How to Beat the Credit Crunch

By Louis Moscatello

Money markets are tight, especially for companies making $500,000to $25 million a year. Your chances Improve greatly if you know where to look and how to make your case.

Fastframe U.S.A. Inc. gets its financing the old-fashioned way. John Scott,who started the picture-framing stores three years ago and has three otherfamily members in the business and grew it to $14 million in sales, raised$500,000 by selling preferred stock to a private investor. Then the ownersof the building in Agoura Hills, California, where Fastframe has its headquarters, madea $1 million investment in the company's common stock.

Preferred Pipe Products Corp., a family business in St. Louis, took another route.The producer of specialty pipeline components for the oil and gas industry had grownrapidly over the past three years to $20 million in sales. Now some of its notes werecoming due. Preferred Pipe could not turn to its banks; it already had reached itslimit there.

The company struck a deal with Waiter Heller, a finance company in Chicago,which injected $6 million in new common equity and subordinated debt into Preferred.the investment gives Heller, owned since 1984 by the Fuji Bank of Japan, a substantialposition in the company and several seats on Preferred's board. Six years from nowwhen the note is due, the family can buy out Heller.

While Fastframe's approach will never go out of style, Preferred Pipe's solution toits capital problems is new to an increasing number of family businesses. Deregulation has dimmed the distinction between banks and other financial institutions. Oncereserved for complex megadeals involving billions of dollars, sophisticated financialinstruments that blur the line between debt and equity are now available for middlemarket companies like Preferred whoserevenues are measured in millions.

The bad news, however, is that lending institutions throughout the countryare tightening their credit standards.This flight to quality by lenders canleave many small companies behind.Through most of 1990, according toFederal Reserve data, existing loans tocorporations by the largest banks fell bya few percentage points, a significantturnaround from the gains registered inprevious years.

Well-managed family businesses canstill get capital, although they will haveto work harder for it. "The credit crunchis not evenly spread throughout thecountry--there are still pockets of liquidity and good deals are still doable,"says Mark DeNino, director of corporate finance at Philadelphia-based CMSCompanies, an advisor to closely heldbusinesses. "It means searching inevery corner and exploring every alternative, including bringing in a minorityequity investor for five to seven years."


For companies with sales below $5 million,commercial banks are often the only feasible sourceof Financing.

Senior debt, which has firstclaims on the assets of a company in event of liquidation,isgenerally secured (when it isat all) by inventory, plant,property, equipment, and accounts receivable. The cost and flexibility of debtis a function of whether it's short orlong term, secured or unsecured."Most family companies only look atinterest rates when measuring costs todetermine if they are getting the bestdeal, but there are other issues to consider," says John P. Waterman, seniorvice president at Howard, Lawson& Co., an investment bank inPhiladelphia. "Usually lower costsimply more strings and quickerrepayment terms. A one percenthigher rate may be worth thenexibility of a longer term andeasier covenants. Especiallysince interest is tax-deductible."


Size of companies served:All sizes.

Cost of capital: Prime rateplus 0.5 percent to 3 percent,plus fees.

Primary advantages: Flexible, low-cost, ongoing business relationship, additionalfinancial services available.Primary disadvantages:Close monitoring of your finances, possible restictionson your activities.How it works. For companies with sales below $5million, commercial banksare often the only feasiblesource of financing. Owners of companies withsales below $10 million will probably have to pledge personalguarantees for their company's loans.

Many of the large money centerbanks and big regional banks are underpressure to upgrade their loan portfolios, in part by dealing more with Iargercompanies. Small to mid-sized companies have a better likelihood today ofgetting bank financing from a smallerregional or local bank.

In the current economic environment, it is important that you do not depend on any one bank. It may be worthwhile to pay a fee to maintain a line ofcredit at a second bank, even if you donot use it.

Commercial banks seek a relationship with their clients. In regions wherebanks are aggressively seeking business with small companies, this canwork to the company's advantage onloan costs."If a company banks with us,brings us their trust business, their deposit business, and their cash-management business, then we can price theentire relationship at a certain yieldrather than putting it all in the loan cost"says Jack Whitt, manager of statewidebanking activities at First City,Texas/Houston.

