Financing the small business

New Mexico Business Journal, Feb, 1997 by Charles Poling

Equity Capital

McCorkle thinks businesses are better off skipping the lenders and finding "patient money" - that is, investors. You don't have to give away the business-work with a limited partner or a minority partner. Over the last three years, McCorkle's TVC has found $22 million in investment funds for about 10 New Mexico businesses, he says.

"I believe that you should find an equity investor who will take a piece of the action because what I call seed money funds a company until it achieves cash flow," he explains. "If you do debt equity, you have to structure the loan for a couple years without payments because you have no cash flow to pay it off. If you find patient money, someone who understands what it means to invest with no return for a few years, they'll have an incredible interest in what you're doing."

But, he warns, "Buy an extra coffee cup and an extra chair, because they're going to come and visit you." And keep in mind that investors could make 15 percent a year elsewhere, so over several years they'll be looking for a sizable return.

Going Public

Another equity option is offering publicly traded stock. Mike Bowlin, president of Bowlin Outdoor Advertising & Travel Centers, Inc., has tackled the lengthy process of taking his company public "to attract investors to secure funds for growth and future development."

With 300 employees and annual revenues of $25 million, Bowlin pushes the definition of small business in New Mexico. The company runs one-stop travel centers along major highways in the Southwest and also has an outdoor advertising operation - no doubt, you've seen their billboards. At press time, the company's stock was expected to begin trading on the NASDAQ exchange.

"There's a lot of benefit in going into the public market" for stock trading, Bowlin says. He was not interested in finding private investors. "Other than capital generated from operations, the only other source you have is borrowed capital, so you're really limited in how fast you can grow using only net profits."

For Bowlin, the process took about six months of meeting with auditors, attorneys and brokerage houses, plus a few rounds of writing and revising documentation to everyone's satisfaction. "Then you go out on the road and meet with potential investors to see if anyone wants to buy your stock."