Walt Robinson described it as “crowdfunding for grownups.”
He and his business partner, Scott Soltau, have launched a new business called BridgePointe Capital Markets, which will be in full swing next month.
Through its online funding portal, the company aims to connect investors to companies that need funding.
The idea is to bridge the funding gap between what community banks can finance and what small businesses need.
“We consider it a higher evolution of crowdfunding,” Robinson said.
Combined, Soltau and Robinson have more than 50 years of experience in corporate finance, investments and commercial lending.
And they saw that some small businesses have trouble getting financing from community banks, which have become more and more regulated by the government.
“I had a lot of frustration in community banking because I saw this funding gap-those deals that are 1 degree off,” Robinson said.
BridgePointe leaders are focusing on lower- and middle-market companies with revenues between $1 million and $50 million, Robinson said.
And they are aiming to provide between $250,000 and $3 million in funding-that’s the funding gap, leaders said.
For community banks to provide financing to a business, the business needs sufficient collateral and enough capital to carry out the business plan.
And new or small companies might not have that.
“It may be a case of a company with a great idea but maybe not with the capital they need to carry out their strategic plan,” Kerry Riley, chief credit officer for Northwest Georgia Bank, said. “They may come to a bank, and we say that it’s a great plan, but there needs to be more core capital at the bottom of it.”
Or maybe a company’s business is mostly wrapped up in one or two clients, or there has been a recent decline in earnings for some reason, Robinson said.
Those things might prevent a bank from making a deal, but that doesn’t mean the company couldn’t be successful, leaders said.
The company just needs extra help and backing before a community bank would be able to provide additional financing.
BridgePointe allows investors to go through the online portal, browse through projects and then invest in those they want to support.
And it allows participants to spread their investments across various projects, which means a more diversified portfolio, which means mitigated risk.
A company that is looking for capital must go through a 40-step due diligence process.
“They download a template and examples and are led through the process online,” Robinson said via email. “Of course, we meet face to face with each company several times; however, the online process makes life easier and more efficient for all parties. The process also provides an audit trail for the SEC and FINRA that ‘diligence’ is taking place to best disclose all material risks to investors for their review.”
Investors can put in a request to get more information about businesses they are interested in, and the business owners can also decline to provide additional information if, for some reason, they don’t want to work with an investor.
Throughout the process, Soltau, Robinson and their team monitor the transactions and work with participants; but the online portal will provide efficiency and allow them to do work throughout the Southeast and-eventually-nationwide, Robinson said.
“A Chattanooga Story”
Soltau, who also co-founded Launch Chattanooga, said the core of BridgePointe is community.
And he said their company fills an important need.
“Community banks are supposed to be the engine portal for local business growth, but they are being hamstrung,” he said. “Something like 60 percent of all deposits now reside with four banks in New York, and only 5 percent of their lending is to small business. The funding gap that exists is that 99 percent of the capital that’s available goes to less than 1 percent of the companies. That spells massive need.”
The idea is to be an advocate for community banks and help small companies thrive and hire more people, which boosts the local economy, Soltau said.
And it allows investors to participate in and give back to their local community, to invest in what they know.
“At the end of the day, this is all about bringing the community together, and that-to us-is very much a Chattanooga story,” Soltau said.
Updated @ 8:24 a.m. on 5/28/13 to correct a typographical error.