Additional Articles for May 2004 Issue

Looking for Cash?

By William Lannon

The ’70s rock group Abba and start-up entrepreneurs sing the same refrain of “Money, Money, Money.” Doubtless Abba had a good deal of it, but the same cannot be said for all that many fledgling business owners. However, since one of the most important aspects of capitalism is to make money work and earn its keep, a variety of non-profit organizations and state agencies here in Maine actively seek emerging businesses and bright ideas in which to invest.

Generally speaking, most start-up business owners begin their search for financial backing in the same place that Willie Sutton, ace grand thief, did: from the banks, because, as he reasonably explained, “That’s where the money is.” Banks are, however, far more constrained by regulations in their lending practices than many realize. Federal and state laws limit the risks to which a bank may expose itself. That fact, as well as any bank’s natural aversion to finding itself absorbing an uncollectible loan, will prompt a bank to seek lending partners or guarantors to minimize their exposure to risk.

Kent Winters, senior Vice President and Regional Manager of Union Trust who works out of that bank’s Financial Service Center on Elm Street in Camden, explains that while an entrepreneur with an excellent business plan may need a total of $300 thousand dollars, the bank may not wish to fund the entire loan package. Should the potential business owner require fifty thousand immediately for start up costs and two hundred and fifty over the long term, Union Trust would look for a partner with which to share the loan. Winters speaks highly of Coastal Enterprises Inc. (CEI) of Wiscasset as an organization with which Union Trust has worked extensively.

CEI was founded in 1977 as a private, nonprofit community development corporation. The organization has a many-faceted mission which includes “creating social and economic opportunities for individuals and families at risk of poverty, engaging in research and policy development, and increasing public awareness and policy debate to facilitate self-determination and empowerment of people and communities.” However, for the entrepreneur the most salient features of the corporation’s thrust involve its goals of “providing financial and technical assistance for development and expansion of industries, small businesses, housing and social services as well as mobilizing private and public resources to support innovative projects that meet the needs of individuals, families, and communities.”

CEI’s informative Web site (www.ceimaine.org) notes some of its impressive accomplishments. The private nonprofit community development corporation operating under the guidance of a 15-member board of directors out of eight branch offices “has participated in over $300 million of economic development financing to 1,000 businesses, social services and housing projects, created or sustained some 10,000 jobs, and counseled over 8,500 small businesses.” Winters notes that CEI is extremely interested in creating more affordable housing for the area and hopes that area is one in which Union Trust and CEI may collaborate in the near future.

He also mentions the SBA (Small Business Administration), but points out that the federal agency specializes in guaranteeing loans rather than making them. However, Winters says that guarantee can make all the difference in whether or not a loan gets made.

In the SBA’s own words, “We help Americans start, build and grow businesses.” The Administration was created in 1953 as an independent agency of the federal government to “aid, counsel, assist and protect the interests of small business concerns, to preserve free competitive enterprise and to maintain and strengthen the overall economy of our nation.”

Among the many services which the SBA provides are free counseling, advice and information on starting a business through the Service Corps of Retired Executives (SCORE) and financial assistance for new or existing businesses through guaranteed loans made by area bank and non-bank lenders.

The SBA also facilitates free consulting services by tapping into the network of the Maine Small Business Development Centers, sponsored by the SBA, University of Maine, and the State of Maine. SBDCs also conduct training events throughout the district, although some of those require a registration fee. In the fiscal year that ended September 30, 2003 the SBA assisted 480 businesses in obtaining $54 million in loans.

The agency is particularly sensitive to the needs of “businesses owned and controlled by socially and economically disadvantaged individuals” —women, veterans, and businesses involved in international trade.

Bob Hastings, Executive Director of the Rockland-Thomaston Area Chamber of Commerce is less sanguine about CEI and would like to see Maine banks form some kind of consortium which would create a pool of funds available to small business. By proceeding in that fashion, Hastings contends the member banks would all share the risks equally. Both he and Winters hope to see a resurgence of activity in the area by the Eastern Maine Development Corporation (EMDC).

EMDC has a new president, Jonathan Daniels, who succeeds David Cole who left to become Governor Baldacci’s Transportation Commissioner. At the moment EMDC is concentrating its efforts in the Bangor area and in Washington and Hancock Counties, but Daniels has made it known that the organization will soon be returning to the Midcoast.

EMDC is also a non-profit organization and is dedicated to helping businesses and communities in Eastern Maine develop and grow. The organization concentrates on businesses from micro start-ups to expanding small businesses and offers help with marketing, manufacturing, government contracting, finance, and international trade. EMDC was the principal force behind the successful Incubators Without Walls program which had a very successful chapter in Belfast some years ago.

Brenda Munroe, the assistant Vice President of the Rockland office of the First National Bank of Damariscotta, agrees that the funding is offered by first-rate organizations, but she reports that some of her customers find the amount of paperwork required by them is “discouraging.” In fact, she says, that one customer was so daunted that he went off and successfully sought private backing. Another was able to get help from the Coastal Community Action Program with a second mortgage.

However Munroe, Hastings, and Winters all agreed that before making any approach to a bank, anybody seeking funds for any business venture should be prepared with a thoroughly researched business plan. Hastings says that when people come to him for advice the first thing he asks about is the business plan. He remarks that it may very well tell you that you shouldn’t be going into business at all. That, of course is a great time and money saver.

For those unfamiliar with business plans, any of the organizations discussed above would be delighted to offer advice and, indeed, assistance.

So, for those who really do have a better mousetrap the money is out there. And the banks really do want to lend it. The entrepreneur’s job, among all the others for which she or he is responsible, is to prove that it will be used productively and, of course, repaid.

FMI: Coastal Enterprises, Inc. Alice A. Hudyberdi, Office Manager, P.O. Box 268, Wiscasset, Maine 04578; 207.882.7552; FAX: 207.882.7308; www.ceimaine.org.
Eastern Maine Development Corporation, One Cumberland Place, Suite 300, Bangor, ME 04402-2579; 207.942.6389, 1.800.339.6389; FAX 207.942.3548; www.emdc.org; email: <jdaniels@emdc.org>.

U.S. Small Business Administration; Maine District Office: Edmund S. Muskie Federal Building, Room 512, 68 Sewall Street, Augusta, Maine 04330, 207.622.8274, FAX 207.622.8277 Web site: www.sba.gov/me and very useful for start-ups: www.sba.gov/starting_business/startup/guide.html.

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