Small business lending perks up

There’s a specialty coffee craze brewing in New York City, and Joe Coffee is at the forefront of the shops that are picking up steam.

“Once customers discover you, once they sort of become part of your following they wont go any place else,” said Joe Coffee founder Jonathan Rubenstein. “They find a way to go to Joe seven days a week.”

Rubenstein says his business has a loyal following that has enabled his family-run enterprise to expand to 12 locations in the same number of years. He started the business with money he’d borrowed from family and friends. Eventually, the growth of the business called for expanding to outside for lenders.

Joe Coffee’s chief operating officer Brandon Wall, who is in charge of the company’s financing, says he opted not to use a traditional bank to secure capital for its 11th location. “We can’t spend a month or a month and a half going through the traditional loan process with a big bank,” he said, adding speed is crucial. So he turned to Bond Street, an alternative lender based in New York.

Small business lending has been slow to recover even as the U.S. economy has improved. But a crop of new lenders are filling the void, making loans of less than one million dollars to entrepreneurs looking for a faster alternative to financing their businesses.

“There are a handful of structural problems which make it difficult for banks to finance the small business community,” said David Haber, co-founder and CEO of Bond Street. “On the one hand with Basel III (global bank regulatory) requirements, they’re forced to hold more capital on their balance sheets for smaller loans, so often it’s more profitable for them to make larger dollar loans to bigger businesses than it is to make thousands of smaller loans to smaller companies.”

Even for small businesses that are healthy, profitable and growing, trying to get financing is a challenging place to be, which is why Joe Coffee decided to go with small business lender Bond Street to finance its 11th location.

“If you see a space that’s great and you want it, you need to be willing to commit and have the money in the bank oftentimes within two or three weeks. You can’t sort of be looking for financing for 6 months,” said Rubenstein. Joe Coffee was able to secure $200,000 in 6 business days to open its 11th location quickly with financing from Bond Street, and now its 12th shop is under construction.

This quick access to capital from alternative lenders is giving a major jolt to small business around the nation.

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