Five Alternative Ways To Finance Your Business

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

companies, according to the Money Tree Report published by Coopers & Lybrand L.L.P.

“SBICs are more likely to finance main street businesses as opposed to hightech companies,” says Lee Mercer, president of the National Association of Small Business Investment Companies (NASBIC) in Washington, D.C. “They’re good for the small business owner who needs as little as $200,000 or as much as $4 million in financing.” SBICs are also more flexible than banks when it comes to making a decision on lending.

“Your business plan is extremely important,” Mercer says. “SBICs are investing in a vision of the future as painted by the entrepreneur. They make a decision to lend based on reasonable projections of growth and earnings.”

There are also “specialized SBICs” that invest solely in socially or economically disadvantaged businesses. Some 86% of the $118.3 million doled out by these specialized SBICs in 1997 went to businesses owned by women and minorities.

SBICs are independently operated and managed by professionals with a broad range of business expertise. They can lend technical assistance to inexperienced business operators. To ensure the success of their investment, they may take an advisory role in your business by asking for a seat on your board of directors. This may be a plus or minus, depending on how independently you want your business to operate.

Each SBIC has its own lending criteria. Entrepreneurs interested in applying to any SBIC should submit an application and full business plan that includes information on product marketing, competition, management and financial statements.

The SBA Office of Investments offers a free publication, Directory of Operating SBICs. To order, call 202-205-6510. NASBIC sells a directory of its members, including specialized SBICs, for $25. To order, contact NASBIC at 202-628-5055, or at

Susus are a more grassroots approach to raising capital, popular in the Caribbean and Asian communities. In a susu, a group of family members, friends or associates pools money, and each person gets a turn at using the entire amount collected. “We see this approach used increasingly by very small businesses, like the mom-and-pop stores,” says Roy Hastick, CEO of the Caribbean American Chamber of Commerce and Industry in Brooklyn, New York.

Most susus involve five to a dozen members. Weekly contributions can range from $500 to $1,000. Payoffs can be as large as $15,000 per person, depending on the size and duration of the susu. Delroy Wright, the 42-year-old owner of the Source Health Food Store in Brooklyn, New York, got his start-up funds by joining a susu with a group of family members and friends. Each contributed $400 per week to the fund over a period of several months. Wright received $10,000 from his susu, which he used to open his health food store.

“You have to be disciplined and have patience to use a susu,” says Wright, who warns that entrepreneurs should make sure they know their susu partners well.

A few points: Deposit funds regularly in an accredited financial institution, and check the salary, employment and credit histories of prospective

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