New year may bring new financing options

If plans currently being discussed become reality, suburban small businesses could have some new financing options next year.

The most intriguing idea involves the possible emergence of a new group of angel investors that, for starters, would center its attention on businesses in Cook, Will, DuPage and Kane counties.

The timing may be right for a new angel group. “Angel investors still have a little liquidity — and want to earn more on it than they can earn in the bank,” says Ernie Mahaffey. A highly committed small business supporter, Mahaffey is one of the founders of Geneva’s Center for Business, Education, Innovation and Development.

With David Gay, manager of the Illinois Small Business Development Center at College of DuPage, Lisle, doing the spadework, about 30 angel investors were to meet at COD last week to discuss formalizing a structure for what Gay tentatively calls the Collar County Angel Group.

Ron Kirchner, who in 2003 founded Heartland Angels Inc., a Skokie-based investor group, has been informally assisting the group.

Gay’s hope is that interested investors will create an angel group that will focus on funding qualifying suburban businesses. “I’m looking at second stage businesses, where you get more job creation and economic activity,” Gay says.

The angel group would be independent, with its own bylaws, membership fees and investment minimums. Although it’s logical that the SBDCs “would be a gateway, a conduit between the angels and the entrepreneurial community,” Gay says there would be no formal link between the SBDCs or the community colleges where many reside.

Kirschner raises the possibility of a network of angel groups, each with an investment territory roughly along community college boundary lines.

“A lot of people like investing in their local area, where they can take some pride in helping create local jobs,” Kirchner says. “If I live in Westmont, it’s difficult for me to get involved in a business in Skokie.”

If a funding request is too big for a local angel organization to handle, a syndication process could allow network angel groups to participate.

Two other financing activities are on the horizon:

Ÿ Karen Lennon, president of Wessex 504 Corp., expects her Chicago-based community development corporation to be approved and become an active 2012 player. Part of the Small Business Administration, the 504 loan program encompasses long-term, fixed asset purchases — commercial real estate or capital equipment, for example.

A CDC provides 40 percent of the financing, a participating bank half. That leaves a 10 percent down payment for the business owner.

Ÿ A small group of suburban bankers who presently prefer to remain anonymous is seeking to put together a Small Business Investment Corp. SBICs leverage their own capital and SBA guarantees to make investments in qualifying small businesses.

Ÿ Jim Kendall welcomes comments at JKendall@121MarketingResources.com.

© 2011 121 Marketing Resources Inc.