Some of these barriers are measurable and concrete, such as the dwindling availability of loans from the Small Business Administration. Others are attitudinal, such as misperceptions about the risk of investing in urban companies. But the major barriers are related to the changes in the banking world over the last 25 years: consolidation and centralization, tightening regulatory and compliance constraints, the decline in relationship management, and loan practices that are designed for much larger businesses in order to facilitate economies of scale. The unfolding credit crisis is likely to exacerbate all these and other challenges.
Typically, business owners who approach Next Street are looking for help with enhancing their financial stability or satisfying a specific short-term need for capital. They are often extremely good at running a business on a day-to-day basis but haven’t realized the business’s full potential and haven’t developed a strategic view of their businesses and their markets. They may lack insight into their business challenges because of inexperience or because they are overwhelmed by daily pressures, so they don’t know that they need a merchant bank until they go looking for something else. To be sure, most of them are stymied by a lack of financial resources. But almost as many are missing key non-financial skills and support. Thus, one of the first tasks with our portfolio companies is to help them recognize both these needs, and begin planning to address them.
Next Street’s updated merchant-bank model is specifically structured to address this issue of growing needs and emerging challenges. In particular, we have developed a range of advisory services that are tailored for this market, truly an innovation in merchant banking. For the most part, even classic merchant banks didn't do this kind of consulting; instead, they directed their clients to management consultants. Next Street has formalized and integrated this function, exponentially strengthening the model as a whole, by recruiting staff with expertise in finance, strategic consulting, and long-term relationship management. This blend of sound advice with a long-term relationship becomes a core part of the implementation, ultimately reducing risk. Like classic merchant banks, Next Street expands and adapts our operations to accommodate these, adding creative services, real estate advisory, and organizational development, among others. Thus, Next Street brings its clients talent that rarely focuses on this market: world-class, Wall Street-quality advice and support.
