May 1, 2024
Celebrating Small Business Week, we reflect on the impact of small businesses on our economy and communities. According to the U.S. Small Business Administration, there are 33 million small businesses in the U.S., employing a staggering 61 million people across the country. Advantage Capital invests in job-generating small businesses and helps ensure financing is available in capital-starved markets across the country.
We dive into the importance of small businesses and how we support them through a Q&A with Josh Rogers, Principal on our investment team.
Why are small businesses important to the economy?
Small businesses constitute approximately half of the private sector workforce in the U.S., playing a significant role in the economy despite their small individual scale. They also contribute nearly half of the country’s GDP. They serve as community anchors, offering accessible job opportunities with potential for upward mobility. They also represent a prime avenue for fostering the American entrepreneurial spirit, presenting unparalleled prospects for individuals to build generational wealth, opportunities not always available within larger corporations.
Why is it important to support small businesses in historically underserved areas?
The most important factor in uplifting underserved areas lies in providing access to quality jobs. A quality job includes conditions where individuals can succeed, receive fair compensation, and have avenues for career progression and skill enhancement. Small businesses often serve as the primary drivers of such quality jobs, particularly in underserved areas. Success begets success – the success of small businesses catalyzes further entrepreneurial endeavors, fostering a ripple effect of positive outcomes that benefit the whole community.
What small business resources does Advantage Capital provide to portfolio companies?
Our primary resource, which serves as our main entry point, is capital. The specific form of capital can vary significantly, and we take great pride in tailoring financial instruments that position businesses for success. In addition to capital, we offer substantial benefits as hands-on, value-added investors, including coaching and support for the entrepreneurs we partner with. Drawing from our experience working with hundreds of companies, we bring valuable pattern recognition and insights to entrepreneurs across various sectors. Our extensive network allows us to facilitate beneficial introductions to suppliers, potential customers, and qualified candidates.
How does Advantage Capital use tax credits to grow small businesses?
Tax credits provide a subsidy that enables us to engage in deals that are riskier than what traditional financial institutions typically undertake. Our initial investment often acts as catalytic capital, unlocking additional private-sector investments that businesses can use for scaling. Our approach enables us to coach and develop entrepreneurs with potential, helping them evolve from B-level to A-level, ultimately allowing them access to traditional capital markets they were initially excluded from.
Tell us about a small business investment success story significant to you.
A particularly meaningful deal has been with mSEED Group, a small-batch cosmetic manufacturer based in South Holland, Chicago. Initially, they faced a dilemma of high demand but lacked the capital to expand their facility. Despite their solid credentials, including a CEO with impressive qualifications, they struggled to raise funds due to their unique business model in a new sector. After a year of unsuccessful attempts to raise capital, Advantage Capital stepped in with a flexible loan, enabling them to purchase a larger facility and accommodate more beauty brands and aspiring entrepreneurs. This not only empowered mSEED Group but also unlocked opportunities for others to launch their own businesses in the beauty industry.
What small business resources do you recommend?
Nearly every community has an economic development office or chamber of commerce, serving as an excellent starting point for aspiring entrepreneurs. These entities can connect individuals with mentors who understand the local resources available to support business ventures.
What advice do you have for small businesses looking to grow?
As entrepreneurs start, they often wear many hats, including founder, salesperson, and strategist. While focusing on business strategy, it’s crucial to also pay attention to financial strategy. Be cautious about committing to large orders from major customers until you understand your working capital needs and how to secure that capital. Overcommitting to customer demands early on can strain working capital and lead to cash flow issues.
Managing a team is also important—whether hiring, retaining, or replacing employees. Employees perform better when they understand not just how to do their job but also why they do it. Fostering a culture of personal ownership and ensuring employees understand their roles’ contribution to the overall picture can lead to better outcomes for both employees and the business.
Anything else you’d like to add?
Spending time in and around small businesses has been incredibly rewarding. The individuals operating these businesses have their hands on the pulse of the economy that those further removed may overlook. I’ve gained valuable insights into economic trends and indicators before they reach mainstream channels. It’s important to not only support but also listen to and learn from those starting, running, and working in small businesses.
Advantage Capital understands the vital role small businesses play in driving our economy forward. We are committed to supporting small businesses and helping them thrive in today’s competitive market. By partnering with us, businesses can access a wide range of capital resources and expertise to help small businesses grow and prosper.
Contact us today to discover how Advantage Capital can be the catalyst for your small business’s growth.
Advantage Capital is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. Any offer to sell or solicitation of an offer to purchase any security or investment product (including any interest in any fund or investment vehicle managed directly or indirectly by Advantage Capital) will be made only to qualified prospective investors pursuant to separate and definitive offering and subscription documents in accordance with applicable federal and state securities laws. Only such definitive offering materials may be relied upon in connection with any decision to invest in a fund advised by Advantage Capital, and all such materials, including any material risks associated with the investment as provided therein, should be carefully read in their entirety. Advantage Capital is an equal opportunity provider.
The portfolio company referenced herein was selected solely to illustrate the firm’s experience investing in small businesses. The profitability of the investment was not a factor in the selection process. Nothing stated herein should be an implication or statement that investments previously made by Advantage Capital were or are successful, or that past performance is any indication of future performance. All investments involve risk and unless otherwise stated, are not guaranteed.
