Meeting the Right Financial Partner

Inner City Capital Connections (ICCC) is just around the corner!  Next Thursday, over 100 inner city entrepreneurs will pitch their companies to potential investors in New York City.  The matchmaking event will include a series of “speed-pitches” with investors representing private equity, venture capital, angel networks, mezzanine financing and debt.  The day is not only about making deals—but making the right deals that fit with the entrepreneurs’ business growth plans.  

Coming off of the October 20^th capital education training in Detroit, these entrepreneurs are equipped with the knowledge needed to communicate with investors.  The 125 companies participating in the program were selected out of a record-setting 3,200 company nominations based on their strong growth potential and commitment to the inner city.  Many of the participating companies are ready to grow, and after attending ICCC, are able to do just that.

Micron Electrical Contracting of Detroit is one of those companies.

Dwayne Coleman and Les Alexander, the owners of Detroit’s Micron Electrical Contracting, are in a very capital-intensive business. They have to finance payroll for months before clients start paying, and with electricians earning a median salary of $90,000, payroll gets expensive—and fast.  “If you want to be a $12 million business, you need about a $2 million line of credit to get there,” says Coleman.

When they attended ICCC, the partners had a $2 million business, but only a $400,000 line of credit. At ICCC, Micron’s owners learned that their net margins of between 7% and 13% were unlikely to be attractive to venture capitalists. “Having the question-and-answer session was very helpful in figuring out how we should position ourselves in the marketplace,”says Coleman. Plus, he says, “We’re not the type of company where you could make an investment and then would want to get out after three to five years. We can do very well over five to 10 years. But those investors are hard to find.”

The solution was one that surprised the partners: factoring. At ICCC, they met executives from LSQ Funding Group, which uses a different business model than other factors, making them less expensive.  “Thanks to factoring, we’re starting to go after other contracts,” says Coleman. He clearly expects to win them; by 2012, he expects Micron to nearly double in size, creating about 30 jobs. “Detroit will be on a steep growth curve,” predicts Coleman. “We want to participate in it.”

We’re excited to follow the growth of Micron, and the other companies that are partaking in the ICCC program next week!

BY Mary Duggan on November 3rd, 2011

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