Small change

Entrepreneur, Sept, 1998 by Charlotte Mulhern

RISKY BUSINESS?

When your loan is considered a gamble, try a nontraditional lender.

The company: Rainbow Materials Inc. Owner: Ramon Carrasquillo Founded: 1994 1997 sales: $12.5 million 1998 projections: $16 million Loan specs: $4.1 million from Heller Financial Inc. in Chicago

When banks consider a business to be too high-risk, smart entrepreneurs seek alternative sources of financing - which is exactly what Ramon Carrasquillo did. His loan search spanned several months, and in the early days, he suffered rejection from a series of unbending banks.

Determined to expand his options, Carrasquillo looked to nontraditional, nonbank lenders - often known for their "riskier" clientele. But even among those lenders, he could only generate limited interest, and they wouldn't shoulder the entire project. Opportunity finally knocked, however; last year, Heller Financial came through with the capital this University of Texas, Austin, professor of civil engineering needed to sufficiently grow his ready-mix concrete business.

"With Heller, I was able to get a line of credit and financing for real estate, equipment, trucks and plants," Carrasquillo says. "So I was able to get it all [from one source]. The banks wouldn't even touch it. It was too risky for them."

Initially, Heller lent him $2.5 million; about nine months later, it authorized an additional $1.6 million. Carrasquillo's business has since experienced dramatic growth: He's constructing a new plant and also purchasing 10 additional mixer trucks and two delivery vehicles. That doesn't include the real estate or equipment costs, but as he explains, "It's a very capital-intensive business."

Overall, Carrasquillo says getting the loan was easier than he anticipated. The documentation Heller required was less complicated than he thought it would be, and its other requests were typical: copies of three years of tax returns in addition to a formal meeting to review his objectives, growth projections and company philosophy. "When they liked the idea, they did the rest," Carrasquillo says.

That's not to say he didn't encounter problems along the way. To start with, Carrasquillo had never established a credit history because he always paid his credit card bills in full. He also had a disappointing run-in with the SBA concerning the amount of paperwork required when applying for its loans. And because the banks he considered were so conservative, he didn't really stand a chance. As he says, "You either fit in the box or you don't."

Having successfully navigated the process, Carrasquillo acknowledges that steps he took early on - like consulting a trusted financial advisor - helped his case. He's also realized just how important it is to form a lasting relationship with your lender, even after securing the loan. Says Carrasquillo, "It's extremely important to continue selling your business to your financial institution. [I] keep letting them know how well the business is doing."