Paul Quintero on Growth Capital

Capital is essential to business growth. Paul Quintero, CEO of Accion East, describes several methods for growing capital.

Video Transcript

So growth capital is probably one of the biggest challenges that we see businesses face. What I would say is it depends on the kind of business that you have. I divide the world in terms of service – or the industry in terms of the service type of businesses and the businesses that actually manufacture, almost artisanal. There’s an advantage to the latter in that if I make, for example, um, a shirt, I make shirts, the buyers of those shirts – department stores, small stores – can be a source of funding for you either because you’re able to, ah, sell the contracts that you have with them to a financier, and they call those factoring, or even from the time they order you can get what they call purchase order financing. So purchase order financing is when a big department store orders from you – hey, Paul, I like those shirts. You get something from, you know, you name the big store that says I’m going to buy 10 shirts from Paul and therefore someone will finance 80-90 percent of that for you and that’s great because you can then use the money to order the inventory, get it made, have it shipped and delivered all advance and then you’ll net the net profit, you know, at the end of the transaction. So for people that make things I would say leverage purchase order financing and factoring to help fund that growth. People often say, oh, that’s a little expensive, but it’s more expensive to not be able to even run your business. At a certain point, when you’ve generated enough cash, then you can look at maybe longer term forms of financing. But in the near term, that’s one. Now you mentioned the idea of crowdfunding. Crowdfunding also, um, I guess fortunately or unfortunately, has really benefited those that make things. Um, crowdfunding often has a comp – an agreement between the business owner and those that found the – fund the business owner, that in exchange for something, um, they’ll invest in their business. Um, there are often great services that you can provide people in scale. One that has happened, and we’ve all read about our films, so everyone can enjoy a movie, but, um, that’s something even that’s very tangible that you manufacture. So I would say, as a general matter, if you’re in the service area, um, those options of crowdfunding, purchase order financing, factoring, ah, really don’t, don’t help. And so on the service side what you need to look at are lenders like Accion and other micro lenders, potentially banks, potentially people that can provide you lines of credit or working capital because what you need is the ability to fund, most likely, people or an advancement of time to help scale what you’re doing. But that’s how I would think about it. Now, if you’re a particular business that has a huge growth profile you know that you’re the next Google. Then clearly neither of these forms are really what you want and you want to have a real, um, equity investor – probably depending on the stage anywhere from angel to venture – that is going to invest in you with the idea of taking you from where you’re at to the next step right before going to become an IPO, or Initial Public Offering. Um, those depend on your trajectories and the kind of business that you have, but a rough way of thinking about where you’re at and what you could do.

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