Sign Up For News!

Follow Us!

Sign Up For News!

Follow Us!
  • fc-webicon-rss
  • fc-webicon-rss
  • fc-webicon-rss
  • fc-webicon-rss
  • fc-webicon-rss
  • fc-webicon-rss

Blogs

How to get more capital to small businesses?

New York Times blogger and loan broker Ami Kassar recently proposed a different structure for loans as a way to open up small business credit.

Instead of set monthly payments, loan repayment would be based on a percentage of revenues, similar to daily merchant cash advance repayments.

Machine worker at Johnson Precision"In the new model I am proposing, because the lender is assured of a piece of the entrepreneur's future earnings regardless of whether the current business succeeds, the lender should be willing to be more flexible with terms and rates," Ami writes.

I certainly agree with Ami that we need more "out of the box" lending and investing approaches in order to get capital to companies on whose success our economy depends. His proposed solution is similar to what Vested for Growth has done in New Hampshire since 2002.

However, I do not see this type of lending as being the role of bankers, whose "least-cost debt" business model only works when they are repaid 98-99%. Alternative lenders can take higher risks with subordinate debt as long as the borrower has steady cash flow and a strong management team.

Then there are companies that are primed for growth, but considered too risky for bank-type loans. That's where royalty financing comes in. Similar to what Ami describes, the investor's return is based on the company's performance and cash flow.

Royalty financing works well for second-stage companies that are introducing a new product or experiencing a merger or acquisition. It does not work well for startups, whose revenue is still speculative.

Evolving businesses often travel a wide spectrum of risk. Entrepreneurs are better off when all of the choices along the risk spectrum are available and when they understand the tradeoffs of each.

John Hamilton is the Community Loan Fund's Vice President of Economic Opportunity and Vested for Growth's Managing Director.

Opportunity. For all.

Blog posts

Impact investing, with a focus on marginalized communities
Julie Eades

The upcoming Invest in New Hampshire forums will focus on some excellent opportunities and options to invest locally.

more>>

Resident ownership is delivering results
Julie Eades

Early data show the "excellent financial discipline" of ROCs.

more>>

How to prevent and remove ice dams
Chris Clasby

Practical tips that stop ice dams cold.

more>>

Co-ops improving communities statewide
Gary Faucher

Resident ownership paves way to lots of good community projects.

more>>

What to do with those old business files
Kelli Cicirelli

File, discard or shred? A guide to what co-ops should do with their business files.

more>>

Success stories

Business education helps farmer up the learning curve

"Lean" describes more than the meat at Brookford Farm, where Luke Mahoney has embraced progressive business practices.
more>>

Owner of manufactured home park was determined to sell it to residents

Stony Brook Estates' 2014 conversion to resident ownership kept homes affordable for its retirees.
more>>

Timely loan helped Great Bay Kids' Company build and expand

Forced to find a new home for its child care/early education center, Great Bay Kids' Company built a new school which would accommodate babies and...
more>>

Investment here builds scholarship fund for young musicians

Earning fixed-rate interest while supporting N.H. people and organizations was the solution for the Monadnock Folklore Society.
more>>

With business investment, Single Digits is wired for success

The co-owners of Single Digits saw an opportunity their giant competitors didn't. A Vested for Growth investment helped them grasp it.
more>>