Five Alternative Ways To Finance Your Business

Just because the bank says no, doesn't mean you have to do without .

to the Caramon Group, a Maryland-based factoring company with offices in Chicago. The company charged him 7%-10% of that amount.

“Only a few days after faxing the invoices to the company, I received a check,” the 52-year-old recalls. “It gave me the cash I needed to pay my employees and keep things running.” Miles factored accounts for two and a half years until he got customers to pay up more quickly.

“Don’t become comfortable with it,” he warns. “Factoring is a good, ready source of cash, but if you rely on it totally, the finance charge could slowly eat into your profits.”

Finance charges for factoring can range from as little as 2.5% to as high as 15%, according to Marvin Waldman, president of the Caramon Group in Fairhill, Maryland. The amount depends on the total value of the accounts your factor. Factoring companies can be found in the Yellow Pages or on the Internet. The Edwards Directory of American Factors (Edwards Research Group; $199) offers detailed information on 200 factoring companies nationwide and is updated biannually. To order, call 800-963-1993 or e-mail .

Luckily, there are angels out here delivering financial miracles every day. These so-called “angle investors” are wealthy business people who flesh out their financial portfolios by investing in new businesses in hopes of getting a nice financial return.

An angel investor made it possible for Johny Johnson to open Community Pride Plus Food stores in Richmond, Virginia (No. 42 in the BE INDUSTRIAL/ SERVICE 100 list). Johnson had risen up the food chain at Farm Fresh stores from grocery bagger to store manager, when a supermarket executive approached him with an offer to open his own chain of stores.

“It turns out this businessman was literally watching over me while I rose through the rank,” says Johnson. “He knew I was a good manager and he was willing to take a chance on me.”

The executive loaned Johnson $70,000. Johnson raised an additional $30,000 by taking a second mortgage on his home and cashing in profit-sharing stocks from his employer. He used the money as collateral to get a $3 million loan and opened four grocery stores in 1992. the 34-year-old now ownes seven outlets. The chain has 466 employees and grossed $46 million in sales last year.

“I would not have been able to do it without this investor,” says Johnson “Richmond is a close-knit town and blacks typically don’t get loans.”

Angle networks are popping up across the country, creating databases that connect investors with businesses that need seed money or expansion capital. Some networks make matches based on industry or geographic region. The networks charge access fees than vary according to the service they provide.

The Capital Network, a nonprofit economic development organization affiliated with the University of Texas in Austin, is the largest matching service in the country for investors and entrepreneurs. “Well over $150 million worth of investments were made during the last three years as a results of our services,” says Bob Mathot, director of clients

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