Finding the Funding: Small businesses find financial support

Laurel K. Zarnosky stands behind the ice cream counter at her newest business Simply Sweets at the Top of the Square Plaza, Watertown.

BY: Norah Machia
When Laurel K. Zarnosky and Mark A. Welser were making plans to open a new ice cream and candy shop in downtown Watertown, they investigated several options for funding their new business venture.

    “We wanted to offer something different than just a traditional ice cream shop,” Ms. Zarnosky said. “And we had already identified a need for one in downtown Watertown. There was nothing ice-cream related in Public Square.”

   The recent closure of the Friendly’s restaurant on Arsenal Street, although outside of downtown, still represented a loss for many people who enjoyed a tradition of going out for ice cream after the movies, following a concert or just as a family outing or date night, she added.

      In August, the couple opened Simply Sweets at the Top of the Square Plaza in a brightly renovated space that had been the site of Waterbury Fine Jewelers. “This spot was a solid location for us, and we have the advantage of plenty of parking here,” Ms. Zarnosky said.

     The couple already had business experience before planning their new venture in the city. They had operated the Guzzle; a well-known eatery and ice cream stand in Thousand Island Park.

     To start their new business venture in the city, the couple secured a $40,000 microenterprise loan from the Watertown Local Development Corp., and combined that funding with their own savings, Ms. Zarnosky said.

    “That low-interest loan was very beneficial for us,” she said. “We appreciated the support, and felt the agency wanted to see small businesses likes ours succeed.”

      Simply Sweets offers multiple flavors of Perry’s Ice Cream, a variety of penny candy, milkshakes, sundaes, kettle corn, fudge, and hand-dipped chocolate-covered fruits and pretzels. As the weather turns cooler, they plan to add hot chocolate, hot cider, and a limited lunch menu with panni sandwiches and soups.

      They also have a portable ice cream cart, which has been a staple at the weekly downtown farmer’s market and can be taken off-site for birthday parties and other events, she added.

     Many small businesses in the north country, such as Simply Sweets, have opened their doors or expanded their operations with support from local economic development agencies. These agencies often partner with local banks and the NYS Small Business Development Center at Jefferson Community College to provide low-interest loans and other types of assistance.

    While these economic development agencies deal with many larger commercial and manufacturing operations, offering services from low-interest loans to tax incentives, they also focus on helping the small business owner.

     One type of assistance typically offered are microenterprise loans, which are often combined with bank financing and a personal financial commitment from the business owner.

     In addition to the WLDC, other agencies offering low-interest loan options and other economic support include the Jefferson County Industrial Development Agency, Development Authority of the North Country, Jefferson County Local Development Corp., and local development corporations in municipalities such as Carthage and Sackets Harbor.

    While the process of seeking help may seem a little overwhelming at first, the good news is that many of these agencies have joined together to offer one application form for their public financing programs.

     “Each individual or company seeking financial support must complete an application for staff and board review and approval,” said Donald C. Alexander, JCLDC chief executive officer. “Applications for financial assistance are also shared with the other agencies, so if multiple agency support is needed, only one application needs to be completed.”

    Generally, the agency’s loans will range up to 40 percent of the total project costs, he said. The more equity provided by the individual or company, the better, he added. But a “bare minimum” would be 10 percent, leaving the 50 percent balance to come from a bank.

     “Although these percentages can vary depending on individual circumstances, they serve as a pretty good guide when trying to put together a financial blueprint for an individual,” Mr. Alexander said.

   One of the most important aspects of any loan review is an assessment of the individual or company business plan, which can provide an experienced reviewer a very good sense of a company’s potential success, he said.

     “We believe our loan interest rates are competitive, and that our agencies are perhaps somewhat more willing to accept risk, given the notion that our charge is to attempt to stimulate the economy,” Mr. Alexander said. “Sometimes entrepreneurs need a helping hand to get projects off the ground.”

     The JCLDC, along with other local economic development agencies, have a history of working together to “help start-up companies find their way,” he added. Many staff members have extensive business experience, and are able to help individuals or small companies address the different challenges that may arise with starting a new venture.

       Applicants for the microenterprise loan programs are encouraged to first meet with advisors at the SBDC at Jefferson Community College if they don’t have proven business experience. Local banks also direct clients interested in starting a new business to the SBDC for assistance.

    “Many times, we refer them to work with the Small Business Development Center to prepare a thorough and well thought-out business plan,” said Mark R. Lavarnway, president and CEO of Watertown Savings Bank.

    It can be a challenge for a start-up business to obtain private bank funding, if the potential owner does not have a proven track record or proven market demand, he said. That’s why private banks often look to partner or collaborate with another entity, such as a local economic development agency, to control the “start-up risk,” he explained.

        In the city of Watertown, agencies such as the Watertown Local Development Corp. will sometimes become participants in financing the new venture to spread the risk among different lenders and as a result, provide more favorable financing terms, Mr. Lavarnway said. This arrangement helps the business have a better choice of long-term growth and prosperity, he added. 

     Watertown Savings Bank also works with U.S. Small Business Administration, which partners with banks to help finance start-up businesses, and provides the bank with a guarantee on a percentage of the loan, he said.

  “In this manner, the bank takes on less risk, which helps with the approval process for a start-up,” Mr. Lavarnway said. “The small business gets a chance to open its doors and grow. This is why the SBA exists.”

     The U.S. Small Business Administration has recognized WSB as “Small Community Lender of the Year” for the organization’s Syracuse District. The bank has received the honor numerous times as a top commercial lender. 

  The NYS Small Business Development Center at JCC offers free and confidential counseling for people looking to obtain financing for a business start-up, or to expand their operations, said Sarah O’Connell, certified SBDC business advisor.

    “We help people figure out what they need to get together before applying for any type of private or public funding,” she said. “The advisors walk clients through the process of developing a solid business plan with accurate financial projections.”

     Several issues are addressed by advisors to determine if a proposed business venture would be feasible enough for consideration of funding, Ms. O’Connell said. This includes determining if the owner could generate enough revenue to make the business viable, the operating forecasts, and the start-up costs (such as insurance, equipment and employees).

   “We also help them review their personal financial situation,” because they have to be willing to make some personal investment in order to apply for other sources of funding, Ms. O’Connell said

    By working with the NYS Small Business Development Center to develop a sound business proposal, “it typically makes the banks and other agencies more willing to lend the money,” she added.

     The SBDC office in Watertown serves Jefferson, Lewis and Oswego counties. Since it was started in 1986, the advisors in the Watertown office have worked directly with 21,459 businesses, helping them invest more than $326 million into the region and created or saved 9,933 jobs, according to the agency.