X-SCREAM's Noel Tarabocchia. (Darren Brown, OBJ)

When Noel Tarabocchia walked into a bank looking for a business loan, he was told he had potential, but lacked the business track record the financial institution was looking for in prospective borrowers.

Having recently combined green screen video production technology with Flash Video, Mr. Tarabocchia was seeking financing to provide him with working capital and to help market his company, X-SCREAM Video Productions Inc.

He was referred to the Ottawa Community Loan Fund (OCLF), a not-for-profit corporation providing local entrepreneurs, internationally-trained professionals and social enterprises with business training and loans of up to $15,000.

In 2005, Mr. Tarabocchia received $15,000 from OCLF, as well as an additional $15,000 from the Canadian Youth Business Foundation. Less than three years later, X-SCREAM has expanded into two production studios and is set to launch a new venture next month.

Mr. Tarabocchia spoke with the OBJ last week about his initial financing challenges and the opportunities created by the OCLF loan.

OBJ: Tell us about your business before you received the OCLF loan.

Tarabocchia: It was the custom design and setup of a green screen video production studio. Green screen is like what they use in Hollywood special effects studios where you film a subject on the green screen and you remove the background. We've married that technology to Adobe Flash and out of the gate I was pretty fortunate that in the very early stages, one of the first calls had come in from Rob Burgess, who was the CEO of Macromedia at the time. He was very intrigued with my developments of some of the interactive things I was doing with video related to Flash. That got a good relationship started with Rob and over the years we've kept in contact.

We were one of the first companies to start marrying those two technologies, Flash video with green screen technology. From there, we set up a state-of-the-art studio here in Ottawa and started doing various client projects using that technology.

OBJ: What led you to the OCLF?

Tarabocchia: It was a reference from the RBC. The RBC liked our plan at the time, (but) as an early-stages startup company, we didn't have the history that traditional banking was looking for in the way of a proven track record of numbers and financials. That was the issue at hand. They loved what we were doing and they saw potential for the company, but they just didn't have that historical view to look back on in providing loans and lines of credit, whereas the OCLF works under a different environment. They thought that it was a good fit, that the community loan fund had that type of micro-financing, and they recommended us to the OCLF. They look not just at your financials, but what's the potential and who are the people behind the company, their integrity, are they going somewhere, that type of thing.

OBJ: What were your financial needs?

Tarabocchia: I call it bridging the gap. We had a lot of stuff set in place ... (and were looking) for some working capital and some marketing aids and materials. We went to the Ottawa Community Loans Fund, gave them the pitch with their six or seven members scrutinizing the whole business plan. They were going over it very carefully and really drilling us hard. They liked it so much they had qualified us for an automatic enrollment and they suggested the Canadian Youth Business Foundation for an additional loan. So we got two loans under their one program which hit the mark of $30,000.

We were just coming out of the gate and within the next 30 days we had landed our first client project, which was a $30,000-contract for an international marketing company.

OBJ: What did the loan allow your business to do?

Tarabocchia: We had our working capital, we had our marketing...which got us a client, Rogers Communications Canada, indirectly through another company. It just kicked off the business. From there, it has just been one thing after another...we expanded to own and operate two video production studios, we've just opened a head office and have a team of six people and are now adding more bodies very quickly to ramp up to our product launch. We've had a very successful Ottawa pilot project with local businesses. Names that have been around for up to 100 years, some of these companies that are coming up. A new company will be launching in the first part of May. It's a new technology that's going to have a significant effect on the advertising industry and is going across Canada and into the States very quickly.

OBJ: What advice would you give to other businesses considering community financing options?

Tarabocchia: Know your business model and business plan well. Really think it through as to what that money would be used for and stay focused on what the objective is as a company. Things will change, as they tend to do dramatically. But as long as you are focused on what the end objective is, that's the key ingredient because things will change everyday, but knowing what (you) are after and not diluting or changing it much is important.

THE EXPERTS SAY

If the loan is less than $100,000, it is very rare for (banks) to even ask for a business plan because the decisions are made basically just punching in the person's net worth and their history and income and that tells them whether or not they get the loan. It is treated as an issue of personal credit.

If (businesses are) able to go to a bank, basically we won't deal with them. They come because they don't qualify under the traditional banking rules for financing. That does not mean they don't have a fantastic business plan or that they don't have loads of experience and competency. What it means is they don't have the net worth or the income at the time they apply to get through the bank screening process.

We deal with people who can't access traditional financing, (but) they have to have a business plan. They have to have experience to back up what they want to do.

It is important to have a business plan that works. I would say don't be intimidated by the thought of doing a business plan because we find even when we have people in to talk about their business plan and the plans are a bit light and they need a bit of work, we find 95 per cent of the information is up in the person's head. They know it in most cases and there are resources out there. Take advantage of them all. There is the Entrepreneurship Centre, there is OCRI ... Do a business plan whether you need it for financing or not. It's important to get it down in writing and have people look at it.

George Brown, president, Ottawa Community Loan Fund

There is a lot of negative press about the capital markets, particularly with the situation in the U.S. We see that we have a role to fill. There are probably many businesses out there who may feel they have opportunities or ventures which perhaps are being somewhat constrained or curtailed because of the situations in the economy. We're a good alternative. We're not a mainstream bank. We're not a chartered bank or a trust company or a credit union. What we do, with all clients, we always have a relationship with another institution. It's absolutely common that our clients will have a current account and perhaps a line of credit or other banking service with a mainstream chartered bank or other institution. We end up partnering with them and their chartered banker.

There are many instances where we will go in and we will take the risk capital portion of the relationship. There may be growth or business development ventures for which the chartered bank will have an appetite for a certain amount of risk, or maybe not at all, and we will take that portion of the relationship and they will continue to have the current account, the deposits, the line of credit and perhaps other mainstream financial instruments.

The relationship we're going to have is going to be different than what other institutions would have. We're going to be in there deeper and probably wider and more intimately because we're basically acting, to a large degree, like an outsourced management support wing for their business. When you are in the risk capital business, the primary element of risk is really the people who are running the business. That is a big factor in what we do, we will invest in them as well as their business.

Chuck Smith, area manager, Business Development Bank of Canada