story and photo by Jess McCuan

It sounds like one of the riskiest businesses you could possibly start. For years, small independent music shops (and even some giant ones, like Tower Records) have been closing left and right, as have small bookstores, which get gobbled up or shut down by the likes of Borders and Barnes & Noble. But Karen Sams, a 43-year-old single mother and classically-trained pianist, decided her new business would combine both of these dying breeds. SoliClassica, which opens at the end of July on Hendersonville Road in South Asheville, will specialize in classical CDs, books and sheet music, and has space for Sams to teach piano lessons. It also has a performance area for classical musicians, but it doesn’t sell musical instruments like some teaching-focused shops in Asheville.

With family help, Sams, who lives in Candler, raised about $65,000 this spring to pour into SoliClassica. But she needed at least $50,000 more, mainly to buy inventory. The question was, as with all small businesses, could Sams sell her idea to a bank so she could borrow the money to bring the business together? For months, she had heard nothing but bad news about loans and credit. Still, risky as it all seemed, Sams had no trouble last month getting the extra $50,000 she needed for SoliClassica’s startup costs.

That’s because, even though the phrase “credit crunch” cycles endlessly through the news—accompanied by stories of banks tightening their standards and making it harder for business owners, college students and everyone else to get a loan—the news is not all bad in Western North Carolina. While big banks in the area may be stingier with credit than in the past, local banks and alternative funding sources like Mountain BizWorks, the Self-Help Credit Union and the Western North Carolina office of the Small Business Administration report that they’re making more loans to small business owners than they did last year. “If you were bankable when the economy was good, you’re bankable now,” says Sharon Oxendine, head of Mountain BizWorks’ Women’s Business Center. Mike Arriola, senior area manager for the Western North Carolina office of the Small Business Administration, says the number of loans handed out by local banks with an SBA guarantee (meaning the government makes good on the loan if you default) is about the same statewide as it was at this time last year. But in the Western North Carolina region, the number of SBA-guaranteed loans to small businesses is up by 46 percent.

To be sure, an inability to get loans from larger national banks may force Western North Carolina entrepreneurs to look harder at alternative local funders. And as usual, you should be prepared to pay a higher interest rate on a loan for a riskier business or one from a riskier funding source, like online peer-to-peer loan sites (see “Get Really Creative,” below). But if you’re a business owner looking to get a smaller loan—say, in the $15,000 range—or you’re looking to raise money for a particular kind of business, like something environmentally-friendly, now may actually be as good a time as any to take the leap.

Here are a just few ways to shake the money tree and get your business off the ground

Think Globally, Bank Locally
At some point in your business life (and probably your personal one), you’ll want to develop a good relationship with a bank. It can seem safer or more convenient to deal with a big national bank, which may have snazzier-sounding services or more locations than a local one. But bigger banks may not be quite as invested in your company’s success. Earlier this year, when Karen Sams started looking for a $50,000 loan, she went to a branch of a major national bank where her mother, a longtime Asheville business owner, had an account. But Sams says the loan officer wasn’t interested in the details of her business plan. “When we walked in, they said ‘We want to look at your liabilities and assets,’” she says. “They didn’t even want to talk about cash flow. They just wanted to hear things like ‘What is the house worth? What is the car worth?’” She ended up securing a loan through Mountain BizWorks instead, mainly because the staff took time to coach her through the basics of business-planning. “You’re putting a lot of yourself on the line when you take out a loan for this much,” Sams says. “I felt much safer and more secure in the process having people review [my business plan] and look it over. It makes you fine-tune and hone what you’re doing.”

Nicole Polzella, who started up the Smoky Mountain Dance Center in Waynesville last fall, says she struggled to land financing at first—making the rounds to banks large and small. She eventually got a loan through the Sylva office of Mountain BizWorks and also got lucky this year with a $10,000 startup grant from the Greater Haywood County Chamber of Commerce. When it came time to start the Dance Center’s business account, she chose to work with United Community Bank in Waynesville, rather than a bigger, national bank—though she admits the bigger banks frequently have better websites and more banking services online. “I feel more comfortable in a small community bank,” she says. “They know your name when you walk in the door, and in the drive-through, they address you by your first name. Customer service is important, and they’ll work with you as a startup.”

