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THE SOUTHERN CALIFORNIA JOB MARKET: LOOKING FOR LIGHT : The Defense Fund : Laid-Off Aerospace Workers Tap Into Conversion Programs

September 20, 1993|James F. Peltz | TIMES STAFF WRITER

There's lots of talk these days about using "defense conversion" funds to help the decimated aerospace and defense industries in California.

Although most of this money is destined for the big guys, individuals can tap into some of the programs. But it won't necessarily be easy.

The handful of defense conversion programs around the country--some of which provide seed money, small-business counseling or both--are just now being formed at the federal and state levels.

In California, the pot of available cash is small, especially compared to the thousands of people laid off from jobs with military contractors.

But for an intrepid aerospace worker who has a good idea for a product or service that might sell well or blossom into a small business, there's a chance to grab a bit of the money that is available.

One source of capital is a fund managed by the Economic Development Corp. of Los Angeles County, a nonprofit entity that recently amassed $1.5 million for defense-conversion loans.

"Unless more people get access" to such funds, the whole premise of defense conversion "ain't going to happen," said Rohit Shukla, the EDC's aerospace director.

The EDC recently picked its first three customers. They will borrow up to $100,000 each, at a relatively low interest rate of 4%, to get their ideas off the ground.

One person patented a new aircraft engine that could be converted to run boats and other power equipment, Shukla said. Another designed software to connect formerly incompatible computer systems so they can share complex data.

The recipients were chosen by the EDC's panel of technical and business executives that reviews and evaluates the would-be borrowers' prospects for success.

Shukla said he hopes to get much more cash in future loans--about $2 million a year for the next four years just from federal defense-conversion grants. "Our goal is 1,000 new enterprises and 50,000 new jobs in five years," he said.

The EDC is focusing on commercial applications such as aerospace, alternative energy systems, environmental goods and services, transportation, medical and information technologies.

Some of the EDC programs don't involve cash loans. Among them is one that will "heavily subsidize" the cost of consulting services to help former aerospace workers-turned-budding-entrepreneurs get started in business. Or the EDC will provide a client with the names of consultants the agency has cultivated for specific areas, but the client pays the consultant.

Another source of seed capital is the Los Angeles County Business Loan Program, based in Monterey Park. It makes loans of up to $1 million, partly "to help individuals and companies adversely affected by the decline in aerospace and defense contracts," said program administrator Lance Stevenson.

There's a catch, however: "For every dollar we lend, we need $2 to come from a private-sector source," Stevenson said. That means a borrower must raise $2 from savings, banks or some other non-government source for every dollar borrowed from the business loan fund.

The idea is to foster leverage so the program does not quickly deplete its fund of about $4 million. For the same reason, the program also tries to get the borrower's home municipality to kick in 25% of the amount of the loan, Stevenson said.

Other sources of defense-conversion cash might soon be developed. California's Trade and Commerce Agency is working with several groups to obtain federal funds that would be matched by the state.

One, the California Gold Strike Program, hopes to get a $4.8-million federal grant and $2.3 million more from the state to pay for grants, loans, technical assistance, information and other services to boost new technologies and fledgling businesses.

That program alone hopes to spur 2,000 new enterprises through this decade and create 100,000 jobs. It would operate three centers--in the Los Angeles, San Diego and Bay Area regions.

The state Trade and Commerce Agency has other programs for assisting laid-off defense workers and others who want to start their own firms.

Fledgling entrepreneurs can get management and technical assistance at 25 Small Business Development centers run by the state agency and the U.S. Small Business Administration. The centers, whose services generally are free, offer help in developing marketing plans and tapping venture capital, said agency spokeswoman Julie Stewart.

Those looking for low-cost help with developing and marketing new products might also consider the California Manufacturing Technologies Center in Hawthorne.

The center, which opened four months ago, also offers retraining.

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