Scarce Financing Thwarts Conventional Wisdom on Business Startups

Article excerpt

Conventional wisdom says there should be more startup businesses starting up: Unemployment in Illinois reached 10.1 percent last month, the highest rate in 25 years; few employers are willing to hire; and ousted workers and managers often decide that working for themselves is a better option.

This time, however, conventional wisdom is wrong. Counselors at SCORE and the Illinois Small Business Development Centers, advisers who are most likely to talk to startups, are seeing fewer entrepreneurial wannabes actually startup.

The lack of startups isnAEt for lack of interest. In fact, startup counseling "is up a little" says Lee McFadden, chair of the Fox Valley SCORE chapter, where startups typically account for a majority of the counseling time. Harriet Parker, director of the Illinois SBDC at Waubonsee College, Aurora, says, "We still have businesses that are starting."

Money is the problem.

"When the bottom fell out, the media scared a lot of people," says Jan Bauer, director of the Illinois SBDC at College of Lake County, Grayslake. "aeDonAEt spend money,AE was the message, and (financial backers) still just arenAEt spending money. There are opportunities, businesses that are doing well. But most of them already have banking connections."

Says Wayne Barcheski, who

manages the Naperville office of Fox Valley SCORE: "ItAEs much harder to finance a startup today."

Entrepreneurs traditionally self-finance their startups, often using corporate buyouts or tapping retirement funds. But, explains Barcheski, "Buyouts arenAEt what they used to be; yesterdayAEs one-year package is maybe one month. …