By BETH LONGWARE DUFF

Staff Writer

Let's say you're interested in starting a new business - a restaurant, possibly a bed and breakfast - definitely something in the field of hospitality. You blithely approach your local bank for financing (the one you've been doing business with for years), and you're turned down cold. So you try other banks - same story. What do you do if you're not willing to give up your dream? You may want to check out alternative financing.

The Funding Solutions, Inc., headquartered at 206 Danbury Road in Wilton for the past three years, represents "a hybrid commercial financing firm with a risk and opportunity sensitivity profile significantly different from traditional institutions," according to Joel Pondelik, vice president of commercial financing. In simpler terms, TFS is in the private lending business, specializing in long term, fully amortized debt at competitive interest rates and terms for the last 15 years.

The entire field of hospitality and entertainment (including hotels and motels, food service, restaurants, and clubs) is, Pondelik said bluntly, "completely unfundable by most banks," for a variety of reasons, including state regulatory issues.

TFS, on the other hand, looks at lending from a different perspective. "The only issue on our side is credit worthiness - whether the client has enough collateral to service the loan. It has nothing to do with all the politics and regulations of the banking and insurance industries. And that is why it is doing really well right now."

The typical deal at TFS is small by banking standards, averaging somewhere between a half-million and 3 million dollars, which many banks don't want to handle. In fact, many of TFS's accounts are referrals in which Pondelik refers to as "pre-qualified transactions" from brokers, bankers, accountants, lawyers, and businessmen. "A lot of the people we see have been thrown out of every bank in the state," he explained. "People who have been customers of the major banks around here for years and years - people who have paid their loans before they fed their children - are being asked to leave. The banks say, 'We want your deposits, we want your fees, we want your cash flow and your checking account. We just don't want your stinking loan.'"

Vinco Marina, a 70-year-old business in Norwalk, is a case in point. In an attempt to get out from under a nearly 36 percent annual interest rate on its mortgage from a private investor, owner Tony Coccoli approached every bank in lower Fairfield County. He was turned down by every one, mainly because the marina business was considered too risky.

But TFS looked at the situation differently. "They had $1.5-million mortgage and were paying 10 percent a year just to roll the note - not interest, not principal, just a flat fee," Pondelik said. TFS arranged a long-term, $1.3-million loan at 11 percent interest.

"New England is still an extremely difficult place to get financing," he said. "A lot of the business that we're getting is referred to us by banks saying, 'Please take these guys out of our portfolio.' Which is good because we get a steady flow of bankable, pre-qualified transactions."

Warming to the subject, he continued, "The fraud is that every day of the week you pick up the newspaper and the banks are saying that they support small business and they're doing SBA (Small Business Administration). They don't do SBA; we have the SBA calling us saying the banks won't work with them. It's all political window-dressing, particularly in the Northeast, which is still completely a red-lined area."

Pondelik, whose corporate background includes business development, acquisition, and investment banking, maintains that there are still plenty of solid deals in the tri-state area. A recent TFS success story is Hotep's Pyramid, a jazz club and restaurant opening in downtown Hartford this fall. The four University of Hartford grads who conceived of the nightspot were turned down for funding by local banks. But TFS stepped in with initial capitalization.

Pondelik predicts that alternative funding will continue to be the wave of the future for commercial businesses because the banking and insurance industries have all but abandoned them. "The economy is in a boom, and if the banks aren't lending in New England in the boom, they sure as hell aren't going to lend in a bust.," he concluded. "I don't see traditional bank lending practices ever going back to where they were. They're going to sell securities and insurance, they're offering credit cards. They're never going to go back because commercial lending will never allow them to make that kind of fee."

If you have comments or suggestions, email us at fundingsolution@juno.com

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