Going after venture capital

Mercer Business, Feb 01, 1997 by Fischer, Dorothy

"The money's there, but it's not readily available," notes one member of the banking community, addressing the problem of start-up businesses and their search for start-up funds. "And I think it will stay that way."

While that's bad news for would-be entrepreneurs looking ahead to the dream of owning their own companies while looking back warily to the nightmare of downsizing, the situation is far from hopeless. It's a matter of knocking on the right doors and knowing what to say when those doors finally open.

CoreStates is a bank that's working with potential start-up businesses, according to Bruce Dansbury, a senior vice president in the bank's commercial group. They're also working with the Small Business Development Center, Mercer County Community College, and the state Department of Commerce in the quest to get fledgling companies off and running.

We're partners with lots of other organizations to work with groups or individuals who are looking to start a business, Dansbury adds. "Once their business plans are developed, we look at them as bankers and try and match them up with a financing program to fit their needs. Many times we can support requests for capital based on the individual behind the startup business. If we can't, we look to the SBA or other special loan programs to try and support the business need."

Several times annually, CoreStates hosts seminars aimed at educating potential business owners concerning such topics as loan programs, and what banks look for when faced with financial requests.

"It's really an educational process," Dansbury advises. "It's about getting creative in trying to find capital."

There are many things the bank scrutinizes when small business wannabees attempt to tap their money supply. Says Dansbury, "If it's a new situation, we want to see some sort of business plan put together. We want to know what the business is, how they intend to market it, who they see as their competition, what they have that will make them successful. We look at their experience and their personal assets.

"Then we look for projections," he continues. "We look to see how those projections match up to service the debt they would be taking on. One thing we want people to understand about the debt before taking it on is whether they're going to generate enough cash to service that debt. Some people don't think that all the way through. We're really trying to measure the character of the individuals who are starting the business and their commitment to that bussiness."

The number of new businesses seems to be holding steady, Dansbury observes, and he anticipates that the pace will remain steady, thanks in part to downsizing.

CoreStates plays a crucial role in several micro-loan programs around the state, Dansbury notes. "We take the lead role, which means we're the one bank that leads the whole process, along with all the other partners. These could be banks or quasi-governmental entities. By taking the lead role, we feel we can help promote getting funds out into the marketplace and in use."

While banks may not be directly offering funds to startup businesses, many do have small business programs in place to help those entrepreneurs who've managed to get off the ground.

"We don't have a venture capital fund of our own where we would invest directly in start-up operations," says Robert Eberhardt, executive vice president with Summit Bank. "We have the ability to help later, with companies that have been up and running from three to five years and who have achieved $5 million insales. We have the ability to help them raise equity capital. We have relationships with various investor groups who provide that capital so we can put clients in touch with a source."

While the bank wants to eventually expand its capabilities in helping companies raise venture capital, this aspect is now handled on the more informal basis of making the appropriate introductions. "For many of these companies, it's critically important that they be introduced to the people with the capital," Eberhardt advises.

"It's hard capital to find and it will continue to be difficult."

Small and traditional businesses are "our bread and butter" at Fleet Bank, according to Richard Seidel, vice president for business banking in central New Jersey. But the bank tends to work more with established firms than with those who are still in the dream stages.

"I don't say we won't help start-up businesses," says Seidel. "Sometimes we'll give them a fully secured loan to start a track record, with their pledge of cash and things of that nature."

The bank offers many products geared to small businesses, including lines of credit, term financing, foreign exchange lines, payroll services, and a fax service to provide balances on a dally basis. "We're looking for firms that have been in business at least 18 months and who have established a track record," Seidel advises.

Fleet, which boasts over 1200 branch offices in New England, New York and New Jersey, is planning to move one of their established products into New Jersey later this year.