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Dr. Cliff Janke, a savvy angel investor and advisor to multiple startups, was sipping coffee at Lola Savannah in the hills of West Austin, reading the headlines about the paucity of capital available to America’s entrepreneurs and contemplating the next steps on behalf of his clients.
The steps are daunting. Countless recent studies. According to a recent study by Goldman Sachs, called 10,000 Small Businesses Voices, “84% of small business owners fear the Federal Reserve’s new bank capital requirements will worsen credit access challenges.” For many small businesses, accessing the necessary capital to grow and scale their business has never been more difficult.
Just as Janke was sipping a cortado, a call came through from friend Grace Gillespie, a business consultant.
Gillespie has embraced an innovative approach, created by Burns Funding, to raise capital, which involves shelf corporations as the centerpiece.
Janke knew all about shelf corporations, which Wikipedia defines as “a corporation that has had no activity. It was created and left with no activity — metaphorically put on the ‘shelf’ to ‘age.’ The company can then be sold to a person or group of persons who wish to start a company without going through all the procedures of creating a new one.”
But what he didn’t know was how they can be used as a resource for alternative funding.
Gillespie, who has partnered with Burns Funding, noted that Burns Funding and its founder, Peter J. Burns, III has created a program that pairs shelf corporations with a line of credit of as much as $350,000. The way it works, she noted, was that a participant purchases a corporation for between $11,000 to $13,000. Burns Funding, then connects the participant with his proprietary funding resources.
But what happens if the participant doesn’t have the capital necessary to pay for the shelf corporation? “No problem,” Gillespie said. Burns Funding has attracted financiers who are willing to “bridge” the money for the shelf corporation, with the expectation of being repaid after funding.
And what happens if, as with Janke’s case, his credit score had just dipped below the requisite 720, which is required of the individual attached to the shelf corporation?
“Burns Funding has that base covered, too,” she said. “They have partnered with a credit repair firm that can restore an individual credit, in most cases, within two weeks, qualifying them for the program.”
Still, paying for the shelf corporation, an origination fee for the loan, and then a loan at a prevailing interest rate would be costly.
Burns Funding has attempted to make allowances for that as well, with the Burns Funding Method. With this approach, Burns Funding takes half the capital after fees, and invests in various passive investment vehicles. In exchange, it contractually promises to service the loan. The participant receives their portion of the funds, without having the responsibility to off the loan.
“It’s an amazing program,” Gillespie said. “I’ve been involved with shelf corporations for the better part of ten years, and I have never witnessed anything like it.”
And the timing of this new “method” couldn’t be better.
Burns, himself, recounted his discussion in Southern California last week with one of the world’s largest banks.
“The banks are pulling the rug on business loans,” Burns said. “The banker told me about his employer’s desire to stop offering business loans — except to their long-time VIP clients. They’re not going to announce it. And there’s no big memo. Just a slow, quiet retreat.”
“This means fewer loans, tighter credit, and less opportunity. And no capital means no expansion, no hiring, and no innovation. While they’re pulling back, we are moving in.”
