While it is common knowledge how vital small business growth is to the American economy, aspiring entrepreneurs face an uphill battle when seeking financing to either start or grow a business.
They even face roadblocks to using their own money, Bill Keenan said.
Mr. Keenan is the founder and CEO of Pango Financial, an innovative company helping entrepreneurs obtain financing, including by unlocking the money they have saved in their own retirement accounts.
It’s a tough time to be in banking, and it’s a tough time getting a loan from one too, Mr. Keenan said. Facing low interest rates, many have abandoned the small business person in favor of chasing bigger game elsewhere.
Banks are also faced with increased regulations after 2008, making them wary of working too extensively in the sector. While they have CRA and SBA commitments, they struggle to meet them in the current climate.
The end result is most entrepreneurs who even bother applying at a bank leave with the same amount of money they entered with.
In that marketplace void Pango Financial was born.
“We looked at how we could develop a platform that initially focused on startups,” Mr. Keenan explained.
Pango Financial offers several different solutions. The DreamSpark plan allows entrepreneurs to unlock their retirement savings and invest it into the business with no penalties. Taxes are deferred and personal credit is protected.
“From there we have the technology that takes the information and qualifies a retirement back end that enables them to roll over an IRA 0r 401 K into a new plan that allows them to buy a privately held company that is their startup,” Mr. Keenan explained. “With that equity infusion they can leverage that capital up.”
Developing the technology took two years, Mr. Keenan said.
Many entrepreneurs use the process to buy franchises in health care and restaurants, Mr. Keenan said. Truck drivers can buy a second vehicle and grow their existing business. One bought a sports facility, using $1 million to leverage $10 million more.
“The idea came to help fill a void in the market while at the same time helping aspiring entrepreneurs start a business,” Mr. Keenan said.
When people normally remove money from those accounts they pay tax, making it a prohibitive option.
While Pango’s process is designed to be mostly self-directed online, Mr. Keenan said applicants may have some questions. Staff are assigned to each entrepreneur and will guide them through the process. Pango also encourages applicants to seek legal or financial guidance when appropriate.
Other funding options available from Pango Financial include SBA loans, unsecured credit lines, marketable securities, accounts receivable, equipment funding and conventional bank loans.