Richard Billings
Title: Managing Director, Clipper Commercial Capital
Age: 54
Experience: 25 years
Richard Billings got his start in the equity capital markets corner of the financial services industry. He was going strong on the research side of the business, running the offices for four different large investment banks. And then he took a step back to focus on raising equity capital for small companies. “We used to call them the orphans,” he said, because they were public companies, but too small to attract much attention from the big investment banks. Billings saw a niche there and last fall, he launched Clipper Commercial Capital, based in Boston.
Q: Was there a particular instance or conversation that provided the impetus for launching Clipper Capital?
A: The experience of raising equity capital and dealing with small companies, you’re always talking about their finances, and every time you talk with them, you find problems raising liquidity, working capital concerns or commercial real estate or something you wouldn’t raise equity capital for.
Traditional banks have tightened up their credit standards, there were these small companies that didn’t qualify for the banks and yet they were kind of too small for the institutional side of the business of the equity side of the business, so they needed solutions on the commercial lending side.
[As an example] a company that’s actually a public company I once raised equity capital for has a deal that may be in the works. They are in the water delivery business, and they need these massive water trucks. They’re expensive trucks, and they’re looking for a line of credit so they can buy the trucks as they need them and expand their fleet. They couldn’t find a lender. We’re trying to find them a lender.
Q: So how does it work, exactly? What kind of financing models do you use?
A: We have probably around 40 lenders we work with. It’s not a straight brokerage. It’s more of an advisory role. We work directly with lenders, and we have a number of SBA lenders that we go to directly with particular needs and transactions. It’s not the type of model where I find a deal and wallpaper the world trying to find a lender.
We work specifically with these lenders and we know what they’re looking for, whether it’s a small business loan or what, and we have certain lenders who are focused on certain niches within that. Then we have other lenders that are conventional or who look at nonconforming loans, so we’re looking for very specific niches, and we have lenders that answer those niches. We don’t find the deal and shop it out everywhere. We work specifically with just over three dozen lenders, banks and non-banks. It’s a very specific model, so there are some things we can’t do.
Q: Like what?
A: It would be a particular deal that just doesn’t match up. I won’t keep going out there to find the last lender in line to do a particular deal. Like right now, I’m having a very difficult time with a particular deal, it’s a small deal, but it’s on the water and they can’t get flood insurance, so that makes it very difficult to get a loan against their property.
One of the things we do quite often is, I talk to many of the commercial lenders at these banks, and we really look for their turn-downs. A small businessperson, maybe grown a business and took on some debt and now they don’t have perfect credit, so the credit committee has turned them down.
I talk to the commercial lenders all the time about their turndowns. And my lenders are not depository banks, so they’re not looking to steal the client, they’re looking to get the loan done.
Q: What do you like about working with smaller companies?
A: Even when I was working on Wall Street, I liked working with small companies because you’re usually dealing with the founder, the guy who built the business from scratch in his garage. It’s fascinating when you’re learning about the business from the person who actually built it, as opposed to some corporate executive who took it over. You learn a lot about what you don’t know about other industries, too.
Top 5 Tips To Successfully Secure Commercial Financing:
- Plan ahead: Crisis funding = expensive capital.
- Divide and conquer: Consider multiple sources. Traditional banks are not the only game in town.
- Educate the lenders: Prepare a detailed business plan and capital request.
- Get smart: The more you know, the more flexibility and options you will have.
- Equity is not cheap: It’s the most expensive capital, and you can only sell your business once.
