Group looking to help startup businesses
Economic Development Council proposes establishing revolving fund of 'micro loans'
Steamboat Springs — Business leaders here want to create new lines of cash to help entrepreneurs put their business plans into action.
The Economic Development Council announced this week that its two highest priorities for 2002 involve establishing a revolving fund of “micro loans” to help startup businesses and creating a network of private “angel investors” interested in putting cash into small businesses on the local level.
The members of the EDC believe improving access to capital will serve the greater goal of economic diversification in a local economy dominated by tourism.
“When you look at the local companies classified as diverse additions to Steamboat Springs’ economic landscape, two key characteristics stand out,” EDC Vice Chairman Scott Ford said. “One is that they are home-grown and the second is that they are primarily located here because the owner is committed to the area and wants to live here.”
Ford, who runs the Colorado Mountain College Small Business Development Center, believes more home-grown businesses could be nurtured here if there was more ready access to the small loans they need to get started.
He is pushing the EDC’s efforts to tap into the Northwest Colorado Loan Fund, a nonprofit corporation that provides start-up and expansion financing for small businesses that are unable to secure conventional financing.
Funding comes from the state through the Governor’s Office of Business Development. Presently, the fund operates in Garfield, Moffat and Rio Blanco counties, but the OK has been given to expand into Routt County.
The loans involved are typically small, no larger than $35,000 and averaging about $10,500.
Ford said he’s been given assurances the loans could be arranged with no origination fees and rates at 2.5 points over the prime lending rate, currently about 6.5 percent.
In addition to providing collateral, Ford said, the borrowers are asked to submit a formal business plan. They are also asked to become involved in mentoring with business people in the community, and financial reviews are undertaken to make certain they are on course in their new enterprise.
Those requirements could be worked out by a local committee, Ford said.
The second approach to tapping capital being advanced by Ford would involve the increasing number of people relocating to Steamboat who are in a position to invest in small local businesses.
A private enterprise, LocalFund Inc., reports there are more than 400,000 private investors in the United States investing about $60 billion annually in more than 100,000 small businesses.
However, Ford said, in many communities, there’s no comfortable way for investors and entrepreneurs to find a match.
“They don’t typically walk down Lincoln Avenue wearing signs saying, ‘I may be able to invest in your project, tell me about your business.'”
LocalFund Inc. is in the business of setting up secure Web sites for private capital networks that match “angel investors” with small entrepreneurs who aren’t ready for venture capital and aren’t quite bankable.
Ford said he has inspected the company’s Web sites with a local Web developer and received a favorable reaction. A local site would allow entrepreneurs seeking capital to place a synopsis of their business plans on the Internet. It would be accessible only to registered investors, who could study the information, and if they choose make direct contact with the entrepreneur.
The EDC would stay out of any ensuing business negotiations, Ford said. But typically, investors seek equity in the company in exchange for their investments.
Ford is forming a subcommittee of the EDC to begin refining the micro loan program and believes it could be ready for formal introduction to the business community by June 1.
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