Banks' covenants on financial ratiosare usually more restrictive than someother financing sources, but they aremore flexible about changing them tomeet changing conditions. "Banks seecovenants as yellow lights or tripwires,so they will be informed of any changesimmediately. It's part of the relationshipthey want with borrowers," says Waterman.

At a commercial bank you deal directly with the key decision maker inyour case--your loan officer. This isusually considered an advantage for theborrower, but not always. Fastframe recently changed banks because it wasunhappy with its loan officers. "I gotsick of having a new account executivejust out of college every three months,"says John Scott, CEO of the company.

How to get it. Identify your financing requirements early and start theprocess of shopping well ahead of thetime you need the money. Loan approvalcan take two weeks to two monthstoday. Apply to a number of banks to besure of finding one.

Don't ask for more money than youneed. This is a mistake small businessestoo often make and it immediatelybrands you as nonprofessional and triggers even closer scrutiny. "A borrowerneeds to make a loan request that wouldmaintain a reasonable ratio of debt to equity consistent with the company's industry and cash now prospects, saysFrank Mynard, president of Bank ofNorthern Illinois and chairman of theAmerican Banking Association's SmallBusiness Banking unit. Have in mind arange of how much you need, preferablyin best case/worst case scenarios. Document both cases in your business plan.


Size of companies served: Below$3.5 million in sales in many cases.

Cost of capital:Varies but usually startsat prime plus 1 percent to prime plus2 3/4 percent plus a 2 percent fee.

Primary advantages: Allows borderline companies to get bank financingwith SBA guarantees; longer maturities;establishes relationship with commercial bank for small businesses with limited credit history.

Primary disadvantages: Requires personal guarantees.

How it works. Many family companies get their bank loans through theSBA's 7A program, which guaranteesloans made by commercial banksand other lenders. The government defines "small" business asindependently owned and operated retail and service companies with sales below $3.5 million, construction contractorswith sales below $17 million,wholesalers with fewer than 100employees and manufacturerswith less than 500 employees.

Secured loans made underthe program range from$50,000 to nearly $1 millionwith the SBA guaranteeing asmuch as 90 percent of the first$155,000 and 85 percent ofthe next $600,000.

Nearly 6,000 lending institutions participated in theprogram in 1989 and made16,831 loans totaling $3,6 billion, for an average-sizeguaranteed loan of $218,000.The largest single SBAlender was not a bank, buta home finance company,The Money Store Investment Corp., which has 30locations in 15 states, mostly on eithercoast.

"Our typical client is a small businessthat is three to four years old, has Sustmoved into the black, and is looking toexpand to larger quarters," says LarryWodarski, executive vice-president atThe Money Store.

Under SBA programs, lenders cancharge the borrower a variable rate upto 23/4 percent above the prime rate, adjusted quarterly.Terms can be up to 10years for working capital loans, up to 15years for certain equipment, and up to25 years for owner-occupied real estate.The borrower must pay a 2 percent feeto the SBA on the guaranteed portion ofthe loan, payable in certifiedfunds at closing.

When an SBA loan is from a bank, itsets the stage for a relationship with thebank. "VVhen we make an SBAloan, weexpect borrowers to have a relationshipwith the bank, and we expect to do morefinancing for that company within ayear," says Pamela Davis, vice-presidentand director of SBA lending programsat the Reading, Pa. office of Philadelphia's Meridian Bank.

Lending institutions which generatea certain volume of SBA loans with a lowdelinquency rate become part of theSBA's Preferred Lender Program(PLP). These lenders areempowered to make theloan and SBA-guarantee decisions themselves, whichmeans less paperwork foryou and about the same waitas any standard bank loan.For this control, the bankssacrifice some of the guarantee "the SBA will insureonly 80 percent of a PLPloan. Since banks have themost risk in this program,they usually put their mostcredit worthy clients in it.

