Going for Broker

At the end of your rope for ways to finance your business's growth? Forget the usual suspects and try the last place you'd think of.

When Kevin Nikkhoo took the entrepreneurial plunge in 1992, it was with a modest amount of start-up capital--his own--that he co-founded Los Angeles-based Vertex Systems Inc. The technology consulting firm thrived without so much as a loan, providing technology solutions to the entertainment, manufacturing and financial services industries.

In 1999, however, Nikkhoo found himself in an unfamiliar situation. Eager to position his company for significant growth and to capitalize on the booming IPO market of the late 1990s, he needed a loan. He was also seeking a commercial lending relationship that extended beyond just borrowing.

of venture-backed start-ups have received follow-ups financing since January 2001.
SOURCE: PriceWaterHouseCooper

"We talked to many organizations," recalls Nikkhoo, 41, the firm's chairman and CEO. "We found that although they were very interested in providing a credit facility, they did not have the ability to scale up with us as we grew. If we needed to strategically look at the different areas we were going to go into, we [needed] to feel comfortable that [the organization] could provide those kinds of services."

Nikkhoo found credit in his stockbroker's office, of all places. While meeting with a Morgan Stanley Dean Witter & Co. broker to discuss his personal assets, he learned the firm offered credit and advisory services to established businesses like his.

In January 2001, Vertex Systems finally had its financing: a long-term loan and credit facility from Morgan Stanley. While the company didn't go public, Nikkhoo felt Morgan Stanley's expertise with IPOs and acquisitions made it the ideal long-term financial partner for his $10 million company.

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This article was originally published in the June 2002 print edition of Entrepreneur with the headline: Going for Broker.

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