Photo by Jim Massara
Consultant Ron Hutcheson explains non-traditional funding to Clayton County Chamber of Commerce members.
Money from banks for small businesses is tighter than ever, but “non-traditional” funding is stepping in to fill the breach, according to a Newnan consultant who spoke to Clayton County entrepreneurs Tuesday.
“We’re not against banks,” said Ron Hutcheson of Smart Funding Solutions, speaking at a Clayton County Chamber of Commerce networking luncheon in Jonesboro. “What we’re saying is, when the bank says no, look at this.”
Hutcheson described four options for raising funds: merchant-cash advances against future credit card sales; advances against total cash flow; invoice factoring, which involves selling invoices for a percentage of their value; and borrowing from micro lenders.
These options are useful but not for everyone, Hutcheson told the audience.
“If you could get the money from a bank, we encourage you, dont use these,” Hutcheson said.
He also cautioned against using money from these sources to consolidate debt. “It doesn’t make sense,” he said. “You don’t take good money and try to chase after bad money.”
Hutcheson did say, though, that non-traditional funding is an excellent way to expand a business and take advantage of opportunities.
“We had one guy who had a taco stand a couple of years ago,” Hutcheson said. “The banks don’t want to deal with restaurants. He’s now on his seventh taco stand because of the cash advance he used to grow his business.”
Jonesboro chiropractor Robert Alpert understands completely. He said he wanted to expand but that banks were making him jump through “a lot more hoops” to obtain a loan.
“In the past, you could get financing through any bank,” Alpert said. “Now it’s to the point where banks are sitting on their money.” He noted that while bigger banks are stingier, in his experience smaller banks are “more likely to loan to the little person.”
Hutcheson started Smart Funding Solutions in 2008 after several years working for a merchant-cash provider. His company charges clients nothing and instead acts as an agent for about 25 non-traditional lenders. He said that most of his clients have annual revenue of between $150,000 and $3 million.