How to get it. To apply for an SBAloan, prepare a current balance sheet.Do not include personal assets or liabilities. Have available a business profitand loss statement for the previousthree years and for the latest period end-ing within the past 90 days. Includecopies of Federal income tax returnsfor the past three years. Prepare a current personal financial statement of allowners holding more than 20 percent ofthe equity. List all collateral to be offered as security; break it down by category such as real estate, machinery,fixtures, and inventory; estimate themarket value of each item. State theamount of your loan request and theexact purposes for which it will be usedby item and dollar amount.


Size of companies served: All sizes.

Cost of capital: 14 to 25 percent.

Primary advantages: Finances up to 100 percent ofthe cost of the leased equipment and allows concentration of working capital; keepso'lher credit sources open;upgrade clauses protectagainst equipment obsolescense; simplifies bookkeeping.

Primary disadvantage:Each lease requires carefulscrutiny.How it works. Sometimessmall, local leasing companies are the only financingsource for family businessesseeking cars or office equipment. "It's more costly thanthe big secured lenders, butfor a small company it may bethe best and only way to getequipment for the companyto grow," says Waterman,who estimates the interestrate charged by most small leasing companies is close to 18 percent.

The two most common types ofleasesare capital or finance leases and operating leases. With the capital lease, thepayment stream covers the full value ofthe equipment plus finance costs. It caninclude a balloon payment covering theresidual value of the equipment at theend of the lease period. At the end of thelease, the lessee owns the equipment.These leases finance the purchase ofequipment and are treated as purchasesfor tax and accounting purposes. The interest rate is built into the terms of thelease, but it's usually competitive withcommercial banks.

An operating lease allows a companyto rent equipment on a short-term basiswith no ownership obligation. Paymentsare treated as a tax-deductible expense.The lessor retains the right to deductdepreciation for tax purposes.

The best deals come from vendor leasing companies, which are eager to placetheir equipment. They can offer operating leases or finance leases. If you turninstead to secured lenders rather thanto vendors, you will likely have to coversome of the cost of the equipment upfront, The interest rate built into thelease for the other 80 percent of the costwill probably be a few percentage pointshigher than a vendor lease.

How to get it. You'll need financialstatements for the past two years. It'salso important to have a suitable bankor trade credit reference. Leasing com-panies do not like to be your first andonly creditor.

Bear in mind that leasing is an unregulated business. In selecting a lessor,check with your lawyer, accountant, andbusiness contacts about reputable onesin your area. Every lease is a contract,but there is no standard contract in theleasing industry. So be certain to checkall documentation carefully before mak-ing a commitment.


Size of companies served: $5 millionin sales and up.

Cost of capital: Prime rate plus 1.5 to6 percent, plus required fees for audits,appraisals, and closing.Primary advantages: Owner canforego need for personal guarantee. Allows otherwise marginal companies toget credit.

Primary disadvantages: Higher costthan standard bank commercial loans.Lenders impose direct controls on useof assets and the cash flows generatedby them.

How it works. What are the financingalternatives for family businesseswhose cash flow prospects are toospotty for bank financing, or who are upagainst some hard times but still possess a solid asset base and reasonablelong-term prospects?

"Asset-based financing is particularly relevant for rapidly expanding businesses whose accounts receivable outstripavailable cash-flow and workingcapital," says DanielJacobson,management consulting manager in Grant Thornton'sChicago office.

The Commercial Finance Association estimates that its 230members do 80 percent of theasset-based lending in thecountry. Its membership roster includes 88 finance companies that make loans frombelow $250,000 up to $1 million. But the high fees involved with asset-based lending make loans below $1million very expensive. Manycommercial banks are alsoofferingasset-basedlending.

Unless the borrower isvery healthy, lenders generally impose a cash/collateral arrangement whereby they get repaid directlyfrom the revenue streamproduced by the collateral, leaving youonly the cash you need.

