Peter Ribeiro decided to start US Business Funding a month before the financial markets collapsed in September 2008 to provide loans to small companies.
“I thought it was a great time to open because it just couldn’t be any uglier,” he remembers. “I said, if I can succeed when the economy is at its worst, I can only imagine what I can do when it’s at its best.”
Almost a decade later, the Santa Ana-based company is thriving. It provided $61.3 million in funding last year, more than triple the $18.7 million it lent in 2015, and plans to increase employment from 30 to 50 by this summer. Its third-floor suite a few blocks from South Coast Plaza has the requisite pool table, bar and kitchen.
US Business Funding provides equipment leasing and financing and working capital from $10,000 to $10 million.
“Orange County is like the mecca for what we do,” said Ribeiro, 35. “There aren’t a lot of big shops. There are lot of shops that have four or five guys.”
Picked His Spot
Ribeiro, a native of Portugal, decided when he was 12 to follow his uncle into banking. He learned how it works during his summers as a teenager by interning in departments such as accounting, marketing, credit and treasury.
“Banking is all about scalability,” he said. “It’s not about big margins. I figured out it was thinner margins and higher volume.”
He earned a business degree from the University of California-Riverside, then worked for Millennium BCP, a Portuguese bank that was expanding in the northeastern U.S. He was advised along the way that he “wasn’t really a banker, but more of a sales guy.”
In college, he’d learned about leasing equipment to small businesses and then worked at a couple of such firms in Orange County. After a few years, he struck out on his own with $200,000 he’d accumulated from commissions at previous jobs.
Ribeiro thought he could survive simply by knowing the nature of the leasing business.
“This whole business is cash-flow based,” he said. “It will never run out of liquidity. It’s almost impossible.”
Nowadays, his company searches for small businesses, such as beauty salons, florists, limousine companies or construction contractors that can’t get bank financing.
Do Your Homework
When Ribeiro began, “I didn’t know how to run a company, but I could sell.” He learned to incentivize employees through commissions and noted that some workers have earned paychecks as high as $25,000 to $32,000.
His advice to other entrepreneurs is that when they start making money, they should study in detail taxes and investments rather than rely on accountants and investment brokers.
“Don’t let someone else tell you how it works,” he said. “Anything you want to do well, you have to do it yourself.”
He’s developed techniques to find the “diamonds in the rough,” companies that will pay back their loans and aren’t fraudulent. Instead of a typical call center where employees make 300 cold calls a day, Ribeiro said his employees make only a handful of calls through use of a targeted marketing system he designed.
Loan Tiers
Firms with top-rated credit can receive loans with interest rates of 4.5% to 10%; with bad credit, they’re charged 10% to 12%; and startups pay 20% to 25%. Loan terms can be from three months to 15 months for working capital or two to seven years for equipment. Much depends on the sector.
“You don’t want to do a five-year loan on a restaurant,” Ribeiro said, because most don’t make it due to low margins and high risk. “That’s the kiss of death.”
Though the interest rates are high, Ribeiro tells customers that by paying back the loans quickly, they can save more money than if they get longer term loans at lower rates from banks, due to accumulated payments over the long term.
Banks may also take six weeks to make a decision, while Ribeiro said his firm’s underwriting can be done in two days.
“I understand a small business far more than your typical bank officer,” he said. “We’re not about the lowest rate and this cute little payment.
“Banks only lend money to people who don’t need it. We’re reaching out to someone who needs the money.”
