Larry Murdock of Bend needed money to help get his small business off the ground last year, but his overtures to local, statewide and national banks fell on deaf ears.

Enter the Oregon Economic Development Department’s Entrepreneurial Development Loan Fund.

Designed to assist start-up entrepreneurs like Murdock, the fund was established with Oregon lottery dollars in the early 1990s. It provides the funding small businesses are often unable to access elsewhere, said Mike Foresee, business finance officer for the Oregon Economic Development Department.

Murdock, who is just now starting his business, Conestoga Wheels, said he pursued funding at more than 20 financial institutions before discovering the program. The banks were not eager to finance a start-up business, he said.

”I had been to a ton of different places before I got this,” Murdock said of the Entrepreneurial Development Loan Fund. ”This is a good program, a terrific thing for people who are starting up.”

Murdock manufactures wooden wheels and wheel accessories, including neck yokes, buggy staves and single and double trees for wagons and horse-drawn equipment. Before he could get his new business up and running, however, Murdock said he needed money to buy the necessary equipment.

One of the only options Murdock had before applying for and being awarded the entrepreneurial loan was obtaining the money by refinancing his home at a higher interest rate, something Murdock said he was not willing to do.

The Entrepreneurial Development Loan Fund was the best option, he said, because the interest rate is 2 percent above prime and he did not have to refinance his home to start his business.

The loan fund is only one of several funding programs offered by the department, and interest in the program is increasing, Foresee said.

During the past two years, the fund has handled almost half a million dollars in loans. In 1999, 17 statewide loans totaled $202,500, and 19 loans in 2000 totaled $229,395.

Since 1996, 15 loans have been made to businesses in Central Oregon, all of them in Deschutes County.

The maximum amount lent to any one start-up is $40,000, Foresee said. To be eligible for a loan, a businesses must meet two of the following criteria: be in business for less than two years; take in less than $100,000 in revenue the previous year; or be certified with vocational rehabilitation.

The program is ideally suited for start-up businesses that need a small loan to help them get started, Foresee said.

”Banks typically do not make loans to start-up businesses because the loss rate is so high,” Foresee said. ”These loans are high-risk.”

About seven out of 10 loans, most of which are used for equipment and working capital, are successful, he said.

Not all entrepreneurs are able to get their businesses off the ground. At least four Central Oregon businesses with loans ranging from $5,000 to $25,000 have closed for various reasons, but they continue to make loan payments, Foresee said.

The success rate is high, however, and several Central Oregon businesses have taken their loans and built successful businesses in a short time.

Mardy Madison, owner of Seven Peaks Electric in Bend, has seen his business grow from a one-person company in the fall of 1999 to a firm that employs 10 today.

”Without the loan program, I don’t know where I would be right now,” Madison said. ”It helped me get to where I am today.”

Madison, who had previously worked for other contractors, said he used his loan to buy a van and fully stock it with various tools and ladders. And he wanted to finance his business without putting his home up for collateral.

”I used the loan to get started, and business has been great,” he said. ”I’ve gone way above my expectations, and I appreciate the fact that I got a chance through the program.”

Alison Reyes also was given the chance to build her business, Sweet Baby Jane’s, by the Oregon Economic Development Department. Reyes started her business in 1996, providing high-quality desserts to restaurants in Central Oregon.

Without the program, ”I would’ve been forced to explore very strange funding options,” Reyes said. ”There’s no other place I could have seen to get the money.”

Reyes said she originally borrowed $10,000 to buy a delivery van and purchase equipment and office supplies. Her second loan of $11,500 allowed her to move in to her own location and remodel the kitchen.

Today, Reyes is in the process of moving her business to the former Cafe Paradiso site in downtown Bend. Reyes plans to open the Bond Street location later this month.

”The best thing about the program is that I could use it as a stepping stone,” she said. ”It made it possible for this project to happen. It was pretty courageous of them to loan me the money.”

Like Madison and Reyes, Sarah and Michael Holmes, owners of Be-Bop Biscotti in Bend, heard about the loan program through Central Oregon Community College’s BizCenter.

The couple started their business in late 1999, and in one year have built an operation that ships handcrafted biscotti to 25 states, Canada and Mexico. Their largest customers are located on the East Coast.

When the Holmes decided to expand their operation and move in to their own space, they turned to the Entrepreneurial Development Loan Fund for the money necessary to modify the building and purchase additional equipment.

”The bank told us we had to find alternative sources, and after the bank turned us down, I was surprised at how easy it was to get this loan,” Michael said. Without the program, it would have taken them longer to get started, he added.

The business has received two loans totaling just over $20,000 from the program, the first of which was paid off in the first nine months of business, Sarah said.

”It was a little scary, definitely,” Sarah said of taking out the loans. ”But it feels really good to have our own business.”

And the hard work is paying off.

”We’ve been growing steadily in the last six months, and our sales doubled in one month between October and November,” Sarah said. ”We feel fortunate that we’re growing so fast and business is so good.

Information: www.econ.state.or.us or (503) 986-0172.