If your family business is seeking anasset-based loan that is too small for abank's secured lending deparment, youmay need the services of a syndicator.They are expensive and may involvepersonal guarantees. Interest costs, plusfees, can go as high as 20 percent of theprincipal.

"Our clients are not GM or IBM. Typically, they were rejected by their bank.They might have two or three years ofoperatinglosses,oramajortaxproblemwith the IRS, but they have a strong collateral base,"says Hewitt Heiserman Jr.of Brice Capital Corp. in King of Prussia, Pa.

Brice specializes in raising capitalfrom as low as $100,000 up to $10 million. It does not put its own capital atrisk, but syndicates the loan among numerous financial institutions or individuals who may have expertise in the borrower's industry. The loans usuallycarry a rate of prime plus 2 to 4 percent.

How to get it, Check with your accountant, investment banker, and otherlocal contacts to find out the names ofreputable asset-based lenders servingyour particular region.

You will need to know how your lenderwill value the assets used in your business. Since it is the basis for the amountofyourloan,youwanttomakesuretheappraisal for your collateral is the highest, or at least the fairest, price. Appraisals of equipment can vary significantly. There are no really good,universally accepted standards. Fairmarket value is usually the best price forany asset. Orderly liquidation valuemeans priced to sell in a reasonable period, usually 180 days. Auction value Isthe price equipment would fetch if puton the block for one day--it's usuallyvery low. In-place value is a price that reflects the equipment as is and as used.It can also be low.

Asset-based lenders are usually veryconservative. Expect them to use orderly liquidation value or less when considering a loan. As for collateral, theselenders prefer assets that are easily liquid such as accounts receivable or a finished goods inventory. In some industries, factoring companies regularlyserve as simple asset-based lenders.They may pay the borrower 85 percenton his receivables and then assume allthe risk of collection.


Techniques used to fund leveraged buyouts of largepublic corporations ore increasingly avoilable toSmaIIer companies.

Subordinated debt, or mezzanine financing, is a form ofquasi-equity. Unlike seniordebt, it is typically unsecured. Repayment can takemany forms, from regular periodic payment of principal and interest to a balloon payment at the end of its term. Asused in financial markets today, suberdinated debt almost always carries anequity kicker that gives the investorsthe bulk of their return at the end of theterm, usually in five to seven years.Used extensively to fund leveraged buyouts of large public companies, suberdinated debt has been increasinglyavailable for smaller companies.

If your company is at the pointwhere some sale of equity is either preferable or necessary as away to raise capital or restructure,subordinated debt may makesense. Equity or equity equivalentsare often a part of their deals. Sofamily companies will have to grapple with all the complex tradeoffsbetween family issues of controland liquidity when going beyondsimple debt financing.


Size of companies served: Minimum sales of $20 million, net worth ofat least $10 million.

Cost of capital: Negotiable, but usually varies between 20 and 30 percent.Pnmary advantage: Large chunks ofcapital available at one time; flexibleterms; relatively inexpensive source ofcapital compared to straight equity.Pnmary disadvantage: Often mvolvessome loss of control to investor.How it works. Noel Urben, presidentof the BT Capital Corp., the venture capital subsidiary of Bankers Trust, citesthe family and nonfamily shareholdersof one company who wanted to raisesome cash.BT bought 49 percent of thecompany. It also provided fundsthrough a "hybrid" zero coupon notefor eight years at 12 percent. Termscalled for no interest to be paid the firstthree years. But the company was allowed to deduct the imputed interestfor tax purposes, thus reducing its taxesand increasing its cash flow. After eightyears, the bank can be bought out at apremium that raises its return wellabove the 12 percent interest.

The rush to do subordinated financing has slowed as a more sober outlookhas taken hold in financial markets. Butmoney center banks are still willing toput their own funds to work. Many localand regional banks are entering thisnew market. Pension funds, investmentbanks, finance companies, and foreignbanks continue to straddle the fuzzyfrontier between debt and equity.

Financing can take many combinations, including common stock, pre-fewed stock, and various debt instruments convertible into equity at somepoint. It's worth noting that, In many instances, the lender never actually ownsequity in the company but simply ownsthe right to buy equity.

