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The holiday cash crunch Featured

9:34am EDT July 22, 2002

For many small businesses, the holidays are the busiest time of the year.

Up to 25 percent of annual revenue for small businesses can come during the weeks between Thanksgiving and New Year's. Some have contracts, but need cash to increase inventory for the holiday season. Others need cash to buy raw materials to fill holiday orders.

Marvin Swain Jr., president of My Mama's Sweet Potato Pie Co., has felt the year-end financial pinch before. In fall 1999, with a contract with a national grocery chain, My Mama's Sweet Potato Pie had an order for 20,000 pies with delivery during the holiday season.

While Swain -- who founded the company in 1986 with $50 and his mother's all-natural recipe for sweet potato pie -- had his first big-league order, he did not have the working capital to fill it. He needed a source of financing to help with cash flow.

His solution? Columbus Countywide Development Corp.'s MicroLoan program, which financed a small business working capital loan.

The MicroLoan program offers financing for "pre-bankable" businesses -- those too small or too new to secure a traditional bank loan. These loans can be used for equipment and working capital like inventory, receivables and operating capital.

All borrowers must write and submit a business plan to be considered for a MicroLoan. The staff at Columbus Countywide helped Swain update his business plan, which was originally written in 1998 with Columbus Countywide's assistance when he secured his first MicroLoan.

D Searcy, owner of Terra Cotta, a pottery and garden-themed accessories store in Clintonville, ran into her financial crunch after the holiday season a few years ago. She found help not once, but twice, through Columbus Countywide.

In early 1997, Searcy moved her store to a bigger space. With the new location came advantages, such as larger windows for displays and on-site storage of inventory. However, it also brought challenges, since improvements were needed for the space, which had previously been a carpet store.

That's when Searcy, a previous MicroLoan borrower, went back to Columbus Countywide and worked with its staff to acquire a loan guaranty from the SBA. She used this guaranty to shop around at banks until she found one willing to finance her loan at the rate and terms she needed.

The SBA Pre-Qualified Loan Guaranty program Searcy used specifically targets rural, women-, minority- and veteran-owned businesses and exporters. Owners put up 10 percent to 30 percent as a down payment, depending on their bank's requirements.

For Searcy, the money went toward working capital, inventory, store improvements and debt consolidation.

Retailers Anthony Thomas Candy Co. in Columbus and Gooseberry Patch in Delaware found another program through Columbus Countywide to buy new buildings to house offices and inventory for the holiday selling seasons. They took advantage of the SBA 504 loan program, which helps business owners finance real estate and new buildings.

The program requires a 10 percent down payment by the business owner, with the bank financing 50 percent and Columbus Countywide the other 40 percent. In addition to the low down payment, the SBA 504 loan program comes with a fixed interest rate and a 20-year term.

Since 1981, Columbus Countywide has helped more than 1,100 small businesses obtain financing. It has approved more than $190 million in loans, which have created more than 11,000 jobs and stimulated more than $500 million in new investments in the 13 counties it serves.

For details on Columbus Countywide's loan programs, visit www.ccdcorp.org or call 645-6171 in Franklin County, or toll free at (888) 756-2232 from elsewhere. Brad Shimp is executive director of Columbus Countywide Development Corp.