Businesses Finances

How It Works Southland bankers and other lenders should rethink how they finance small businesses. Also, local government should boost efforts to encourage entrepreneurship. For the banks, a key step would be to change small-business lending policies that now are dependent on the use of real estate as collateral. Because of the Southland's depressed real estate market, many small businesses no longer have the option of using property as collateral.

As American investors try to educate themselves about the ins and outs of mutual funds, much of their confusion focuses on the word "risk." Every time they are surveyed, would-be fund buyers seem to testify that they simply don't understand the basic risks involved. On the other hand, once they are aware of hazards, they often appear determined to avoid them at all costs--as if investment success were simply a matter of eliminating risk from the process.

Is the credit crunch dead? Many bankers would like you to believe they're back in the lending business after the savings and loan crisis, the commercial real estate collapse and the intense government scrutiny that followed, which sent banks into hibernation. Banks now are extremely profitable compared with their sickly balance sheets a few years ago. But that doesn't mean they're making those profits by lending again and collecting the interest.

In hard times, a cash-starved small business often gets nowhere with its local bank. But experts say struggling entrepreneurs may have more cash-raising options than they realize. "There are now many, many different ways of financing a company," said Tiffany Meyer Haugen, director of a small-business development program at the UCI Graduate School of Management. "The more you know about the options, the greater the chance you will pick a financing tool that's right for your company."

Acclaimed film director Spike Lee has publicly berated Bette L. Smith during the past few months because Smith's Completion Bond Co. took control of Lee's unfinished "Malcolm X" when the film went $5 million over budget. But Lee's criticism probably doesn't hurt nearly as much as the money Completion Bond and its parent, Woodland Hills-based Transamerica Insurance Group, could lose on the film.

Democratic and Republican congressional leaders agreed Tuesday on the need for tax breaks to help new businesses in blighted urban neighborhoods but they and President Bush were unable to settle on how to pay for them. Their failure to resolve crucial questions about financing suggested that considerable work remains to be done before the plan for expanded "enterprise zones" can be enacted, even though California officials pressed for quick action.

Growing up, we are constantly cautioned against borrowing money from friends and relatives, yet more and more small-business owners are looking around the dinner table for funding in these tough times. In fact, 21% of the members of National Small Business United, the nation's second-largest organization of small-business owners, rely on friends and relatives to raise start-up capital, according to a 1991 membership survey conducted by the Gallup Organization.

This past year--the Year of the Budget--will be a tough act to follow. Congress has yet to settle on the subject for its next donnybrook, but there are several candidates. And general patterns seem to have emerged already--big guys versus little guys, to reregulate or deregulate, to bail out or not to bail out and at what cost to whom.

A lot of big losers have surfaced since last month's stock market crash, but where are the winners? One good place to look is Japan. Financial markets there suffered heavy losses, to be sure. But in losing less than their American counterparts, they have gained much. The total market value of the Tokyo Stock Exchange has now declined about 15% from its peak. New York's swoon was almost twice that.

Construction financing of $6.5 million for the Sorrento Valley Business Park has been provided by First Interstate Mortgage Co., San Diego, on behalf of a California limited partnership. The development consists of four single-story R & D buildings totaling 103,446 gross square feet and is located on 7.96 acres on Oberlin Drive in Lusk Business Park, San Diego.