Ryan Zagata, founder of Brooklyn Cruiser LLC, which sells urban bikes out of Brooklyn, N.Y., needed his first commercial loan to accelerate growth. The 18-month-old business had been self-funded, with reinvested profits, but Zagata didn’t want a loan to depend on equity. He was a poster-boy with personal assets, a fine credit rating and a strong earnings history in sales, his previous career, an important factor should a business fail. Two large national banks turned his application down. They needed more than two years of consistent cash flow.
Leroy Pacheco, president and CEO of the New Mexico Community Development Loan Fund, in Albuquerque, N.M., says that small-business owners need to “keep looking.” When Zagata did, he struck gold.
LENDERS
“If you have a good story and a good business,” Zagata says, “someone out there will be willing to lend to you. It’s just a matter of persisting until you get the right match. Just keep dialing and telling your story.” He called the SBA, but the loans were too small to increase his inventory. The SBA referred him to the New York Business Development Corporation, an alternative lender comprised of banks that could lend to businesses without having the loans appear on their individual books.
The Intersect Loan Corporation in New Brunswick, N.J., lends $600 to $3,000 to businesses with no more than five employees, according to co-founder Joseph Shure. “They’re generally unable to get loans from banks, because they’re so small and they’d be unprofitable for the institution,” he explains. Intersect funds a range of businesses and purposes, from disaster relief to expansion. For example, a restaurant needed an oven to grow, while a Fair Trade coffee bean business needed a storefront. The non-profit receives government, corporate and foundation grants.
Albuquerque’s The Loan Fund has lent $49 million since founding in 1989 to help pull people out of poverty. It averages loans of $50,000 – from $2,000 to $750,000 – to businesses and non-profits. Ninety-eight percent of borrowers have repaid.
One man uses his garage to make $200 pine boxes for burying the indigent. A former inmate needed money for liability insurance, first- and last-month’s rent for his 400-sq. ft. barber shop and working capital. His loan helped tie him to the community, not head back to prison.
Launched in March of 2012, Lutz, Fla.’s Pasco Economic Development Council Inc. has lent an average of $22,000 to each of eight businesses in five industries needing anything from equipment to safety training, reports Krista Hakes, economic development manager. “We’re fundraising again,” she says, “and applying to the SBA to become an intermediary lender (of SBA loans).”
WHERE TO LOOK
Where do you find such lenders in your area? They aren’t hiding. First, put yourself where people are discussing loans and financing, even if your business might not meet a lender’s requirements. Get referrals from banks, credit unions, venture capitalists and the SBA. Pacheco suggests you also look at “small-business development centers at local universities,” which contribute to The Loan Fund’s referral rate of more than 50 percent statewide and throughout the Navajo Nation, which spans Utah and Arizona.
Next, broaden your scope. Read local newspapers, both print and online, which may introduce you to prospective lenders. Watch for upcoming business functions, both financial and general, where you might find a person who could help or hear about a lender you hadn’t considered. Once you’re there, hunt for previous clients.
“I can’t beat the drum enough,” Zagata remarks. “If you believe in your business and it’s a legitimate and profitable business, don’t give up. Someone will lend to you.”
Dr. Mildred L. Culp welcomes your questions at culp@workwise.net. © 2013 Passage Media.
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