Backyard strategy: untapped local funds can help grow your business – Column

Gianna Jacobson

BILL DEATON FIRST heard the rumors in 1992. Government officials in his area of eastern Kentucky were so concerned about high unemployment that they were offering “tremendous financial incentives”, to start-up companies that created jobs.

It was his big chance. After 22 years in management at a data-processing company, he was ready to open a shop of his own. All he lacked was the capital.

Deaton wasted no time. In three years he raised more than $800,000 from local and state sources, and he did it without leaving his own neighborhood.

Entrepreneurs often think in terms of SBA loans or Housing and Urban Development grants when they consider government sources of capital. But a snowballing number of cities and counties are feverishly competing to attract small businesses to their markets. The action is hottest in small and medium-sized towns, where the decline in American farming and manufacturing has created die biggest employment holes. There, local officials are dangling carrots to business owners, ranging from tax incentives and low-interest loans to cash and free utilities – and Bill Deaton has taken a few bites.


Deaton started his financing quest through a program under the Kentucky Jobs Development Act that enables his London, Ky.-based Image Entry Inc. to receive state-tax credits for a period of up to 10 years. The result@ a net gain of about $180,000 annually to help grow his business.

In 1993, while gearing up for a second data-processing center, in nearby Mount Vernon, Deaton obtained a $150,000 construction loan from the Kentucky Highlands Empowerment Zone, a private entity that disburses federal funds for local business development.

Word got out that Image Entry was hiring hundreds of Kentucky residents. In 1994, when officials from neighboring Manchester heard Deaton was looking for a third site, they targeted a property valued at $166,000 and offered to pay $100,000 of the price if he would pay the rest and guarantee at least 200 jobs in the community. He did, and made good on his guarantee. The government’s goodwill didn’t stop there@ He’s also gotten $600,000 in low-cost federal loans from other local agencies.

Without local financing, building up our resources would have taken much longer,” Deaton says. Image Entry now processes more than 100 million documents a year, including credit-card applications, insurance claims, magazine subscriptions, and tax returns. It has grown 77 percent a year, creating a total of 500 new jobs in 10 locations – seven in Kentucky, one in Indiana, one in Ohio, and one in Georgia – and has annual revenues of $12 million.


When die owners of Los Angeles-based Drazin Inc. decided to close up shop, George Akers and Manny Burgess said no way. Burgess had spent more than 20 years of his life at die 40-year-old knitwear manufacturing company, working his way up from the cutting-room floor to become president. Akers had been a customer of Drazin’s for years.

To get the capital they needed, the entrepreneurs turned to the Los Angeles Community Development Bank, a nonprofit agency that, under the Co Lending Loan Program, lends between $500,000 and $5 million to L.A. firms. Funds come from the municipal, county, and federal governments and the private sector. The bank’s goal,” says spokesman Robert Alaniz, is to help regenerate Los Angeles businesses. We recognize that there are a number of people with good credit and good ideas who need help getting started and can’t get a loan from a traditional bank on their own.”

In July, Akers and Burgess secured a $700,000 loan close to the prime rate to buy existing machinery at Drazin, renamed Trinity Knitworks Inc. The fact that 150 jobs stood to be lost with the factory’s shutdown was the 100 percent reason the bank loaned us the money,” says Akers. But besides the loan, we also got the city, as our partner.” The Community Development Bank will offer the owners ongoing assistance in business development, cash flow, and sales projections, at this time set at $5 million by August 1997. The city has a vested interest in our success, says Akers. “They’re on our side – that’s an intangible but essential asset.”

COPYRIGHT 1996 Success Holdings Company, LLC

COPYRIGHT 2004 Gale Group

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