The lenders are typically looking toearn an annual return of 20 to 30 percenton their investment. They want to beout of the deal in about five to sevenyears, usually through an exit strategythat's been negotiated as part of thepackage. The return often includessome current yield to the investor, usually through preferred stock dividendsor interest payments of between 12 and15 percent on a debt instrument, if used.The bulk of the return comes atthe end of the investment's life,when the exit strategy can call forthe lender to "put" its equityrights back to the company, oreven for the company to be sold,or go public.

How to get it. Shopping forthis capital infusion requires thesame preliminary steps as approaching a bank for a loan. Itmay also require the services ofan investment banker whoknows the marketplace for thetype deal you need. For mostbusiness owners, this is aonce-or-twice-in-a-lifetimestep involving a great deal ofmoney. Hiring an expert tohelp you prepare yourself,market the company, and negotiate the deal can make alotofsense.


Size of company served:Minimum sales usually of $20 million, net worth of at least $~O million.

Cost of capital: Usually between 30 and 35 percent, plus fees. Primary advantage: Large amounts of capital available at one time; flexible terms; relatively inexpensive source of capital compared to straight equity.

Primary disadvantage: Often involves some loss of control.

How it works. The greatest competition for the merchant bankers comes from the many funds that provide private placements to middle market companies, which these funds typically define as companies whose total marketvalue is $1O million to $15 million.

These funds are generally seeking a30-to-35 percent return compoundedover a five-to-seven year period, derivedfrom a combination of interest paid onthe debt portion or dividends on preferred stock, and redemption of equitykickers at the end of the period.

How to get it: There are many waysfor a family business to find LBO funds,which make these type of investments.There are numerous lists. One excellentsource is The Corporate Finance SourceBook, a $377 directory published by National Register Publishing, that listsspecifics on 3,000 venture capitalsources, advisors, and other information.

Many funds specialize in a particularindustry, and often provide management expertise to the companies theyinvest in. Ask your lawyer and accountant for leads. But it still usually pays toget an agent familiar with this market tohelp you locate the best source for youand make the best deal.

There's also a publicly traded $83 million fund that provides senior and subordinated debt financing to small, privately-held business. Allied CapitalCorp. II was created in 1989 and tradesover the counter."We have many family businesses as clients," says DavidGladstone, president of the fund. Thesize of Allied's clients vary friom a corner store with $500,000 in revenues tolarge manufacturing companies.

The fund provides the loan portion atits standard rates, plus the borrowergives up rights to an equity stake of between 5 and 20 percent. The equity rightgives the fund an exit window from thedeal, usually after five years. "In 30years, we've never exercised an equityright," says Gladstone. Instead, Alliedusually "puts" the rights back to thecompany, usually on terms that call forpayment over a two-to-five year period.


The most flexible method of financing raises difticultissuesoboutsharing thefamily'scontrol of thecompany with outsiders.

Common equity capital is themost flexible method of financing. It may not requirerepayment, nor must it pay adividend. But this aexibilitycan carry a high cost, in terms of sharing control.

"When you take in a new partnerthrough an equity investment, it's likea marriage. It's crucial you ask,'Whatsort of partner are they?' " says Francoisde Visscher, of de Visscher & Co. inStamford, Connecticut, an investmentbanking advisor to family businesses.

Equity investors can be individuals orbusiness associates, institutions, or youremployees. A company can also sellshares to the public, although intoday's markets it takes a large,well-established company to do sosuccessfully. Initial public offeringsare not considered below.


Size of companies served: Allcompanies

Cost of capital: Varies but investors generally seek eventualreturns of 30 percent or more onequity investments.

Primary advantage: Highlyflexible; repayment often notnecessary; dividends at management's discretion.

Primary disadvantages:High cost if redeemable; sharing of control.

