Lilliputian Loans

Entrepreneur, Oct, 2001 by Nichole L. Torres

WHEN IT COMES TO FINANCING, BIGGER ISN'T ALWAYS BETTER. HAVE YOU TRIED AN SBA MICROLOAN ON FOR SIZE?

YOU NEED A LITTLE DOUGH TO GET YOUR business off the ground, and traditional bankers won't give you the time of day. We've heard this story before, and the SBA has a program for you. Welcome to the wonderful world of microloans, where the maximum amount is $35,000 (a figure that wouldn't get you a second look from most major banks). Even a few past credit woes might not disqualify you from the SBA MicroLoan Program.

The SBA isn't the actual lender, though--an SBA-approved subsidiary lends the funds to entrepreneurs in any stage of business. "[The SBA's] intermediary lenders [have] experience making and servicing small loans and providing technical assistance to the borrowers," says the SBA's Michael Stamler. There are about 150 approved lenders nationwide serving all types of new business owners with the capital and guidance they so desperately need.

Jonathan Reese and Jason Salfi, owners of Comet Skateboard, a skateboard manufacturer in Oakland, California, got a big helping hand from their lender, the Oakland Business Development Corp. (OBDC). Lending with funds from the SBA as well as a number of city and county sources, the OBDC made Reese and Salfi two $20,000 microloans in March. Because the two entrepreneurs had almost no credit history and very little collateral to speak of, Reese says, "Our banks didn't want to touch us."

To get the money, Reese, 32, and Salfi, 30, were required to write a near-complete business plan and show what the funds were to be allocated for. According to SBA guidelines, funds can be used for working capital, inventory, supplies and other equipment but may not be used to purchase real estate or pay down existing debt.

One of the best incentives for working with a microlender is the one-on-one attention that small companies receive. Reese and Salfi, for instance, worked closely with Robert Gebauer of the OBDC. So close, in fact, that they're on a first-name basis. "Robert got us all the money he could," says Reese.

With sales projected at $750,000 for this year, Reese and Salfi are working toward growth for Comet Skateboard in the next few years. Though they want to secure a line of credit from a major bank someday and are actively seeking venture capital, the microloan provided just the help Reese and Salfi needed right now--a cash infusion for production and equipment costs. "We don't want to grow too fast," says Reese.

To get your hands on some microloan money, stop first at the SBA Web site (www.sba.gov) or call (800) U-ASK-SBA for a list of requirements and intermediary lenders in your area.

Healthy Profits

WITH ALL THOSE MAD COWS, VEGETARIAN FOOD LOOKS A LITTLE BETTER EVERY DAY.

WHILE MAD COW DISEASE and Foot and Mouth Disease (FMD) currently appear confined to Europe, images of diseased animals and burning carcasses have crept into the United States. Granted, we're all still eating Big Macs and T-bones, but our collective consciousness has been pierced by the question: Could it happen here?

Not terribly likely, with all the safeguards put in place by the FDA and the USDA. But now is still an opportune time to talk about alternatives to meat. "There's been a widening [consumer demand] for vegetarian-type dishes, particularly among younger people," says Warren Belasco, a professor of American Studies at the University of Maryland, Baltimore County, who teaches a class on American foods. "They're more aware of the general health issues-not just contamination issues, but heart disease, cholesterol and fat issues as well."

It's no news flash that people want to eat healthier. But combined with the FMD and Mad Cow phenomena, now's a great time to get into the game--perhaps with a vegetarian-themed business, be it pre-frozen veggie meals or a vegetarian restaurant.

If you're a confessed carnivore, how about pumping the virtues of organic and healthy meat, the kind that comes from animals that aren't raised in the industrial-type environments where Mad Cow or FMD are more likely to flourish? An all-organic restaurant or a natural meal delivery service might be in the cards.

BEGGARS SHOULD BE SAVERS

BEFORE YOU APPROACH LENDERS FOR QUICK CAPITAL, BE READY TO SHOW THEM YOU'VE PINCHED YOUR PENNIES.

When on the hunt for a microloan, you'll need to save as much money as possible on your operating expenses. We asked Linda Saggau, a communications and business consultant and founder of Mr. Wolf Ltd. in Minneapolis, for tips on how to tighten your belt during start-up:

* Before you buy anything, write a viable and complete business plan that details your core purpose. Cut expenses that don't relate directly to your core business.

* Barter or trade services with another professional, such as a PR person.

* Don't spend money on image items like a fab location or fancy furniture.

* Share technology services, such as a T1 line, with neighboring businesses.