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Banks are showing greater willingness to offer unsecured credit to small companies. In the latest study by Greenwich Associates, 63% of companies with sales of $5 million to $50 million report having unsecured loans, up from 52% in 1984; meanwhile, only 68% have secured bank loans, down from 80% in '84. Not surprisingly, the biggest increases since 1984 have been in unsecured term loans and in revolving loans convertible to such term loans. Both are forms of credit that customers like and bankers hate, notes Greenwich Associates partner David Fox: "In their banking relationships, these [smaller] companies are in a buyer's market.'

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The business incubator is emerging as a vehicle for helping smaller companies break into foreign markets. In Columbia, Md., Abco Enterprises Inc. has served as an incubator for about a dozen European companies entering this country; now, it has opened a Paris office to help U.S. businesses go the other way. In Chesterfield, Va., a Norwegian company called Scancenter has begun building an incubator for small Scandinavian exporters; if it works, chairman Anders Skipenes plans to set one up in Scandinavia for U.S. companies. Meanwhile, Philadelphia's University City Science Center has formed a joint venture with a Kyoto counterpart to establish such incubators here and in Japan.

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New data suggest that franchising may not allow a company to grow as fast as is commonly believed. In a recent study of 2,141 franchisors, consultants at Growth Decisions Inc. discovered that companies sell an average of just 3.1 franchises in their first year of franchising. Those in their second and third years do only slightly better, with 4.3 sales annually. But the situation improves if you wait: companies selling for 4 to 10 years make an average of more than 10 franchise sales a year.

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Thanks to a little-noticed provision of the trade bill, companies can now get SBA guarantees for larger loans than was previously permitted. Under the revised law, the agency can guarantee 85% of loans up to a total of $750,000 guaranteed; prior to the change, the limit was $500,000. That's only the second increase in the cutoff since the agency's founding in 1953, when the maximum loan was $350,000. Notes one SBA staffer wryly, "This increase probably gives us half the purchasing power we had in 1953.'

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A new technology-transfer project from the University of Utah may make it easier for technology companies to benefit from academic research. In an unusually aggressive outreach effort, the university has put together a computerized database of 1,100 companies, along with their interests and contacts. The listing is free for companies -- but program director Norman Brown has in the past nine months sold the database to 17 institutions looking for customers for their research, including Harvard University. One particularly significant sale: the Federal Laboratory Consortium for Technology Transfer, which is trying out the database in three U.S. government labs.

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To help small exporters, some states are forming "shared foreign sales corporations," which qualify participants for a 15% tax break on export profits. Delaware recently set up the first two shared FSCs, where up to 25 companies share costs (but not information, profits, or liabilities); four other states are reportedly working on similar programs. But very small exporters may do as well on their own. Delaware's annual maintenance fees start at $2,500 -- no cheaper than individual FSCs for companies exporting less than $5 million. Meanwhile, at least one private firm, Export FSC International Ltd., has set up its own group FSC for very small exporters. Annual fee: $500.

-- Martha E. Mangelsdorf

Last updated: Nov 1, 1988




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