Dr Jeff Cornwall

A few years ago we received a seed gift from a donor who has now become our major benefactor for the Center for Entrepreneurship here at Belmont.

He and I had a conversation about what the gift would allow us to do.  He deferred all decisions to me, but did make a challenge.  He said that he hoped that we could find ways to leverage his gift.

What a lot of entrepreneurship programs do to leverage gifts is to set up venture funds.  They make investments in student and alumni businesses with the hope that these investments will pay off big returns.

But that model does not work in our Center.  We have our unofficial “Life Time Warranty” which states that we never take ownership or consulting dollars from any students or alumni no matter how successful their businesses become.  We will always be there as their teachers and mentors.

So we came up with a different model.  We called it our Runway Loan Program, in which we would make $25,000 loans to student or alumni businesses that needed help and showed good potential.

Here are the terms:

1. Zero percent interest
2. Repayment of principle tied to cash flow (very small percentage so as not to bleed cash)
3. Non-recourse loan
4. Once principle is paid back a gift agreement kicks in which says they will give our Center a gift of 1% of the revenue of the business we supported that continues until the business is sold.  At that point we get 1% of the proceeds of the sale.

When I presented this model to a couple of national meetings I did not get a very warm and fuzzy response.

I was told, “They will never pay it back without teeth in the agreement.” 

And I heard, “No entrepreneur is going to give up 1% of revenues in perpetuity for a measly $25,000!!”

Well, they were wrong on both counts. 

We had strong interest for our initial round of two loans. 

Yesterday the first of the two loans, this one made to Just Kidding Productions (video company, whose founders also started the apps company Aloompa), was paid back to us in full.

And thanks to the on-going generosity of  our donor, we will be making many more Runway Loans for years to come!