A helping hand - starting a meeting management and event planning business - Brief Article

Nation's Business, April, 1996 by Laura M. Litvan

Experts answer our readers' questions about starting and running their businesses.

I am interested in starting an event-planning and meeting-management company. Can any of the loan programs offered by the U.S. Small Business Administration provide a helping hand to a woman who would like to start her own business? S.T., Hudson Mass.

The SBA administers a guaranteed-loan program to which any small-business owner can apply. This program, known as 7(a), guarantees repayment of a set percentage of a small-business owner's bank loan, depending on the loan's size; the repayment cap is $750,000.

In effect, the program offers a security blanket to a bank considering a loan application for start-up capital or small-business expansion--loans typically seen as risky by lenders.

Under an SBA pilot project designed to make it easier for female entrepreneurs to apply for such loans, women business owners in states (including Massachusetts) covered by 16 of the SBA's field offices are getting assistance from selected organizations in preparing their loan applications. These applicants also are being preapproved by the SBA for loan guarantees before applying to lenders.

Such preapproval differs from the usual 7(a) program procedure. Normally, an entrepreneur first applies for a conventional loan and then, if rejected, is informed by the lender that the SBA has a loan-guarantee program.

The SBA's pilot program stemmed from concerns about the low proportion of loans being made to women-owned firms.

Although women own about one-third of U.S. businesses, in 1994 they received only 19 percent of government-backed bank loans for small business. In fact, SBA research indicates mat about 70 percent of women who launch companies use their credit cards for start-up capital.

Women who apply for 7(a) loans through the pilot prequalification program must meet the same financial standards as other loan applicants, says SBA spokesman Mike Stamler. The advantage for a woman who does participate, he says, is that she has an SBA guarantee in hand at the outset of her dealings with a bank and can take the initiative in discussing it with a loan officer.

Under the prequalification program, the SBA guarantees up to 80 percent of loans of up to $100,000 and up to 75 percent of larger loans, to a maximum guarantee of $250,000, which is lower than the SBA guarantee cap available outside the program.

For more information, contact the SBA's Boston field office at (617) 565-5590.

Readers who want to find out if the prequalification program is available in their state can call their local SBA office, listed in the Blue Pages of the telephone directory.