Virtues Pay Off For Marketer Seeking Funds

By Cara S. Trager - Crain's New York Business, January 2011

The year 2008 wasn't exactly a great time to start a business, especially one that depends on corporate largesse. But that didn't stop Adam Rauch from launching One Line Sports Agency or getting a bank loan to do it.

Mr. Rauch started the business—which creates sports- and entertainment-related corporate incentive, reward and sponsorship programs—with $12,500 from his savings. He grew it by drawing on his five years' experience at a similar company, where he had held executive positions in marketing and promotions.

He has also taken a conservative financial approach and operates his lean, profitable business from his home in Bayside, Queens. Mr. Rauch has just two employees—a salesperson and an event planner—and pays bills promptly to avoid finance charges. One Line's revenues were set to double in 2010 from the previous year, to more than $1 million.

But sluggish cash flow is sometimes a problem. Mr. Rauch can wait as long as 90 days for payment on projects that range from getting a luxury suite at a stadium concert ($250 a person) to handling a trip to a major sports event, complete with deluxe accommodations and high-end meals ($7,000 a person).

As a result, Mr. Rauch went looking for a line of credit when the agency was 6 months old. He naturally turned to the local Citibank branch, where he had commercial savings and checking accounts and had also conducted his personal banking for years. He met with the client services manager, his go-to person for help with such tasks as processing his clients' credit card payments.

Instead of handing him an application, the manager counseled Mr. Rauch to wait another six months “to give the bank time to monitor the history of my finances,” Mr. Rauch recalled. “I needed to prove the business' viability first.” Six months later, in December 2009, Mr. Rauch secured a $40,000 credit line.

According to banking experts, Mr. Rauch was smart to heed the advice, because the extra time gave the bank a sufficient, year-long record of One Line's deposits, withdrawals and cash flow needs. He was also wise to cultivate a relationship with the manager. “Banks lend on character and credit,” said Les Dinkin, managing director at Novantas, a financial consulting firm in Manhattan. In addition, borrowers who do their personal and business banking in the same place allow that institution to better gauge their financial behavior, including “whether they pay down their credit cards, have bounced any checks and maintain a certain deposit level,” Mr. Dinkin said.

Raj Seshadri, head of small business banking at Citibank, believes that in some instances, running a home-based business demonstrates “prudent” choices about what owners need and where they spend their money. Nonetheless, Mr. Rauch was initially disappointed with the terms, which included a $500 one-time fee, a $100 yearly service fee and an 8.25% interest rate.

“I asked if it was negotiable, and they told me, "You're lucky to get a loan,' “ Mr. Rauch said. He shopped for better terms at another bank but was turned away because his company was relatively new and he had no relationship with the institution. Mr. Rauch remains a fiscal conservative. “When I get paid, I dump the money right back into the account,” he said. “It's a safety net.”