Teaching start-ups about loan rules can create tomorrow's customers.

Countryside TV Management Services Inc. of Summit, N.J., is typical of many new companies desiring bank credit.

"We need capital, but the banks want two or three years of operating experience before they will lend us money, and new companies just don't have it."

This is the lament of Steve Van Voorhis, president of Countryside - an 11-year IBM veteran and a man with 20 years' business experience who is one of the top managers of this wireless subscription TV operation.

Expansion Planned

Countryside operates wireles TV stations in four cities now, and is planning to expand to 15 more not reached by hard-wired franchised cable companies.

"We're too small for Wall Street, and we don't have the salable assets that would attract a commercial finance company." he says. "It's a lot easier factoring or doing receivables finance on textiles or toys than on a TV tower. Who wants it?

"As for the Small Business Administration, when they do have funds, they have priorities, such as the interest of some officials in financing only special groups like Vietnam veterans," he says.

"And on top of this, the banks that must take the 10% noninsured part of a SBA loan are as particular on that tenth as they are when they are asked to take up the entire credit."

Sense of Frustration

So, Steve is mystified, and as we talked about banks, he was disappointed and a little frustrated.

Naturally, as I have said time and again in this column, you can't blame the banks for their attitude. A bank is not in business to provide venture capital that might easily be lost.

Since with a 1% return on assets it takes the profit from 99 good loans to offset the loss on one nonperformer, one can see why banks exercise a lot of caution in financing ventures without a track record.

As for the collateral, not only do we have courts and lawmakers who are prejudiced against any lender who wants to foreclose and compensate himself through the rapture of the collateral, but when it is recaptured, it often brings far less than expected in this new noninflationary environment.

Finally, as Van Voorhis admits that tower TV is just not qualified to serve as collateral. due to its inability to be converted to some other use.

In this regard, I remember when a major bank called a troubled airline and said it was foreclosing on its loan collateral. The airline head replied: "Where do you want us to leave the planes;' Will they fit in your office tower?"

But Steve, despite this, has some advice for bankers that makes a lot of sense.

"Even if you won't or can't make the loan, give us advice on what we can do to qualify later," he pleads.

"Tell us if our concept has merit, where we should be in six months, how we can tell if we are making progress in moving toward being bank eligible."

Starting a Relationship

In other words, Van Voorhis is asking the banks to start a relationship that could work well for both in the years ahead. And giving advice does not impair bank capital.

Steve has another gripe:

"We're tired of the wall that separates the loan officer we are assigned from the loan committee that make decisions. In other words, we want someone with knowledge who is not just executing orders and treating us like a commodity. For we have spent this time and money in preparing the business plans the bank requested.

"When we are turned down, we want a "quality no - a no that spells out what is good and what is bad.

"So even if we are turned down, we have an understanding, we gain education in finance and are much more willing to develop a relationship if we are assigned a banker with experience, who understands our industry and who seems interested in learning more about our specific operation even if he or she can't grant us a loan at the present time."

Friendly Signals

In addition to advice and explanation of what needs to be done, a relationship can be developed if the banker and the borrower like each other - if the banker returns phone calls and seems pleased to hear from you, and in other ways shows that he would like to make the loan if he could.

So for companies like Countryside TV, today's source of capital must be friends, relatives, and fee-seeking middlemen in touch with private capital.

But with the guidance of the bankers assigned, the day may come when a full bank relationship is established, and the bank is able to lend to this type of borrower on a basis that is beneficial to both parties.

Mr. Nadler is a contributing editor of American Banker and professor of finance at the Rutgers University Graduate School of Management.

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