Capital Investment

Finance giant GE Capital said it will make a $10-million investment in Los Angeles-based TelePacific Communications, a business-to-business telecom and Internet provider. "We're fortunate to have been recognized by such an established, reputable organization like GE Capital," said TelePacific's Chairman and CEO David Glickman. The cash infusion is expected to help the privately held TelePacific expand in California and Nevada.

Picture this: You start a business confident that, over time, you will see it grow. You're patient, you don't expect to make a quick killing and you think you can finance your growth out of cash flow as demand for your product grows. Then demand suddenly skyrockets, and you find yourself short of working capital to meet it. What do you do? Cash flow trouble kills a lot of businesses, particularly the kind that comes from a sudden increase in demand.

The search for outside financing frustrates many an entrepreneur who runs a business at the start-up stage or just beyond it. Indeed, it's probably harder to finance a business at this stage than at any other. For one thing, commercial banks don't lend to companies that are less than 3 years old, as a rule, and in any case they want to see that the business, no matter what its vintage, can service the debt.

The lack of one crucial resource for a start-up, capital, can tempt you to skimp on another, management. The result is that the start-up is often crude, fragile and risky, like the first airplane flown by the Wright brothers. Many an entrepreneur finds a creative way to succeed anyway, as the Wright brothers did--and as Mark Skiba did in launching his Marina del Rey company, Storactive Inc., which makes online computer backup software.

For the entrepreneur, financing a business start-up is a tough do-it-yourself affair fraught with danger. In almost every case, the entrepreneur must use personal resources to get the enterprise up and running, scraping together money from personal savings, friends and family, a second mortgage, credit cards and, on rare occasions, an angel investor.

ECompanies, the Santa Monica-based Internet business incubator formed in June by top executives from Walt Disney's Buena Vista Internet Group and EarthLink Network, is expected to announce today that it has raised more than $130 million for its first venture capital fund. ECompanies co-founders Jake Winebaum and Sky Dayton said they initially planned to raise $100 million for their fund, but they lifted the cap because of intense interest from investors.

If you're like most successful business owners, you have a substantial part of your net worth tied up in your company--and you will do yourself and your business a favor if you fix the problem now. Why is this a problem? Because the business that is an extension of the founder's ego often dies when the founder does, hurting many people--the founder's family, the company's employees, sometimes even the company's vendors and customers.

Ask business owners to name their biggest problem and you often hear a simple answer--financing growth. Ask lenders or investors to name their biggest problem and you get another simple answer--finding growing businesses to finance. Put their answers together and you get the paradox of finance for small and mid-size businesses: * Business owners want help to make their companies grow. * Meanwhile, lenders and investors want growing businesses in which to put their money to work.

Los Angeles-based Aames Financial Corp. said it's discussing a proposed capital investment by an unidentified equity fund of up to $100 million. Aames, which specializes in lending to those with bad credit, said the investment would probably be made "well below the current trading price" of its common stock and would result in "substantial dilution" to stockholders. Aames shares fell $1.25 to close at $1.88 on the NYSE. Aames this week reported a 97% plunge in first-quarter results.

Venture capital investments in Southern California surged to a record $289.7 million in the third quarter, up 47% from the second-quarter total of $197.2 million and 15% higher than $251.2 million a year earlier, PricewaterhouseCoopers reported. A total of 27 firms received financing in the latest quarter in the region, which encompasses Los Angeles, Orange, Ventura and Santa Barbara counties.