How it works. Individualsoften are the best source ofequity funds. Some are willing to take straight minoritypositions with no exit strategy, as professional moneymanagers insist upon. AsJohn Scott learned when hislandlords, a construction company, decided to invest $1 million as a minoritypartner in Fastframe, new investors canoffer a lot more than just capital--theirwealth of experience, for instance, andtheir contacts.

How to get it. There are lots of"angels,"but they are difficult to find. No formalmarket exists. Talk with your lawyers,accountants, members at your club, orany network you think can connect youto a source.

Expect private investors to act justthe opposite of the faddish stock market. They are usually more interested inyour company's fundamentals ratherthan whether or not you're "hot." Youcan place unregistered stock with up to30 sophisticated investors without running afoul of the SEC.


Size companies served: Fair marketvalue of at least $.5 million; at least 40employees.

Cost of capital: Similar to bank ratesfortermloans.

Primary advantage: Tax-advantagedfunds source; helps perpetuate business; aids in estate planning; providesemployeeincentive.

Primary disadvantage: Reduces fam-ily equity.

How it works. Selling equity to youremployees through an employee stockownership plan (ESOP) is another excellent way to raise equity capital. AnESOP is an employee-benefit plan designed to purchase stock from a company or its share~olders.

ESOPs are not for every family business. They generally work best whenfamily owners are willing to bring employees into the decision-making process, treating them as the part-ownersthat they are. If a company is in good financial condition, an ESOP can be anexcellent way for owners to withdrawsome of their capital from the businessin a tax-advantaged manner, either togain liquidity or as part of overall estateplanning. "But ESOPs are also a deviceto put capital into the business," saysDick Burton, chairman of Private Capital, Inc., a San Francisco investmentbank that specializes in designing andimplementing ESOPs.

The ESOP purchases stock directlyfrom the company or its shareholders.To do so, the ESOP often borrows themoney, from a bank or other lender, including the company itself. When theESOP borrows money, the companyusually guarantees the loan. The company also commits itself to making tax-deductible annual payments to theESOP that are sufficient to meet theESOP's obligations to the lender.

To justify the costs of installing andmaintaining an ESOP, a companyshould have a minimum fair marketvalue of $1.5 million and a payroll ofabout $500,000 annually, estimates Buxton. "But they are really best for companies that have a minimum of 40 to 50employees and are looking to perpetuate the business through and beyond atransfer from one generation to thenext," says Burton.

How to get it. ESOPs are complicatedand cost $20,000 or more to set up. Butifyou decide to take the step, financingis not difficult to arrange for a solidlyprofitable and growing company.

Your own bank is the best place to gofor financing an ESOP. Some of the nations largest commercial banks, suchas Chase Manhattan, Chemical Bank,and Bank of America, have set up divisions dedicated to providing funds forESO Ps.

The ESOP Association of America, inWashington, D.C., can direct you to anaffiliated public agency in your ownstate or a local expert who can help youorganize an ESOP in your company(telephone 202-293-2971).Taking the pulse of your bank

Just as a bank will examineyour company's credit worthiness, you should pay strictattention to your bank's financial health, too. If thebank is a publicly tradedcompany, much informationis readily available from itsannual report. Check withbrokerage houses for analysts who follow the company.Resources

The CorporateFinance Source Board.a $377 directory publishedby National Register Publishing, that lists specifics on3,000 venture capitalsources, advisors, and otherinformation. Address: 3004Glenview Rd., Wilmette, III.60091. Telephone: 800-3236772.

Small BusinessAdministration. contactyour local SBA office.

The NationalCooperalive Bank. P.O.Box 96812, 1630 Connecticut Avenue, N.W., Washington, D.C. 200906812. Telephone: 800-955-9522.

National Commercial Finance Association. Rosterof Members by loan type,size, and marketing region,225 West 34 St., Suite 1815,New York, N.Y. 10122. Telephone:2125965053.

Pratt's Guide toVenture CapitalSources. $145 plus $5shipping and handling.Write: Venture Economics,75 Second Ave., Suite 700,Needham, Mass. 02194.Telephone: 617-449-2100.

