Help near for ailing businesses in Las Vegas

When William Payne moved to Henderson from San Diego a few years ago, he noticed a change in the business climate different from what local boosters were touting.

Instead of lower taxes and less regulation, he discovered a much skimpier network of organizations geared toward nurturing entrepreneurs.

"In San Diego, it was really easy to find help," said Payne, a small-business adviser and investor. "In Vegas, it is much tougher. For people who need help, it is sort of difficult to find the right resources here in town."

He attributes this partly to the long-standing dependence on gaming and construction that has made it difficult for other industries to take root. In addition, Las Vegas has enjoyed such a long-standing boom that a gold-rush mentality has deep roots; business owners think that merely turning on the "open" sign will be enough to attract customers.

But with a more punishing economy now well settled in, help with basics such as price setting or startup-capital raising have become much more important to businesses hoping to survive their fragile first few years.

Aside from private consultants who charge fees for their expertise, several groups will give over-the-shoulder guidance for little or no charge.

Financing, however, has become a much tougher door to unlock. The debate goes back and forth over whether banks have tightened or closed entirely their loan pipelines to small businesses, particularly those in the risky startup stages. The Small Business Administration totals have dropped dramatically in the past two years, and independent groups such as the Vegas Valley Angels have gone into a self-described "semiactive mode."

Excluding banks and independent consultants, which work off a wide menu of services and prices, here are some local sources of assistance.

ADVICE

•Nevada Small Business Development Center

The center, a joint venture between the Small Business Administration and the University of Nevada, Las Vegas, stages a series of free training sessions on business basics, such as marketing and building a Web presence.

For business owners who want individual help, the center will assign one of its three advisers, backed by eight graduate students, to provide operational guidance, business-plan structuring, financing applications and statistical analysis.

Although the center does not get into financing, director Larry Vierra will steer business owners to what look like the most promising avenues.

"Through the SBA, I have lists of financial institutions that have optimal track records for granting a loan," he said. Combined with personal contacts with bank officers, he added, "I know which ones are lending and which aren't."

For example, he will not warn a restaurant owner to avoid a particular bank that shuns food service clients, but will highlight those that do.

•SCORE

SCORE, which started as an organization of volunteer retirees who wanted to keep a hand in the business world, has increasingly enlisted advisers who are still active.

Nevertheless, Southern Nevada chapter Chairman Greg Twedt estimated that the advisers on hand handle only about half the caseloads they could.

"Part of our problem is making sure the small-business community is aware that we even exist," he said. "We'll talk to anybody."

SCORE focuses on helping entrepreneurs write business plans, not necessarily to take to financiers but to explain coherently what startups want to accomplish and how.

"It doesn't have to be a monumental effort," he said. "But if you don't have a business plan, then you won't know where you are and you won't know if you are moving the ball ahead."

SCORE advisers will try to unkink potentially ruinous problems and impart the importance of fundamental business practices.

"It's amazing how many people don't have fundamental financial skills," he said.

FINANCING

•Small Business Administration

SBA-guaranteed loans made through commercial banks, for years a financial font for business, have taken a particularly steep dive in Nevada.

The 289 loans made during fiscal 2009 under the 7(a) program, covering general working capital, marked a nearly three-fourths decline from the peak in 2007 and the lowest total in at least a decade. The $76.1 million approved was just more than half the amount from two years ago.

The story was basically the same with the 504 loans to cover the purchase of hard assets. The 67 loans and $116.2 million in 2009 both dropped 64 percent from two years ago.

Deputy district director Dennis Wengert said that lending in some parts of the country has shown signs of a rebound that has not yet reached Nevada. Two of the major players, Silver State Bank and Community Bank of Nevada, have failed. Bank of America, which formerly promoted the SBA Express program, granting small loans through a quick, computer-based process, has all but disappeared. Wells Fargo dropped from 140 loans to 47 loans over the past two years.

"Frankly, banks are very hesitant to take on additional loans that regulators might consider risky," Wengert said.

But Vierra said the law of unintended consequences has also played a role. Federal stimulus legislation that waived loan fees as a way to help struggling businesses has caused banks to de-emphasize SBA loans because the profit margins have tightened.

•Vegas Valley Angels

Primarily, the angels are an investment club that collectively hears presentations from companies but allows members to decide individually what to support.

As such, they are not a group of consultants to give entrepreneurs remedial tutoring on subjects such as how to calculate profit margins.

"But when we invest in a company, we typically put advisers in place as directors," said Angels Chairman Bill Bott, to try to ensure that the investment flourishes.

Although the angels look to inject equity into a company at an early stage, they also confine themselves to a narrow scope. Typically, Bott said, the angels look for companies that have at least developed a functioning prototype, either of a product or service, but need extra capital to hit the market.

"We want something that has broad appeal, that is scalable," Bott said. "If it's a mom and pop business, its probably not for us."

But in the past year or two, members have pulled back in their commitments as their bank accounts or investments have shrunk during the recession. The membership list now stands at about 35, down from 48 three years ago.

The investment range has run from about $300,000 to $2.5 million, averaging just less than $1 million. In the past five years, the angels have injected $12 million into 14 companies.

•Venture capital

While tiny compared with the epicenter of venture capital in California's Silicon Valley, Las Vegas does have a handful of firms with specialized approaches. Generally, however, they avoid sole-proprietor startups.

Redhills Ventures seeks investments ranging from $250,000 to $7 million, mainly in health-care fields but sometimes in other sectors.

Nevada Ventures has scouted out companies in the state for concepts that can not only roll out on a major scale, but dominate a sector that is not easy for competitors to enter.

Desert Frost Ventures consults and raises capital for young companies in the technology and hospitality industries.

HYBRID

•Nevada Microenterprise Initiative/

Nevada Women's Business Center

Although small by nature, the SBA's microloan program administered by the Nevada Microenterprise Initiative is one of the few financing sources that the recession has not eviscerated.

During the fiscal year ended Sept. 30, the organization granted 39 microloans, matching the total in 2008 and nearly quadruple the count from four years ago. Microloans ranging from $100 to $35,000 are targeted for startup or growing businesses that can't attract or don't need more financing. The SBA borrows the money, then turns it over to the initiative as its conduit to the borrower.

Rather than just process the loans, the nonprofit initiative counsels applicants in getting their businesses in shape for approval -- which can take a few weeks or several months -- and monitoring the borrowers until the loan is repaid.

"We are kind of stuck with them and partner with them," said Anna Siefert, the project manager.

In particular, the initiative coaches applicants on writing at least a simple business plan that may only run a couple of pages.

"This is to demonstrate that a business owner can actually explain on paper what the focus of the business is and how to achieve it," she said.

Startups can borrow $100 to $10,000 for as long as three years, while existing businesses can go as high as $35,000 for five years. No matter the status, a business must show it cannot obtain credit from a traditional source, with a bank rejection letter required for any loan exceeding $10,000.

The Nevada Women's Business Center steers women-owned companies into obtaining official government certification to bid on set-aside contracts. Part of the process, Siefert said, is to ensure the business makes something or provides a service sought by the government, rather than have business owners spend hundreds of dollars on a useless certification.

Contact reporter Tim O'Reiley at toreiley@lvbusinesspress.com or 702-387-5290.