Go Green
Since 2001, the Natural Capital Investment Fund, a West Virginia nonprofit affiliated with the larger national Conservation Fund, has been doling out loans to “green” West Virginia businesses, like a homeopathic medicine producer in Berkeley Springs and a recycled flooring business in Renick. (They also loaned money to at least one business that doesn’t seem all that green, the Blue Smoke salsa company in Ansted, West Virginia). Last year the fund expanded to include businesses in North Carolina, along with Virginia and northeast Tennessee, and it can lend up to $250,000 to a suitably green North Carolina business. So far, it has helped a biofuels business in Moncure, North Carolina buy a tanker truck to collect waste grease from restaurants. The group’s areas of interest include businesses in heritage and recreation-based tourism, sustainable agriculture, water treatment, forest products and recycling.

Move to the Country
If you’re in a rural area and looking to start a business, you’re in luck. The Rural Venture Fund, which has $6.8 million in available capital and can loan you anywhere from $50,000 to $350,000, was just created last year by the North Carolina General Assembly and the Golden LEAF foundation, which doles out money from the state’s master settlement with tobacco manufacturers. The main goal of the Rural Venture Fund is to help entrepreneurs in the state’s poorest counties. All you need to apply, other than a business address in, say, Yancey County, is a well-developed business plan. A few weeks ago it loaned $350,000 to a wood pellet manufacturer in Franklin.

Get Tech Help
There’s also the Advantage Opportunity Fund for businesses, started up last year by AdvantageWest, WNC’s regional economic development commission. So far they’ve handed out loans of between $25,000 and $40,000 to a handful of Western North Carolina businesses—among them, Group de Tete, a high-end racing bike manufacturer; Jute Network, a tech firm that creates relationship mapping software; and 1X1 Media, which prints small runs of CDs and DVDs for bands, filmmakers and other businesses. Their only requirement is that you go through a technology workshop at A-B Tech. 

Go to the Mountain BizWorks Women’s Business Center
If you’re not living in or moving to a rural area anytime soon and you’d rather start up a hip downtown boutique than a company that recycles soda cans, Mountain BizWorks’ Women’s Business Center might be a good place to start. They offer extensive workshops on starting and running a business and a good deal of information on how to write and tweak a business plan. About two thirds of Mountain BizWorks’ clients are female. So far in 2008, according to Chief Financial Officer Fred Waldkoetter, the organization is on track to loan out around $1.2 million by the end of this year, up from just $877,000 at the end of last year.   

Get Really Creative
If you’ve been turned down by non-traditional lenders, try your luck on a person-to-person lending website like Prosper.com, which works a lot like eBay. If you need cash, you sign up for a membership and allow Prosper to check your credit. Then you post your loan request (of up to $25,000), and you must tell the site’s potential investors how you intend to use the money. After you post, you wait for up to a week for loan offers, and the offerers can serve up various terms for the deal. If your loan gets funded, Prosper mediates between you and your lenders. Usually, you end up paying one percent of the loan amount upfront and lenders pay an annual fee of half a percent. Other peer-to-peer lending sites like Zopa and Lending Club work much the same way.

Ask Your Mom
If no one else will loan you money, you can always ask your mom or other family members and friends. Just make sure you draw up some formal agreements about how you’ll pay them back and by when. “We see clients get into the most trouble when they borrow from friends and family but don’t agree on the terms,” says Oxendine of the Women’s Business Center. For a fee, a company called Virgin Money (known, until last year, as CircleLending but now owned by British billionaire Richard Branson) can help you finalize and manage loans from friends or family by setting up the payment schedule, servicing the payments, and handling things like escrow.

Whatever you do, says Polzella of the Smoky Mountain Dance Center, don’t give up. It took several months of searching last year before she found the cash for her dance center. “Be ready to hear the word ‘No’,” she says. “It’s not personal, especially when you’re dealing with the banks.” Networking with people in Waynesville has been her key to getting all sorts of help—from business advice to information about additional funding sources. “Networking is the best thing I ever could have done for my business,” she says. “You have to make an extra effort, and then, there are people here who will help you.”    

RESOURCES

Mountain BizWorks offices:
www.mountainbizworks.org

Asheville
153 South Lexington Avenue
828-253-2834


Sylva
200 Marsh Lily Drive

828-631-0292

Hendersonville
508 North Grove Street

828-692-5826


Self-Help Credit Union:
34 Wall St, Asheville
828-253-5251
www.self-help.org

Asheville & WNC SBA
29 Haywood Street, Asheville
828-225-1844
www.sba.gov

Natural Capital Investment Fund
1098 Turner Road

Shepherdstown, WV
304-876-2815

www.ncifund.org

Rural Venture Fund
N.C. Rural Economic
Development Center
4021 Carya Drive, Raleigh
919-250-4314
ncruralcenter.org/loans

Advantage Opportunity Fund
134 Wright Brothers Way, Fletcher
828-687-7234