How the ESOP ReallyWorks. $13. Contact ESOPAssociotion, 1100 17th St.,N.W., Suite 1207, Wash-ington, D.C. 20036.

Managing an EmployeeOwnership Company.$25 ($15 for members).Contact The National Centerfor Employee Ownership,2201 Broadway, Suite 807,Oakland, Calif. 94612.Telephone: 415-272-9461.

Steps to SmallBusiness Financingjointly published by theAmerican Bankers Association and the National Federation of Independent Business, Capital Gallery East,Suite 700, 600 MarylandAve., S.W., Washington,D.C. 20024.Telephone:202-554-9000. Also inquireabout the publication at yourlocal bank.Special consideratons for family businesses

The family business anglecan be an important part ofyour "story" when talking toinvestors or loan officers."The most salient characteristic in making loans to smallcompanies is that you dealwith people, not the company," says Paul Browner,senior vice-president incharge of the business banking division at HuntingtonNational Bank dealing withcompanies with less that $10million in sales. "When looking at a credit request, we'rereally making a judgment onthe character and competence of the people and theircommitment to the business.It's not until a company getsto $30 million in sales thatwe begin to look at the company, its strategic position,and other measures."

Having dedicated, experienced management thatgrew up in the business canwork to your advantagewhen seeking capital. Butyou must demonstrate thatthe company is run as a business on an arm's length basisand not out of the family'spocket. Whenever transactions exist that are overly favorable to the family, suchas a nonworking family member on the payroll, this shouldbe disclosed and appropriate adjustments shown on thecompany's financial statements.Whether or not succession is an issue that a family business must addresswhen seeking odditionalcapital depends on the nature of the business, the ageof the key family members,and the type of capitalsought. Seldom is a writtensuccession plan a requirement for getting financing,but having one puts potentialcreditors greatly at ease.

If the business is highly dependent on the founder orhead of: the family for technology, sales, or management, succession becomesan issue for discussion. If: thekey individual is over 55,lenders will want some indication that the business hasconsidered the possibility ofsuccession.

The type of financing hasan impact. "It's different fora revolving line of credit fora company where the fatheris 64 years old and the sonis 30. It's not much of anissue then," says Brawner."But if they're seeking a 20-year loan to buy a factory,then it's an issue. "HELEN CHRISTIAN, PRESIDENT
CID Draperies Inc., Gaithersburg, Md.

Product: Custom draperies.

Sales: $200,000.

Capital Needs: Obtained a $175,000 SBA-guaranteed loan through Allied Mortgage Co.,the real estate financing arm of Allied Capital Corp.The loan enobled her to purchase a building to house her company.JOHN SCOTT, PRESIDENT AND CEO
Fastfframe, U.S.A. Agoura Hills, Ca.

Product: Retail picture frames.

Sales: $14 million.

Copital needs: Raised $500,000 from thesale of preferred stock to a private investor and$1 million from the sale of common stock to theowners of the building where the companymaintains its headquarters. The money wasused for expansion.MICHAEL GRAVELY, PRESIDENT
Gravely Roofing Corp., Philadelphia, Pa.

Product: Roofingng contractor.

Sales: Less than $10 million.

Capital needs: Switched his lending business toUnited Valley Bank of Philadelphia, Pa. After receivlng a credit line of $800,000, Gravelybrought ail his banking business--includingmortgages and a real estate limited partnership-under United Valley's roof.KEVIN EAGLETON
Preferred Pipe Products, St. Louis, Mo.

Product: Specialty pipeline fixtures

Sales: $20 million

Capital needs: Sold $6 million in common stock and junior subodinated debt to Heller Equity Capital Corp., a division of Heller Financial Inc., owned by Fuji Bank of Japan. Heller got a substansial position in the company and several seats on the board.H.C. JACKSON, PRESIDENT
Jackson Hardware,San Rafael, Ca.

Product: Hardware, home improvement items.

Sales: $13 million.

