What Next Street is doing that others haven’t done is really getting to know the businesses in a way that banks don’t.
We estimate there are at least 25,000 inner-city companies with annual revenues of $5 million to $60 million. On average, they are more profitable than US corporations as a whole, and more conservatively financed. Yet they are starved for growth capital.
Bank lending to the small companies that create the lion’s share of American jobs has declined every quarter since 2008. Small business loans slowed by $60 billion between 2008 and 2010, and fell by another $15 billion in the first quarter of 2011. This underinvestment is doubly damaging, since it perpetuates the myth that the opportunities aren’t there.
Next Street serves companies that are too large for most CDFI and SBA programs – and too small to get the attention of the capital markets. Most Community Development Financial Institutions focus on housing, not business financing. Meanwhile, the majority of SBA loans go to very small companies: In 2010, the average SBA loan was just $265,000.
Next Street’s advisory relationship with clients puts us in position to invest in a company’s potential – not simply its track record – and to ensure that potential is realized. We work side by side with the business owners, helping them set the right goals, hire the right executives, and deploy the right marketing tools to make sure that ambitious targets are met.
This is one of the reasons we can often provide financing when commercial banks pass: loan denial rates for African-American and Hispanic-owned businesses are five times higher than for other companies of similar size, despite consistently faster growth over the last decade.
Next Street specializes in the kind of financing this market wants. Venture capital and private equity deals have little allure for most business owners in our market. Their companies are already successful. They aren’t looking to sell a significant piece of the business. What they want most are structured lines of credit, term loans, equipment and real estate loans. This is our focus.