Credit Make-Over
When I apply for a business start-up loan, will the fact that I filed personal bankruptcy in 1991 be a major roadblock? If so, do you have any suggestions about how to go around it?

Carol Harris

Greenbelt, Md.

Securing a business loan is tough enough without the burden of bad credit, so be sure of your capital needs and maintain realistic expectations. Many bankers view a recent bankruptcy as a neon sign that screams you'll never repay. Still, there are ways to obtain a loan, and that loan needn't necessarily come from a bank.

Your first step is to rebuild your credit, but note that most credit grantors won't consider you until you've been out of bankruptcy for at least two years. John Ventura, author of The Credit Repair Kit (Dearborn Financial; 800-621-9621, extension 650; 1993; $19.95), suggests that after two years have passed, you go to a bank and request a $1,000 loan, to be placed in (and secured by) a certificate of deposit with that bank. Provided all your payments are made on time and in full, you'll emerge with a good relationship with an institution. Another option: apply for credit cards and use them regularly. If you're turned down, try a secured card. Steady payments will reflect well on your credit report. (For a free copy of your latest report, write TRW Complimentary Report Request, P.O. Box 2350, Chatsworth, CA 91313.)

If you still can't get the backing by yourself, find business partners or creditworthy friends and family who'll guarantee the loan. "If you're able to sufficiently collateralize the loan, that will diffuse the impact of the bankruptcy," explains Howard Beck, chairman of the small-business-reorganization committee for the American Bankruptcy Institute, in Washington, D.C.

Don't forget that you can tap sources other than banks. If your employer has a clean credit-union account, you can use it as a reference to open your own account and build credit. Or try the Small Business Administration's microloan program. For more on microloans, see "Start-ups," [Article link].

Throughout your quest for a loan, honesty is the best policy. Beth Bloom Wright, chief financial officer of Quaker Construction Services, in Millville, Pa. (see "To Bankruptcy and Back," September), urges you to be up-front with lenders: "Explain what has been done to rectify those past problems and also what you've learned." Present the lenders with a formal loan proposal, a well-written business plan, and a 12-month cash budget detailing the costs of overhead, inventory, and debt service, along with the time it'll take to collect receivables. For more ways to make your lender smile, see "Plugging Holes in Loan Proposals," Banking and Capital, April 1992, [Article link].

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Testing Temping
We've launched a career-management company specializing in placing executives permanently. We may spread into the temporary-placement arena, so we need a sense of how that market differs. How do other placement agencies sell their services?

Gerry Palmer


Palmer & Associates

Bangor, Maine

The recession has forced corporate America to become more flexible in its staffing decisions, so your instinct to tap the $20-billion temporary-help market is a fine one. Some insiders foresee an explosion in the executive -temp niche as more companies realize that outsourcing short-term assignments to displaced execs can be rewarding for all. But before you diversify, you should explore your home market; consider budget, marketing, and legislative issues; and educate clients.

Executive-placement businesses like yours can compete profitably on the national level from a small-city base, but if you add the temporary dimension, you must survey the Bangor market to be sure that healthy supply and demand exist for your services. Get started with the National Association of Temporary Services' Research/Reference Kit ($30 from NATS, 703-549-6287), which contains industry statistics and lists of consultants and suppliers to the temporary-help market. NATS holds regional workshops and can refer you to state chapters for local market conditions.

There is, of course, a downside to diversification. Be aware that the temporary market is costly to enter and to grow in because you have to carry your temps' payroll -- sometimes for up to 60 days. "People get into the temporary business figuring they can cover everything out of gross. They don't realize we're talking gross margin dollars, not gross revenue dollars," explains Julie Prafke, founder of Humanix Temporary Services, based in Spokane, Wash. What's more, the temporary market is notorious for high turnover and cutthroat business practices. "You'll see real low-margin bids -- even no-profit bids -- just for the hope of getting future business," says Greg Garvis, founder of Denver's BankTemps, a placement agency for financial professionals.

Still, fast growth isn't impossible: a total of 29 temp agencies made the Inc. 500 list in the past two years. Why not contact them to learn about their financial strategies and to find out how to expand your core business and get into the temporary market? You can also get tips from members of the National Association of Personnel Services (703-684-0180; membership is $400).

