"It turned out to be a valuable experience," she admits. "Now, I've become an artist at supplier financing." Within a few months, Lavelle had run up a $165,000 trade payable -- the type of expense the federal grant wouldn't cover -- mostly for utilities. The incubator would have died aborning had not Lavelle cajoled someone at Peoples Gas Light & Coke Co.: "I know I can pay it back. I'm going to have more tenants. Let me do it in installments." Unwillingly, the gas company became an unsecured lender, cinching Lavelle's first lesson in the critical connection of money to time: spend the money, then argue for the time. "Everything is negotiable," Lavelle insists. "Never simply tell them, 'I can't pay.' Always have a plan, a workout, a strategy."
Undercapitalized by a good 40%, what made her think she had a chance? "I had little to lose," Lavelle asserts. "A 60% chance is a 60% chance. Besides, the way this area was in 1980, a 30% chance would have been worth going for, because to do nothing would have been to let it keep slipping backward."
In 1986 the incubator itself nearly slipped backward when its first-floor anchor tenant, whom Lavelle had welcomed as a large-square-footage rock on which her co-op of tiny start-ups could be built, suddenly went bankrupt, strewing unpaid obligations in its wake. Lavelle hoped to recover the $100,000 owed to her in back rent, but the Chapter 11 produced $0. To attract more fledgling businesses, she had to subdivide the unexpectedly vacant and discouragingly huge space, and pronto. By that time, however, she had run out of rehab money and, per the Department of Commerce, was forbidden to borrow. So she arranged for one (and possibly the only) creditworthy tenant to go to a commercial bank and get a $100,000 line of credit, turn some of it over to her on an unsecured note, and thus become her bank, once removed. "There's no doubt," Lavelle says of her "compulsive Presbyterian Calvinist" penchant for dogging through such hopeless hours, "that it's strictly by the grace of God we survived."
Now that the incubator's own cash flow is on the positive side, it no longer requires pure grace. "It's amazing how much money these things can make!" Lavelle confides. She has seized the opportunity to make even more money and at the same time ensure full occupancy by financing working capital for cash-starved tenants. The modest demand notes she has been issuing are backed up not by a borrower's receivables -- which is as far as the most cavalier asset-based lender would carry the risk -- but, as Lavelle describes her collateral requirements, "by anything." Security largely consists of purchase orders for goods yet to be shipped, and she doesn't even ask for the reassurance of a financial statement, because "all the documentation in the world wouldn't mean a thing, since it's created by the documenter. Good God, they can't afford audits." Essentially, the aim in making virtually lienless loans is to get the fledglings self-bankable faster and then let some bona fide loan officer take on the ongoing risks.
Lavelle, whose support staff consists of five maintenance workers, a bookkeeper, and two clerks, figures she can afford the gamble, since little goes on in the building -- businesswise or otherwise -- that she doesn't immediately know or soon find out about. "There are more than 600 employees here right now. Toribio Ortiz -- our chief maintenance person -- is an important source of information. Ortiz talks to all the workers, I talk to all the owners, so between the two of us we can glean an enormous amount of information about a particular enterprise." No demand note has yet been defaulted.
Indeed, talking is how the ex-singer, whose voice can carry across Cook County without amplification, spends most of her day. "I sell them faxes and copies, I get them suppliers, I answer the telephone, I lend them money, I try to keep the place from crashing in on top of them, but what do I do the majority of the day? I talk. I spend lots of time getting people to listen to other people about potential opportunities for mutual benefits. Basically," she sums it up, "I'm an accelerator of relationships. Isn't that a weird way to make a living?" Perhaps not weird, but certainly effective. "This incubator has gotten strong and taken on its own life," Lavelle recognizes with an overtone of nostalgia. "As integral as I was to it, I also know there's a point beyond which it won't die without me. I've managed to get it beyond its vulnerability stage!"
Lavelle has persuaded high-priced consultants to come in and charge her tenants on the basis of whether their advice proves meaningful to the bottom line; if it doesn't, the consultant swallows the difference. The problem is, Lavelle concedes, that most tenants "think lawyers and accountants are like God. When they seek advice, they follow it blindly." The thing not to do, Lavelle keeps telling them, is to get others to make decisions for you. That that sermon has proved particularly hard to grasp doesn't surprise her. "There isn't a human on the face of the earth who doesn't wish a white knight would show up and make the decision, and you just lie back and say, I'll do whatever you tell me to, I'm so exhausted and beaten down." As a start in overcoming that attitude, recently she convinced the CFO of one of her better-capitalized companies to tutor finance-ignorant founders on an hourly basis in his spare time.
Over the past five years Lavelle has become known for stirring up brews within the incubator, blending entrepreneurs together like eyes of newt for the greater benefit of each. With her encouragement, affiliations have sprung up among aspirants such as, of all the unlikely industries, manufacturers of trade-show exhibits. The first such to arrive at Fulton-Carroll was Bill Murphy, to whom, five years ago, Lavelle had promised not to let any competition into the building. "Then," as Lavelle describes the rest of the ingredients, "John McConnell shows up. The trade-show company he had been working for was liquidated after its owner's death, and he was out of a job." McConnell hoped to use his savings to start his own business in the incubator.
