Six years ago, 29-year-old James Moore quit his job and moved back in with his mom.
He was a vice president for a now-defunct company in his hometown of Columbus, Ohio, that matched entrepreneurs with investors, and he’d noticed an underserved market: There were few one-stop shops to guide founders through the funding process from start to finish. The U.S. Small Business Administration offered advice, but not practical assistance writing business plans or incorporating startups.
So Moore decided to become that one-stop shop–all by himself. He managed to garner a few clients, which let him afford to recruit a few former co-workers and move into a small office. His company, Small Business Owners of America, was born.
Today, Small Business Owners of America is near the top of Inc.‘s 2017 list of the 5,000 fastest-growing privately held businesses in the U.S. for the second year in a row. In 2016, the company placed 11th. This year, it came in at No. 6, boasting 2016 revenue of $19.7 million–growth of 19,352 percent from three years prior.
Its 12 employees handle clients ranging from no-name small businesses to big names like Wham-O and a few that Moore, now 35, can’t publicly name. One, he says, is owned by a reality television star. Another, he adds, has been featured on Discovery Channel’s Deadliest Catch.
Most of that growth is due to a single decision: In 2013, Moore decided to add financing to his portfolio–providing capital to small businesses across the country. That’s when things really took off, he says. In its first year of offering funding, Small Business Owners of America bankrolled about $400,000 in deals. Last year, the company both invested in companies and offered factoring financing worth over $15 million to more than 100 small businesses. Factoring refers to a type of financing whereby an owner sells his or her receivables or invoices to a third-party intermediary. Moore says financing now makes up about 90 percent of his company.
CREDIT: Courtesy Small Business Owners of America
The investments are specifically structured: Moore trades capital only for equity, exclusively considering companies with at least $150,000 in annual revenue, 10 separate revenue streams, and a full year of business operations. Eschewing highly regulated loans in favor of accounts receivables purchases, a.k.a. factoring, also makes Small Business Owners of America unique. Those deals function without bank charters, making Moore’s company an alternative lender that functions in the same space as more well-known firms like OnDeck Capital and Lending Club.
Of course, these companies have recently come under fire. This past May, The Wall Street Journal reported that OnDeck Capital was slashing expenses–including cutting jobs by 27 percent–thanks to rising loan defaults, increased funding costs, and a smaller volume of expected loans in 2017 than in years past. A Lending Club presentation to investors earlier this year reported three straight quarters of decreasing year-over-year revenue–owing, in part, to a 2016 scandal involving founder and former CEO Renaud Laplanche’s alleged shady lending practices.
Interestingly, Moore doesn’t view those firms as competitors–not strictly, anyway. “I even work with other funding companies–to syndicate with them, just to diversify our portfolios,” he says. “They’ll put money on our platform–syndicate with me–and I’ll put money on their platform, syndicate with them. In all reality, yeah, they’re competitors–they’re doing the same thing we are–but we work together to help each other out.”
Moore terms his services as “short-term working capital”–small deals that can be funded in 24 hours and completed in months, rather than large long-term loans that take months to set up and years to pay back. His goal isn’t to finance the next Facebook–it’s to help struggling companies with potential keep the lights on.
“I’ve always been passionate about small businesses, and I respect people who take that leap and actually go out and do something on their own,” Moore says. “It’s scary and it’s risky, and my whole thing is that I want to make it as easy as possible to help them.”
He does, of course, acknowledge the need for his own company to turn a profit. “Without it, we can’t pay our investors back,” he chuckles. “And without that, we can’t keep giving people money.”