Scrappy Entrepreneurship At Its Best: Fresh Diet CEO Zalmi Duchman (Part 5)

Sramana: So you took out an SBA loan for $900,000 and used that to acquire operations in Chicago and New York, and to expand your Florida operation. How much did you have to put towards the SBA loan?

Zalmi Duchman: I had to put $200,000 toward it, which meant I had to mortgage my condo. The $900,000 loan was the first step I incurred aside from the mortgage on my condo. We were able to get some cash flow into the business.
Sramana: What was the process of getting an SBA loan, and what were the terms like?

Zalmi Duchman: The SBA loan process was hell on earth. If they made the government go through that process, there never would have been a stimulus. The process started in August 2008. We closed in late December. The last day they came to me and said, “We are not going to approve you because you do not have expertise in running a company that is multi-state, multi-city.”

I immediately wrote them a very long e-mail. I explained how I had grown the business through sweat, blood, and tears and how I had managed the dead leads business for Crescent Heights. Any person who came in to buy a condo and did not actually buy one became a dead lead after a certain amount of time. I received a small percentage of the sale for any revived dead lead. I explained how I managed the dead leads programs in Atlanta and San Francisco from Miami.

When they had told me no, I was devastated. That was the only time I felt that way throughout this entire process. The day after I sent that e-mail, I was told that I was now approved and that their vice president had signed off on the loan. The terms were prime plus 1.5% on a 10-year loan.

Sramana: What led you to consider this loan? Did you go to a local SBA office or find a local bank that had those programs?

Zalmi Duchman: For me, it was just finding the right people at the right time. The bank that we used is not a Florida bank. They have one broker in Florida who happens to be an SBA specialist. The broker for the selling business is the individual who referred me to this bank and SBA specialists.

Sramana: Once the loan had closed and you bought the business, you suddenly had operations in multiple cities. How did you handle that transition?

Zalmi Duchman: The first thing we did was find a new caterer in New York. One of the New York kitchens that had been used was a chicken kitchen in the mall. We immediately stopped that practice and hired an appropriate caterer to support their 30 clients. During that process, we moved over our Florida kitchen to a caterer as well.

Sramana: It seems like you were becoming a virtual coordinator that maintained the customer acquisition role. You used caterers to prepare the actual meals and then layered logistics support on top of that to deliver meals to the clients.

Zalmi Duchman: Yes. We did maintain the delivery, we never outsourced that. We took the phone calls and signed up clients, but we did outsource the good kitchens in 2009.

This segment is part 5 in the series : Scrappy Entrepreneurship At Its Best: Fresh Diet CEO Zalmi Duchman
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