McKinley Capital Management opens a new direct lending program to promote business growth
ANCHORAGE, Alaska (KTUU) - While money flows from a number of relief programs throughout the pandemic, McKinley Capital Management seeks to broaden the scope of loans offered to businesses through a new direct lending program to be more inclusive of businesses that are larger than small operations but smaller than giant corporations in Alaska.
CEO Rob Gillam explained that there is a gap in the size of loans offered to Alaska businesses currently. He said the loans the company are offering are meant for those who fall in the middle.
He said small business loans will usually have a maximum amount of around $7 million and folks usually have to provide a personal guarantee in order to get the money.
Meanwhile, bank loans require businesses to have a longer list of requirements in order to get huge loans, usually with a minimum of around half a billion dollars, according to Gillam.
“A bank loan is generally good. You know, rates are low, so that’s generally good in terms of borrowing money. But you have to have to have a lot of assets, you have to have a lot of cash flow behind those assets, and oftentimes companies — particularly companies in distress, or going through high growth opportunities, either one — don’t qualify for bank financing. And so direct lending is a specific category that’s designed to span that gap and there really isn’t such capital here in the state,” Gillam said.
Gillam said the money offered through the lending program comes from McKinley’s capital acquired through investors. He said a company or business that qualifies and has a plan to use the money use it for that plan.
He said it’s a “win-win” for the borrower, McKinley’s clients, and the company for the service they provide.
Gillam added that the money is supposed to be used to help businesses grow, not survive. Although, he said that the money could be used by a company to “see their way through the pandemic.”
“You can think about this as ‘offensive capital’ as opposed to ‘defensive capital,’” Gillam said. “So this isn’t like a rescue type of financing like we’ve been seeing through PPP [Paycheck Protection Program] and some of the federal assistance type programs. This is more, ‘you want to take advantage of something.’ You don’t really qualify for a bank loan — you don’t have the right level of assets, or right level of cash flow — but you know, you need to borrow say, $40 million to take out a competitor, or you need to buy some new assets, or you need to reconfigure a building or a manufacturing line, or something like that.”
Therefore, Gillam said these are not loans meant to start a new business. He said they are meant to be spent on a specific need.
“They’re already a big company,” Gillam said about the kind of businesses who could benefit from these loans. “So it’s not a start-up situation, and they need capital to do something specific. It could be something as simple as they need to find a path through the carnage, it could be that they need to make an acquisition, or they want to make an acquisition. Generally speaking, banks only loan against significant assets and cash flow, and a lot of companies as a result of COVID don’t have either.”
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