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The Next Street Opportunity Fund combines growth financing with the sophisticated expertise that urban business owners need to expand in a tough environment.
Next Street is bringing the merchant bank model to underserved companies in urban markets. Our goal is to equip local business owners with the financing and the business expertise they need to take their companies to the next level.
We are unleashing the power of growing companies to create new jobs and economic vitality in low- and moderate-income communities where growth is needed most.
- Tight focus on small business expansion to build employment
- Targeted in low- and moderate-income areas of urban markets
- Lending criteria based on business potential, not just history
- Access to premier business expertise as well as financing
Next Street is targeting “urban blue chip” companies that are too large for most SBA loans and too small to get the attention of capital markets.
These companies are also underserved by community investing initiatives and traditional banks, which historically focus more on affordable housing than small business lending. Opportunity Fund criteria:
- Established employers, with annual revenues of $3 million to $60 million
- Minimum 5 years of operating success and a strong management team
- Clear growth opportunities and strategies to realize them
- Client of Next Street for at least 90 days prior to financing
Expertise is a critical factor in small business success. Next Street’s merchant bank model is ideally suited for the challenges that growing companies face.
An advisory relationship with clients allows us to evaluate business potential differently than a conventional lender. Since Next Street helps its clients develop business plans, hire talent, implement operating and strategic initiatives and tell their stories in the marketplace, we are better able to assess the opportunities and risks in our decision process than traditional lenders.
Because Next Street provides active assistance in pursuing new contracts and business opportunities, we have a clearer picture of clients’ revenue potential than conventional lenders and can apply more flexible credit standards with confidence.
Lending to the small companies that create the lion’s share of American jobs declined by more than $60 billion over the last four years. While lending has showed signs of recovery, access to growth capital continues to remain a challenge to high-potential small businesses.
Access to growth capital is particularly difficult for companies in low- and moderate-income areas, and those owned by women and minorities. This underinvestment is doubly damaging, since it perpetuates the myth that opportunities do not exist in these communities.
We estimate there are at least 25,000 companies with annual revenues of $5 million to $100 million in inner cities alone. On average, they are more profitable than US corporations as a class, and more conservatively financed. Improved access to capital can help make them engines of employment, while producing strong returns for Next Street investors.
Most of the financing will be in the form of loans, because most urban business owners prefer not to sell a piece of their company in a private equity transaction. The Opportunity Fund will offer business owners:
- A mix of senior secured term loans and senior structured loans
- Collateral and debt service coverage ratios based on both historical and projected financial performance
- Loan amounts up to $2 million
The Opportunity Fund will target companies in low- to moderate-income areas that meet Community Reinvestment Act eligibility criteria in the following Metro areas:
- Boston-Quincy, MA
- New York City – Wayne, NJ – White Plains, NY
- Nassau and Suffolk counties, NY
- Newark-Union, NJ/PA
- Bridgeport-Stamford-Norwalk, CT
We expect lending to begin in these areas by early 2012 and anticipate expansion to other markets as we build capacity.
Next Street was founded in 2005 on the idea of providing growing companies in urban markets with the flexible financing and expertise that investment banks, Madison Avenue, and the elite consultancies provide to Fortune 500 companies. Next Street portfolio companies now generate $600 million in annual revenues and employ over 4,000 people. Most are located in low-income areas. Two thirds are women- or minority-owned businesses. One third are nonprofit organizations.
Copyright 2013 Next Street Financial LLC. All rights reserved.
Printed on Friday, May 24, 2013