Capital needs: Set up an employee stock ownership plan [ESOP) for the company's 74 employees. As the ESOP expands its equity interestin the years ahead, Jatcksan figures his outsideborrowing will be drastically cut.BANKS

American State Bank Pierre, SD 605-224-9233
Associated Commerce Bank Brookfield, Wl 414-271-1786
BancOhio National Book Columbus OH 614-463-7099
The Bonk of Califomia N.A. Son Francisco, CA 415-765-0400
Bank of Hawaii Honolulu, IN 808-537-8111
Bank of Newport Newport Beach, CA 714-760-6000
Bank of Vermont Burlington, VT 802-658-1810
Bank One/Dallas Dallas, TX 214-290-2000
Barnett Bank of Jacksonville N.A. Jacksonville FL 904-791-7500
Bay Bank of Commerce San Leandro, CA 415-357-2265
California Business Bank N.A. San Jose, CA 408-290-8866
Casco Northern Bank N.A. Portland, ME 207-776-7018
Chose Manhattan Bank N.A. New York, NY 212-580-2558
Civic Bank of Commerce Oakland, CA 415-836-6500
Cole Taylor Bank Wheeling, IL 312-775-7171
First National Bank of Omaha Omaha, NE 402-341-0500
First Tennessee Bank N.A. Memphis, TN 901-523-4444
The Huntington National Bank Morgantown, WV 304-291-7700
INB National Bank Columbus, ON 614-476-8300
Kelly Field National Bank San Antonio, TX 512-681-5100
Lake Shore National Bank Chicago, IL 312-915-5779
Maryland National Bank Baltimore, MD 301-244-5000
Michigan National Bank Grand Rapids, MI 616-451-7872
National City Bank Cleveland, ON 216-575-2000
Ohio Citizens Bank Toledo,OH 419-259-6683
Pittsburgh National Bank Pittsburgh, PA 412-762-2000
Seattle First National Bank Seattle, WA 206-358-7800
Signet Bank/Virginia Richmond, VA 804-747-2000
Southtrust Bank of Alabama Birmingham, AL 205-254-500O



Advance Financial Corp. Atlanta, GA 404-256-2123
Alcor Business Capital Los Angeles, CA 213-937-0535
Boston financial & Equity Corp. Boston, MA 617-267-2900
Branch Banking & Trust Co. Wilson, NC 919-3994111
Capital Factors Inc. Ft. Lauderdale, FL 305-730-2900
Celtic Capital Corp. Santa Monica, CA 213-314-7333
Citizens Trust Co. Riverside, RI 401-546-7000
Concord Growth Corp. Palo Alto, CA 415-493-0921
Dam Business Credit Cleveland, OH 216-243-7778
Deutsche Credit Corp. Deerfield, IL 708-948-7272
Diversified Business Credit Inc. Minneapolis, MN 612-339-8958
Enterprise Financial Corp. Atlanta, GA 404-255-4400
Fidelcor Business Credit Corp. New York, NY 212-333-7445
Finance Company of America Baltimore, MD 301-752-8450
First Capital Corp. Oklahoma City, OK 405-755-5260
Independent Equipment Co. Son Francisco, CA 415-981-0308
KBK Financial Inc. Houston, TX 713-2244791
Lighthouse Financial Corp. Greensboro, NC 919-272-9761
Midlantic Commercial Co. Bloomfield, NJ 201-893-3700
Orange Commercial Credit Anaheim, CA 714-937-1181
Phillips Factors Corp. High Point, NC 919-889-3355
Presidential financial Corp. Atlanta, GA 404-491-8345
Prestige Capital Corp. Fort Lee, NJ 201-9444455
Puritan Finance Corp. Chicago, IL 312-372-8833
RAI Group Hackensack, NJ 201-489-6400
Republic Acceptance Corp. Minneapolis, MN 612-333-3121
Riviera Finance Redondo Beach, CA 213-540-3993
Rosenthal & Rosenthal Inc. New York, NY 212-244-1200
Winfield Capital Corp. Great Neck, NY 516-487-0320


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January/February 1991

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