Alternative funding sources when the bank says 'No'
Howard Jaffe is an honest banker. Chairman and CEO of Oak Brook-based Inland Bank and Trust, he responds with a classic "Yes, but" answer when asked if banks have money for small businesses.
"Banks want to be supportive," Jaffe says. "But underwriting standards - such things as collateral, cash flow, guarantees of the principals - have a much more significant role in bank lending today.
"We have lending officers out making calls, and we're happy to meet with potential clients."
Yet, Jaffe adds, even "good businesses with good fundamentals need to explore other programs."
Bankers aren't entirely to blame for a lack of lending. They're trapped between politicians who are quick to demand that banks lend to small businesses and newly aggressive bank regulators who, stung by criticism that their lax approach led to excesses that fueled the great recession of 2008-2009, often seem to discourage lending of almost any type.
There are options to explore.
Farm your ecosystem. That's the network of players who have a stake in your business' success and who therefore may provide support - if asked.
"Any business that benefits from your business (can be a target)," says Stefania Aulicino, president of CapitalLinkUSA, Chicago. (Connect with her at www.capitallinkusa.com.)
The idea is to present a positive plan that Aulicino says will create a win-win situation for your business and theirs.
"Tell them, 'Here's where I'm going,' and ask, 'How can you help?' "
You might not get money, Aulicino says, but you might, for example, get free use of otherwise empty space where you can store inventory.
Look for Angels and librarians. Heartland Angels, a private equity group based in Skokie, "remains quite active," says President Ron Kirschner. Early-stage startups are the focus. Find requirements at www.heartlandangels.com - and, Kirschner says, also visit the library to look up similar funding sources.
Librarians have a lot of information and technology they can bring to bear on your funding search, Kirschner says.
He also suggests looking at small business incubators, some of which are beginning to fund activities, and searching out "a strategic partner" who, Kirschner says, might be someone who will "write programs for a piece of the cake."
Go small. Accion Chicago is a micro loan fund that last year made 170 loans to small businesses, many of them turned down by traditional lenders. The loans were small, an average of less than $7,100 each, but that can be a plus if you don't need big money.
Established businesses can borrow up to $25,000, startups up to $15,000.
Get terms and other requirements at www.accionchicago.org. You can apply for an Accion Chicago loan at Illinois Small Business Development Centers at College of DuPage, Waubonsee Community College, College of Lake County and CenterPoint at Governors State University.
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