Lack Business Capital? You Need to Know Where It Is
What do high school seniors bound for college have in common with business owners dreaming of expansion?
Two things at least: Both need capital to get where they want to go, and they often overlook good sources close to home.
Many scholarships go begging year after year because matriculating high school seniors don’t know about them, including many scholarships targeting students with specific ethnic or religious backgrounds, students with particular academic goals, students from various geographical areas and so on.
Similarly, business owners fail to tap many sources of potential financing because they don’t know about them, including programs run by all levels of government, by organizations and even by public corporations seeking to foster, for example, franchising among women or members of minority groups.
Indeed, many business owners think first of the bank on the corner as a source of outside financing--and give up the search when they hear the discouraging words, “We’re sorry, but you don’t qualify for a loan.”
You must dig to learn about these programs--and keep on digging to find one that fits you.
Here are a few:
* The Los Angeles office of the Small Business Administration lent $688 million to 2,700 Southern California businesses last year, including $322 million to 1,400 businesses owned by women or members of minority groups. The SBA offers special help to business owners needing technical assistance in preparing a loan package, and its micro-loan program lends capital in small amounts--typically $8,000 to $10,000, and not more than $25,000--through organizations such as the First AME Church of Los Angeles and the Valley Economic Development Center.
* Some national franchisers offer special incentives, including subsidized loans, for entrepreneurs seeking to open outlets in specific areas. Blimpie International Inc., a chain of sandwich and salad shops, waives franchise fees for shops opening in inner-city empowerment zones and enterprise communities, as designated by the federal government. Other franchisers make special efforts to foster businesses run by members of minority groups or women. Among them are the ice cream maker Ben & Jerry’s Homemade Inc., Motel 6 Corp., Coffee Beanery Ltd. and AFC Enterprises Inc., which operates chain restaurants such as Chesapeake Bagel Bakery.
* Shell Oil Co. participates in loans to inner-city businesses made through a special program with Founders National Bank of Los Angeles and Unity National Bank in Houston. Shell Oil assumes as much as 45% of the risk of loans made under the program at market-rate interest. In effect, the program makes it possible for the banks to offer larger loans than might otherwise be possible. In 1998 the program injected $1 million in loans to inner-city businesses.
* Los Angeles Community Development Bank offers loans ranging from $1,000 to $20 million to businesses located in an area stretching from downtown Los Angeles to South-Central Los Angeles, along with an area around Pacoima designated an empowerment zone by the Department of Housing and Urban Development. Only businesses and individuals already rejected for commercial bank loans qualify.
* The First African Methodist Episcopal Church of Los Angeles acts as an intermediary in the Los Angeles Community Development Bank program through its business resource center. The church also acts as an intermediary in placing loans funded by the U.S. Economic Development Administration to businesses damaged in South-Central Los Angeles by the Northridge earthquake. Under a separate program financed with a grant from Walt Disney Co., the church offers low-interest micro-loans ranging from $2,000 to $20,000 to businesses within the same area.
* The Pacific Coast Regional Small Business Development Corp. in Los Angeles, the Valley Economic Development Center in Van Nuys and the East Los Angeles community organization TELACU participate in the Loans to Lenders program of the California Economic Development Lending Initiative, offering lines of credit from $50,000 to $500,000 at below-market interest rates to small businesses ineligible for ordinary bank loans.
* More than two dozen small banks in Southern California, including American Commercial Bank in Ventura, Asahi Bank of California in Los Angeles, California Federal Bank in Glendale and Vineyard National Bank in Rancho Cucamonga, participate in another program sponsored by the California Economic Development Lending Initiative to offer businesses loans ranging upward from $50,000 in the form of subordinated debt--that is, junior to ordinary bank loans. The subordinated loans draw interest at prime plus 2% to 5%.
* Lockheed Martin Corp., working through a nonprofit subsidiary called Technolog Ventures Corp., fosters start-up businesses using technologies developed at Lawrence Livermore National Laboratory in Northern California and at Sandia National Laboratories in Albuquerque. The program occasionally offers very small amounts of start-up financing; more often it acts as an intermediary seeking outside financing for research scientists with promising technologies.
As you can see, not everyone qualifies for these programs--and not all of those who do qualify even know about them, much less make use of the capital they provide.
But some do.
Next Week: How to make the federal government your financing partner through a little-known program fostering innovative research.
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Columnist Juan Hovey may be reached at (805) 492-7909 or via e-mail at jhovey@gte.net.