Your marketing challenge is to pitch whatever makes you unique. Ask clients to critique your current services -- perhaps they'll offer testimonials. Survey potential clients about the services they need, and modify your menu based on that feedback. Keep tabs on all your placements -- they may someday be in a position to hire for the companies they work for. And remember, says BankTemps' Garvis, to advertise your most valuable assets -- your recruiters. His recruiters are former bankers themselves, the idea being to give BankTemps' clients greater confidence in the company's matchmaking abilities.

The biggest industry worry is labor legislation, notably regarding workers' compensation and health-care issues. Some CEOs predict a shakeout in the temporary-placement market as the Clinton administration's national health-care plan rolls out. But that uncertainty, says Prafke, is a great reason to hold free seminars to educate your clients and employees. Twice a year Prafke invites labor officials and businesspeople to Humanix to speak on hot topics (such as job discrimination and wrongful discharge) and to field questions. It's great public relations and cheap, too. The half-day seminars each cost Humanix $800, including doughnuts for 150 attendees, and the printing and mailing of brochures. But that's not all. "When we held our first seminar, in 1989, we had 42 attendees. The following quarter we had $50,000 in new business," says Prafke.

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New Year's Resolution
Striving for the highest ethical standards is basically the mission of our young company. Are there resources that will prepare us for the problems we'll face along the way? Is there a descriptive phrase for businesses that make ethics the cornerstone of their existence?

Gwen Holtsclaw


Cheer Ltd.

Fayetteville, N.C.

You're one of a growing number of managers who understand that being ethical is good business. The Center for Business Ethics at Bentley College, in Waltham, Mass., can quantify the trend: today 15% to 20% of large U.S. corporations have "ethics officers." That percentage has risen markedly, the center claims, since 1988.

As an enlightened CEO, your first job is to rid yourself and your employees of any ideas that business associates who lie, cheat, and steal have an edge, coaches Andrew Singer, editor of Ethikos , a Mamaroneck, N.Y., journal devoted to business ethics and compliance issues. When in doubt, bear in mind the standard that Scott Cook, the founder of software developer Intuit, in Menlo Park, Calif., sets for himself: "If what I'm doing isn't something that I and my children can be proud of, I'm not sure I should be doing it."

Any introduction to business-ethics theory should involve case studies. Here, Kirk Hanson, business-ethics professor at Stanford Business School, shares his reading list. At the top is Manuel Velasquez's Business Ethics: Concepts and Cases (Prentice Hall, 1992, $34.67), the most popular text available. LaRue Hosmer's The Ethics of Management (Irwin Professional, 800-634-3966, 1991, $28.95) is a good mix of theory and application. And Mary Scott and Howard Rothman's Companies with a Conscience (Birch Lane Press, 800-447-2665, 1992, $19.95) profiles 12 socially conscious and profitable organizations.

Now you'll need help putting theory into practice. Craig Cox, managing editor of Business Ethics magazine (612-962-4700, six issues yearly, $25 for new subscribers), suggests James O'Toole's The Executive's Compass (Oxford University Press, 1993, $19.95), which charts an ethical decision-making course for CEOs. A lighter and more literate hands-on guide to resolving tough business challenges is Laura Nash's Good Intentions Aside (HBS Press, 617-495-6192, 1993, $14.95). Using interviews with corporate brass, Nash shows how managers can use new problem-solving techniques to help workers make sound ethical choices in any situation. Finally, The Soul of a Business (Bantam, 1993, $21.95), by Tom Chappell, president of Tom's of Maine, a maker of all-natural personal-care products in Kennebunk, Maine, proves that you can meet the traditional goals of commerce without checking your values at the door.

To help with the design and implementation of your own corporate ethics program, try publications and video-based training tools offered by the Ethics Resource Center (202-737-2258) or on-site leadership training from the Josephson Institute of Ethics (310-306-1868). Shake hands with peers at the business-ethics summit that independent research group the Conference Board will hold in May in New York City. (Call 212-759-0900 for more information.) And get involved with local colleges that offer roundtable discussions on applied corporate ethics.

Our experts couldn't come up with a buzzword to describe companies like yours. "Ethics should pervade everything you do," said one. "Let's hope everyone sets out to build a credible company." Still, we'll open up the query to readers. Send us your suggestions; we'll print the best of them.

-- Reported by Karen E. Carney and Stephanie Gruner.