With more than 1,300 wine and liquor stores doing business in New York these days, standing out from the crowd in the city that never sleeps can be pretty tough. In the past few years, demand for wine has been booming in Manhattan as locals develop their palettes and explore new grapes, whether it’s a spicy zinfandel from the Napa Valley or a crisp sauvignon blanc from New Zealand.
I opened Renaissance Fine Wines & Spirits with my business partner in 2002 on the Upper West Side, and for more than a decade business flourished in our growing neighborhood. But as the popularity of wine increased, so too did the wine stores opening for business in neighborhoods across the city — including our own. Once three new wine and liquor stores opened nearby, my business partner and I realized we needed to innovate to stand out from the pack, enhance consumer loyalty and grow our customer base.
As graduates of the Wine & Spirit Education Trust, we decided there was a huge opportunity to harness our passion and do something truly unique in the wine education space. As the industry grew, we wanted to give our customers the skills to recognize great values and perfect food pairings. With that came the concept of the Vino Maestro Wine School — an online wine education and tasting program.
Tasting wine is an integral component of the learning process, but instead of having students travel to the classroom, we wanted our customers to experience the program and wines from the comfort of their own homes. Collaborating with a professional wine instructor, we began creating video lessons with a handpicked selection of wines.
Building out this kind of concept was going to require a strong injection of capital, so early on in the process we visited our local bank branch armed with a detailed business plan and strong financial projections. Unfortunately, due to tougher regulations since the 2008 financial crisis, we learned that the process to get a traditional bank loan had become extremely cumbersome and we needed a more efficient way to receive the capital needed to launch our new product in time.
We decided to investigate nonbank sources of financing like peer-to-peer (P2P) lenders. P2P lenders function essentially as matchmakers for businesses looking to borrow with investors who want to lend — at a price everyone is happy with. The transactions take place online, which cuts out the long wait times and complexity of dealing with a financial intermediary like a bank and the high cost of dealing with a merchant cash advance.
Funding Circle, a San Francisco-based online marketplace lender, was one of the non-bank lenders that caught our eye. The online application process was simple and quick, and we were able to see if we qualified for a loan within minutes. Shortly after, I was on the phone with an account manager from Funding Circle talking about their term loan product, my business plan and how a loan would make a positive impact on our bottom line.
Banks may offer slightly more attractive rates, but Funding Circle’s process was quick and easy and their terms were much more reasonable than credit cards or other cash advance financing options. Besides the speed and transparency, what makes nonbank lenders like Funding Circle particularly interesting is that they use big data and technology to evaluate a business’ ability to repay a loan. So, while our credit history was still an important gauge of our financial and operational stability, so too were metrics like real-time cash flow and our passion for the market opportunity.
As a small business owner, I know firsthand that building a successful business requires a lot of work, perseverance and access to capital to invest in growth. Money can sometimes be tight for entrepreneurs, which is why it’s so important to understand all of the financing options available — including opportunities from the new, non-bank lenders.