MyBusiness Manual                                      September/October 2001

Alternative capital source

By Alvin M. Hattal

(Published in My Business magazine and e-zine)

If your banker has become tight-fisted in this slowing economy, check with a Small Business Investment Company, or SBIC, for start-up capital or a timely shot in the arm for a growing business.

Some of the world's biggest corporations got their start with financial help from SBICs: Intel, FedEx and Apple Computer all received early financing from private sources under a federal program to aid struggling new enterprises.

Supervised by the Small Business Administration, the 36-year-old program licenses SBICs to assist high-risk fledglings that might not otherwise find an angel. Such lenders invest in businesses with fewer than 500 employees, with a net worth of up to $18 million and whose after-tax income does not exceed $6 million during their two most recent years. 

Just six years ago, Fran Lent began producing a line of healthy frozen meals for children in Burlingame, CA. Her small company, Frans Healthy Helpings Inc.' offers food with kid-friendly names like Lucky Ducky Chicken, Wacky Whale Pizza and Twinkle Star Fish,

No business novice, Lent had an MBA from the University of Michigan and more than 10 years of corporate experience, primarily with Del Monte and Specialty Brands. She and her husband sank their $100,000 life savings into the new venture. After two years in development, Fran's started shipping in 1997. Sales grew to $600,0O0 in 1998, over $1 million in 1999, and $1.4 million in 2000. Lent projects about 2 million this year.

Two years ago, two companies that specialize in investing in women-owned businesses--Women’s Growth Fund, a Washington, D.C., SBIC, and Capital Across America, in Nashville, TN--each put $900,000 in the young company, And Bank of America's SBIC invested $700,000.

"SBICs appear to have a very strong mission to help small businesses grow big," says Lent. "I don't think I'd have succeeded without their help and guidance from the SBA. I believe they have an understanding of companies that are generally underserved by investors and a real commitment to assist them."

 SBICs typically provide smaller amounts of needed amounts of capital than other lenders. says Sam Freedenberg, communications director of the National Association of Small Business Investment   Companies in Washington. The more than 400 SBICs in experience invested $5.5 billion in more than 3,000 small businesses last year, he said.

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