Banker's Guide to New Small Business Finance Venture Deals, Crowdfunding, Private Equity, and Technology

Figures and Tables xi

Preface xiii

Acknowledgments xix

About the Author xxi

Part One: Survey of Funding Small Business 1

Chapter 1: How Small Businesses Are Funded 3

Defining Small Business 3

ABCs of Small Business Funding 8

Usual Suspects Providing Business Capital 10

The Rise of Alternative Financing 12

Chapter 2: Elusive Nature of Bank Funding 15

Risk Appetite Is an Oxymoron 16

Source of Bank Funding Limits Its Use 17

Small Business Credit Is Difficult to Scale 19

Loan and Bank Size Are Inversely Related 20

Chapter 3: Capital Market Disruptions, Post-2008 23

Didn't Anyone See Bubble Coming? 23

This Time Was Different 25

Where Did Main Street Funding Go? 29

SBA—Main Street's Federal Bailout? 30

Supply versus Demand—Did Anyone Ask for a Loan (and What Was the Answer)? 33

Post-Crisis Reflections on Financial Regulation 37

Part Two: A Perfect Storm Rising 43

Chapter 4: A Paradigm Shift Created by Amazon, Google, and Facebook 45

Amazon Creates Digital Trust 46

Who Answered All Those Questions Before? 49

Your Opinion Is (In)valuable 51

How Do These Changes Affect Small Business Lending? 54

Chapter 5: Private Equity In Search of ROI 59

The Fed's Low Interest Policy and the Effects on the Private Investor 60

Wall Street Isn't Main Street 60

First Buy In, Then Invest Up 62

A Cautionary Note about a 72 Percent APR 67

Chapter 6: First Change the Marketplace, Then Change the Market 71

Old Thinking/Technology Can Stifle Credit 72

Morality and Money 78

The Unintended Consequences of Old Law 79

Capital Markets Go Digital 81

Pattern Recognition—Data Is the Game Changer 82

Different Processes and Different Views 84

Crowdfunding versus the Crowd That Got Funding 86

The Rise in Alternative Paths to Source Funding 88

Billions Went Missing and No One Noticed? 89

Part Three: Digital Dynamics in Small Business Funding 93

Chapter 7: Funders and Lenders—Online Capital Providers 95

Innovative Funding Marketplace 95

Online Funders: Purchasing Future Receipts 97

Online Lenders: Money from the Cloud 106

Chapter 8: Crowdfunding with Donors, Innovators, Loaners, and Shareholders 125

Donors—Funding Arts, Solving Problems, and Floating Local Businesses with No Strings Attached 125

Innovators—Buy It, I'll Build It 133

Loaners—Brother Can You Refinance My Visa? 135

Shareholders—Online Market for Equity 140

Crowded Elevator? 147

Chapter 9: Other Innovative Funding Sources on the Rise 151

Factoring in the Digital Age 151

Working Capital Management as a Financing Strategy 156

Investing Retirement Funds in Self, Inc. 157

No Store, No Hours, No Bank, No Problem—Virtual Lenders for Virtual Merchants 160

Taking as Much Time as Needed to Repay 164

Chapter 10: Capital Guides—Online Resources to Find, Coach, and Assist Borrowers and Lenders 167

Loan Brokers 168

Other Online Resources 174

Chapter 11: What Innovation Means for Bank Lending 177

Competition Erodes Banks' Share of Small Business Loans (Again) 178

What Banks Can Fund (but Won't) versus What Banks Cannot Fund (but Will) 180

The Best Defense Is Still a Good Offense 182

Banks Still Have the Most Customers and Cheapest Bucks in Town 184

What's Next? Character Redux, Rise of Alternative Payments, and? 186

About the Companion Website 191

Index 193

CHARLES H. GREEN is a seasoned finance professional with over 30 years of experience advising, financing, and investing in the small business sector. His experience includes tenure as a commercial banker and venture capitalist. He also founded and served as President and CEO of Sunrise Bank of Atlanta. He regularly consults with business owners and bankers, writes about financial topics, and teaches finance through seminars and conferences produced by the enterprise he founded, the Small Business Finance Institute.