Alternate Monies: Online Angels
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.
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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:
capital harder with an SBA-guaranteed loan. You can also get more
done with less up-front investment.
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.
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.
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.
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Loans to 150,000
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.
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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.
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.
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.
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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.
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Venture Capital Firms
Princeton 08542. John Clarke, general partner. 609-924-6452; fax,
609-683-0174.
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.
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.
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.
309, Princeton 08542. Stephen Shaffer, partner. 609-497-4646; fax,
609-497-0611.
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Other Funders
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.
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.
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
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.
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.
fax, 609-395-1051. A diversified cash flow brokerage.
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.
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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:
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.
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.
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."
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.
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.
(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."
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Raising Money The Smart Way
Tips on raising money from David J. Sorin, managing partner
of the College Road-based law firm, Buchanan Ingersoll.
investors before you run out of cash.
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."
the weaknesses of your management team. Assure them you are willing
to build a team with others.
for delays, even though they use delaying tactics themselves, perhaps
as a negotiating tool. Keep your cool and stay responsive.
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."
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.
investors before you run out of cash.
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."
the weaknesses of your management team. Assure them you are willing
to build a team with others.
for delays, even though they use delaying tactics themselves, perhaps
as a negotiating tool. Keep your cool and stay responsive.
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."
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."
Corrections or additions?
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— the web site for U.S. 1 Newspaper in Princeton, New Jersey.
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