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Show Me the Money
Small-business owners discover that there's more
to financing than just banks
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Business New Haven
10/30/2000
By: Linda G. Mele
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When Phyllis Duane, her husband Patrick ,and his brother Michael decided to start their own commercial plumbing and heating contracting business eight years ago, they started as subcontractors and worked out a deal with the general contractor to be paid for their work every two weeks.
“Michael and Patrick worked for other companies,” Phyllis Duane recalls, “and both got laid off, so they had an opportunity to start our own business, and took it.”
About eight months into the venture, cash flow for Superior Mechanical Systems Inc. in West Haven was tight so they got a small loan from a relative.
“After that, we started looking at banks for lines of credit, but not too many were interested in talking to us at the time,” Phyllis Duane says.
According to Duane, the company's accountant suggested they contact the then-Bank of New Haven (now Citizens Bank), which was headquartered in the Elm City, from which they got a small line of credit secured by their personal property.
Eventually, the company turned to Fleet Bank and found out about resources like the Connecticut Development Authority (CDA).
“I wish we had known about and used them earlier,” Phyllis Duane says, “because we probably would be a lot better off financially.”
CDA works to expand the state's business base by encouraging companies from other states and countries to move to or establish new operations in Connecticut, as well as encouraging businesses already here to expand their operations.
CDA also works with private-sector partners to provide financial incentives to enhance the skills of employees and to encourage investment in Connecticut's urban commercial infrastructure.
In addition, the CDA guarantees or participates in business loans that might not meet credit underwriting standards and furnishes access to lower-cost U.S. Small Business Administration (SBA) financing.
The CDA can also provide direct loans to businesses and helps rehabilitate industrial sites for commercial - and in some cases residential - uses.
Jack Cowall and Anthony Toms have spent at least $30,000 of their own money - Cowall used profits from his business and Toms sold company stock options he owned - and they borrowed money from family members to launch their company, Bad Banditos LLC.
One night in 1996, the pair, who have known each other for 30 years, were hanging out together when the idea to start the company was born.
Cowall, who owned his own plumbing business, says he was “tired of working in the cold and thought there had to be an easier way to make a living.”
Toms, a retail manager for the JC Penney Co. for the previous eight years, had been involved in the retail business all of his adult life.
The two friends say they had often talked about going into business together, but this time it turned out to be more than talk.
“Our original plan was to sell the great chili Jack makes,” Toms says. “We investigated what it would take, and found there was too much bureaucratic red tape to deal with when producing a meat product,” Cowall explains.
The two brainstormed some more and decided to go with “something hot, because people can't always find a good barbecue sauce that's hot enough,” Toms says.
They eventually perfected the recipe, found a bottler and began selling Bad Banditos Old No. 9 Barbecue Sauce.
Along the way, they found a friend in the state's Department of Agriculture and its “Connecticut-Grown” program, which helps state growers and food-product producers sell their wares.
Connecticut-Grown “is an ongoing initiative to increase the demand for Connecticut products from within and from outside the region, increase sales and value of Connecticut products, increase farm product profitability, increase farm numbers and production to ensure equilibrium beyween supply and demand, diversification of farm products and farm-use capabilities, increase visibility of Connecticut products via the 'Connecticut-Grown' logo, and to improve and provide quality assurance and educate the consumer at large,” according to the agriculture department.
The program was developed in 1986 to distinguish Connecticut products through the use of a logo and, as the logo became more recognizable, the program itself has branched out to incorporate a variety of projects.
In September, agriculture Commissioner Shirley Ferris attended the groundbreaking at the Hartford Regional Market to announce “a landmark private/public partnership that will prove pivotal for the future of this unique food-distribution facility” which is scheduled to open next May.
The$4.8 million state-of-the-art food distribution facility will be located on the grounds of the market located at 101 Reserve Road in Hartford.
The DOA also sponsored the fifth annual Ag Expo earlier this month at the State Armory in Hartford, at which the Bad Banditos guys had a booth in order to attract a distributor that could help them grow their business.
The first bottle came off the production line in April 1999, and today it's used by three restaurants/delis and available in at least 20 retail outlets.
“Now we're looking for a venture capitalist that could help us with the financing, and a distributor that could get us access to the big stores like Big Y and Stop & Shop,” Cowall says.
Although Anthony Inzero and Betty DelVecchio, owners of Tony and Betty's Flower Affair in West Haven, have been in business together since 1977, it hasn't been all roses.
“I started selling flowers on the roadside when I was a kid,” Inzero explains, “and opened my first shop on Orange Avenue in 1972 while I was a retail manager for a shoe company. Betty joined me in 1977 to expand the business to include gift items.”
The business has changed location several times and until eight years ago Inzero worked a full-time job elsewhere in addition to working in the shop, he says.
According to Inzero, the big move came two years ago when they were contemplating a move to their current location at 529 Campbell Avenue, a few doors down from Silver's Drug Store.
“We needed money to expand the business, pay for the move and to buy new equipment and a new phone system,” Inzero says, “and since the move, business has increased about 30 percent.”
Inzero says he learned about the Connecticut Community Investment Corp. through the West Haven Development Corp.
“They were great,” Inzero says, “and I would encourage anyone thinking about going into business or expanding their business to contact them.”
Launched in 1973, CTCIC recently moved its offices from 900 Chapel Street to 100 Crown Street in the old Gas Company Building, according to spokesman John Torello.
CTCIC is also the statewide lender for the Child-Care Facilities Microloan program developed by the state, offers technical assistance - free of charge - to all borrowers to help them make a success of their businesses and holds free seminars - at which attendance may be required as a condition of the loan.
Other loan programs available through CTCIC include:
• The Defense Diversification & Adjustment Revolving Loan Fund, which provides financing for companies affected by defense cutbacks.
• The SBA 504 Program, which provides money to small businesses to buy real estate and/or machinery and equipment.
• The CTCIC Direct Loan Program, which can provide “gap” financing to businesses located in the south-central part of the state.
Janet Carlin started her stained-glass business 21 years ago and paid her dues schlepping to craft shows and festivals. She was joined by her partner, Jane Crowley, when she expanded the studio and began carrying contemporary crafts.
They had to start all over again, however, when the building in which the shop was located in Branford, as well as other buildings, burned down in 1998 putting ten businesses out of business.
“It was devastating,” Carlin recalls, “to sit there and watch years of my life burn up. I even lost Christmas presents I hadn't had a chance to deliver.”
“We never even had time to think about what we were doing,” says Carlin. “We thought the insurance would take care of it and reopened down the street three months later,” Carlin says.
Unfortunately, Carlin says the insurance company “promised everything and delivered nothing.”
“The day the insurance company told me they weren't going to cover the entire loss was worse than the day the store burned down,” Carlin says.
Because so many businesses were affected, the street was declared a disaster area and state agencies stepped in to provide information that would help those who had lost their businesses get them opened again.
“The SBA process seemed long and complicated to me, but programs through the Connecticut Development Authority helped us get a loan without a long, drawn-out process,” Carlin says.
“They were absolutely wonderful, helpful and caring,” Carlin says. “If it wasn't for them, we would not be in business today. They gave us hope when we had lost it.”
Inzero views his association with CTCIC as very productive and “eye-opening.”
“If I had the kind of help 29 years ago that I've had in the past 18 months,” Inzero says, “I would have progressed more rapidly and been more successful.”
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