(FORTUNE Small Business) – A Private Backer

After nearly 50 years, the private sector has finally launched an alternative to the Small Business Administration's popular 7(a) loan guarantee program. Under that program Uncle Sam cosigns 75% to 85% of a bank loan for corporate small fry. Its new rival is Business-Backers Management Corp. in San Diego. This company, which is backed by the Kemper Insurance Companies, guarantees up to 75% of a $100,000 to $500,000 loan for a maximum of 10 years. It helps finance things the SBA shuns, such as existing working capital lines of credit, refinancings of existing SBA loans, and management buyouts. The hope is it will supplement the existing government program where demand exceeds supply.

Sixteen lenders--mostly community banks--offer the new product. BusinessBacker's advantages: 24-hour approval on loans, and simple loan documentation requirements. To get a list of participating institutions go to Businessbackers.com.

Touched by an Angel

Need equity capital, but don't fit the VC mold because you don't run a high-tech startup that needs millions? The good news is that angel investors are still an alternative source of financing for low- and nontech companies in industries ranging from retail to direct marketing. Despite the downturn in the capital markets, these deep pockets (which provide on average about $150,000 per deal) should continue to fill the gap left by VCs in 2001.

According to a survey by AngelSociety, an industry research group, the level of angel investment will hold steady and perhaps outpace the 35% growth rate it has had for the past five years. The survey also noted that there are eight million individuals with a net worth of $1 million or more who qualify as angels under SEC guidelines. Increasingly these deep pockets coinvest through angel syndicates. The most active angel networks cited by the survey: Band of Angels, Northwest Capital Network, and Angel Capital Network.

Funding Startups

Marketing 1 to 1 Ventures, a $96 million equity fund based in Stamford, Conn., is on the prowl for startups that are developing tools and services that help gauge customer needs and behavior. And since the fund got its Small Business Investment Company license from the SBA in December, small firms that need equity are ready targets. Without limiting itself to particular industries, the fund invests $1.25 million on average in equity financing to early-stage companies targeting this niche. (Two big players in the field include E.piphany, a provider of software applications meant to strengthen company ties to customers, and BroadVision, which supplies e-business applications.) In exchange, the fund's partners take 10% to 30% ownership of the company and serve as advisers on portfolio companies' boards of directors. Since the fund's April 2000 launch, it has backed five startups, including Silver Carrot, a dot-com that sells promotional gifts for clients, and iGain, a developer of online customer-reward programs.

Microloans Get Bigger

Overwhelming demand from the small business community, which is faced with the rising cost of labor and technology, has prodded Congress to increase the amount of funds that entrepreneurs can raise under SBA's popular microloan program. Under the new limits, small business owners who need startup or expansion capital can borrow up to $35,000. Until now, entrepreneurs were only able to borrow a maximum of $25,000. Terms of the financings are attractive: The maximum repayment term on a microloan is six years, with interest rates that are set by lenders that vary deal by deal.

In addition, the SBA has bumped up the amount of debt that companies can piggyback with their microloan by more than 30%. They can now raise additional bank financing of up to $70,000.

Who qualifies for such finance? Companies that are for-profit and are not speculative like real estate developers are. Currently 150 nonprofit groups--mostly community-development organizations--are qualified microlenders. To find a local lender check out www.sba.gov. It lists microlenders by state.

Reported by Jennifer Keeney and Ron Orol