into a Class A building.

Harmon also suggests accepting the imminence of Murphy’s Law

(that what could go wrong will go wrong). "If entrepreneurs have

a viable worst-case-scenario commercialization strategy," he says,

"they reduce the risk of failure. Bootstrapping is often an entrepreneur’s

only viable strategy and many successful entrepreneurs both launch

and continue to build their business that way."

Top Of Page
Raising Money The Smart Way

Tips on raising money from David J. Sorin, managing partner

of the College Road-based law firm, Buchanan Ingersoll.

Start early. It will take longer than you think. Seek

investors before you run out of cash.

Know how to present your company. If necessary, hire a

speech tutor. "Verbal communication skills are a must for any

entrepreneur who meets with investors and has to talk about the company

in an effective way."

Understand your weaknesses. Investors will zone in on

the weaknesses of your management team. Assure them you are willing

to build a team with others.

Be organized and ready for extensive due diligence scrutiny.

Be responsive. Potential investors have a low tolerance

for delays, even though they use delaying tactics themselves, perhaps

as a negotiating tool. Keep your cool and stay responsive.

Play your cards close to your vest. "Do not reveal

that you desperately need funds or that the investor is the only game

in town, or it will be used against you. Develop alternative funding

sources, negotiating one proposal against another."

Consider quality as well as price. Higher quality investors

bring added value through a longer-term business relationship. "Investigate

where they have made other infusions of capital and talk to your counterparts

to gain a better understanding of issues down the road."

Top Of Page
Raising Money The Smart Way

Tips on raising money from David J. Sorin, managing partner

of the College Road-based law firm, Buchanan Ingersoll.

Start early. It will take longer than you think. Seek

investors before you run out of cash.

Know how to present your company. If necessary, hire a

speech tutor. "Verbal communication skills are a must for any

entrepreneur who meets with investors and has to talk about the company

in an effective way."

Understand your weaknesses. Investors will zone in on

the weaknesses of your management team. Assure them you are willing

to build a team with others.

Be organized and ready for extensive due diligence scrutiny.

Be responsive. Potential investors have a low tolerance

for delays, even though they use delaying tactics themselves, perhaps

as a negotiating tool. Keep your cool and stay responsive.

Play your cards close to your vest. "Do not reveal

that you desperately need funds or that the investor is the only game

in town, or it will be used against you. Develop alternative funding

sources, negotiating one proposal against another."

Consider quality as well as price. Higher quality investors

bring added value through a longer-term business relationship. "Investigate

where they have made other infusions of capital and talk to your counterparts

to gain a better understanding of issues down the road."


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