Today it’s tough for entrepreneurs to finance businesses growth. Banks have tightened lending standards since the 2008 financial crisis, and some business owners don’t have the credit or collateral to score a loan for even small projects.
There are some alternative and creative funding options, though, and one Cincinnati-based company has built a growing business on financing small projects that banks won’t take a chance on.
The Business Backer, in Mason, has provided more than 3,000 businesses across the country access to $60 million in working capital since its founding in 2007.
The Business Backer is privately funded, and finances small business projects up to $75,000. In turn, the Business Backer receives a percentage of the borrowing company’s future earnings, says Business Development Manager Daniel Royce. The funding is repaid, often in a year or less.
“Our industry is not new, but it fills a void,” Royce says. “This is for business owners who may not have the collateral (for a traditional loan). They may be unbankable, but that doesn’t mean they are a horrible business.”
The Business Baker looks at financial information and the growth potential of each applying business. The relationship between The Business Backer and clients is an important aspect of the financing process, Royce says.
“We look at the whole picture. We ask, ‘Who is the businessperson, what services are they providing?’ We see the value that lies beneath that (traditional financial) information, weighing that information and the risk to determine if we can do something,” Royce says.
Some financing companies have a bad rep for high interest rates that take advantage of customers, Royce acknowledges. The Business Baker, from the start, aimed to keep rates at “a half or a third of competitors,” he says.
The Business Backer was founded by software and business services entreprenuers Scott Avera and Mark Deeter. CEO Jim Salters, a turnaround consultant, joined in 2009. The company has about 40 employees.
“We want to provide extremely affordable capital, and provide a service based on a relationship with clients,” Royce says.