In 1973, I started a company to mate a new technology, the floppy disk, with a 300-instruction-set programmable calculator. I called the result a desktop computer. This was a system to be made available to the small business world, an affordable desktop solution to business reporting needs. If not the first, it was certainly one of the earliest uses of random access technology applied to business applications (accounting, word processing, automated forms fill-out) at the desktop level.

I financed the new entity using a newly available government guaranteed loan program [from the U.S. Small Business Administration (SBA)]. This form of bank loan required personal collateral. My partner and I provided our homes for this requirement. As unthinkable as it is today, back then, Chicago venture capital sources for technical start-ups were essentially nonexistent. The failure of such ventures generally left investors with nothing of recoverable value.

Fast forward eight months: The new venture had 35 employees mainly writing software, and, although the desktop computer unit had proven itself valuable to at least 40 users, 400 users were required to provide the cash flow needed to service our then-current US$500,000 debt and burgeoning payroll. To say the least, a review of company financials did not inspire investor confidence. To make matters worse, a second larger SBA loan, granted by the same bank, was about to default. We exhausted assets and could not provide additional collateral to pledge to support additional debt financing.

A very close family friend, a Chicago attorney, offered to present our case to a bank (which was friendly to him) that he was certain would issue a much larger SBA loan, sidestepping the additional collateral caveat. This loan would carry us over for at least another year, thereby preventing the foreclosure loss of the company and the existing collateral (expressly, the homes of myself and my partner). The hitch was that I would be required to execute a “consulting” contract for 10% of the loan face value to whomever my attorney friend named. Of course, this “contract” was simply subterfuge to bypass the SBA-mandated 1.5% limit on allowable fees for representative agents. Eventually, the pressure presented by the potential loss of the enterprise (and our domiciles) overcame my reluctance to be part of such a loan.

One night, I drafted a letter giving my attorney friend power of attorney to negotiate for our company in this loan application. After a sleepless night, I arrived at my attorney’s home at 5 a.m. After much hemming and hawing, I retrieved the letter and destroyed it on the spot. Our enterprise eventually failed.

Never once in my entire entrepreneurial life did I ever regret my action. And never once did I ever again allow entrepreneurial pressures to cause me to entertain such behavior.