Business fund looks back on its beginnings

Group aided by chamber able to help companies with capital, expansion

Howard County

January 06, 2003|By TaNoah Morgan | TaNoah Morgan,SUN STAFF

Business owners who go to Jim Rouse Entrepreneurial Fund to help their companies grow need only look at the organization's history for a real-life primer.

The group that sprung from the generosity of the Howard business community and in honor of Columbia's visionary founder has become a $3.3 million resource and a beacon for entrepreneurs long on ideas and short on cash.

JREF is a fund designed to help entrepreneurs who don't qualify for bank financing find start-up capital or money to expand their business.

The group is one of several to be honored at the Chamber of Commerce's Bravo Business event Jan. 24 at the Great Room in Historic Savage Mill.

"We often forget the sense of history," said Linda Burton, vice chairwoman of the chamber. "We're celebrating business, and the chamber has supported a lot of business. We spun out JREF, Leadership Howard County and the high-tech network."

In its 10 years, JREF has lent nearly $2 million to local businesses and helped create more than 350 jobs in Howard County, said Mary Becker, JREF executive director. As the not-for-profit fund moves forward, it will look to join more banks to increase its lending capacity to try to target specific types of entrepreneurs, she said.

Becker said that the greater number of banks involved with the fund, the more loan applicants she sees. Because of JREF's growth and track record - and the fact that banks can get community reinvestment credit by lending through the group - the organization likely will not have to look for new partners.

"There are now banks that have come into town that would like to be a part" of JREF, she said.

Although the notion of a fund to help small businesses is far from novel, JREF is different because it is not affiliated with any government agency.

The fund has its roots in the county Chamber of Commerce, which organized local businesses to make a five-year commitment to fund $1 million for the fledgling organization.

In its first year, with $200,000, JREF was able to lend a maximum of $20,000 a loan to a few entrepreneurs. A year later, the executive board raised the maximum loan amount to $50,000, and a few banks had begun contributing to the group. Within five years, JREF had reached its goal of having $1 million to lend, and had five banks with which it had a line of credit to extend to entrepreneurs.

Today the group has 10 banks signed to an agreement to each contribute a percentage of each loan JREF approves. The loan approval committee is managed - as it has been since inception - by a group of board members. Loans can be for as long as seven years, and for up to $100,000. Applicants need only to live in Howard County or have a business there.

"I think it's neat we are working with companies with a great deal of creativity," said Diane M. Battle, second vice president for JREF's board of directors. "In these challenging times, I think we'll be successful in developing more employment in Howard County."

Although JREF is self-standing, the fund receives a $100,000 annual grant from county government to help with operating expenses and pad its reserve fund. If a loan goes bad, the fund is responsible for repaying 75 percent of that loan to the banks. The banks share the remaining liability.

JREF also manages the county's community development block grant from the federal government, which has to be given to low- to moderate-income applicants, or a company that will create low- to moderate-income jobs. The county also provides free office space to the group.

Any type of business can apply for a JREF loan. In its 10 years, JREF has completed 30 loans to companies with missions as complex as biotechnology firm Cylex Inc. and technology company Cnapsis LLC, and businesses as mainstream as the Main Street Barber Shop and Wine Mates. Applicants must first be rejected by two banks.

Although a few companies have defaulted, several other companies have paid back their loans. The fund has about $710,000 in outstanding loans.

The fund charges a higher interest rate than banks - about on par with finance companies - and requires personal guarantees, but the fund also is more flexible, accepting guarantees from family members and on occasion taking a small percentage of equity in a company.

"We look at it as closely as a bank does. We're just willing to take a greater leap of faith than a bank would," said Antonio P. Salazar, deputy general counsel for Provident Bank of Maryland and first vice president of the JREF board. "If someone has a good business and track record, were willing to see them succeed in Howard County."

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