May 23, 2016

By Bob Coleman
Editor, Main Street Monday

Fountainhead Commercial Capital secures $23 Million for SBA 504 lending.

Alternative asset manager Magnetar Capital, through its affiliated funds, invested $23 million in a Series A round of financing, joining an affiliate of 20 Gates Management, an asset management firm based in New York, as the first two institutional investors in Fountainhead.

Episode 19 -- Chris Hurn, CEO and Founder, Fountainhead Commercial Capital

Bob Coleman: “Commercial real estate ownership is an important wealth creation strategy and we fully believe every healthy small business in America should consider it,” says Chris Hurn, founder of Fountainhead Commercial Capital. Chris, you’re an expert on financing Main Street dreams, but the big news today is you yourself are being financed. You’re getting an investment of $23 million. Tell me about that.

Chris Hurn: Yeah, Bob, thanks for having me by the way. That was big news. We actually announced a couple of weeks ago Magnetar Capital, a large hedge fund based actually outside Chicago, we deal with folks up in New York. But they basically invested $23 million of a series A in our company and we will be able to lever that capital a good eight to ten times on an annual basis to do small business loans, so that’s going to translate with us focusing predominantly on SBA 504. That means we’ll probably be able to do about $300 million or so in small business loans as a result of that investment.

We actually had a seed investment when we first started about 16 months ago that was another group called 20 Gates Management which is an asset manager out of New York that also invested in us, so we feel we’ve got a couple of great partners and we’re hitting the ground running with lots of powder and are excited to do this. Obviously, this allows us to go nationwide which is something we’ve wanted to do since we started Fountainhead and have been limited to some extent. We launched with the minimal viable product which meant 504 loans in only a few states initially, but we’ve been working real hard to bring this to market and, I guess, better late than never.

Bob Coleman: Chris, that’s going to set the stage for you to become one of the largest, if not the largest, 504 lender in the country.

Chris Hurn: That’s exactly our goal, that’s what we’ve stated from day one. Yeah, we want to be the leading 504 lender in the country, no question. And that’s just 504s for now, we’ll actually be able to do low loan-to-value conventional loans as well and I may have a few other things up my sleeve that I’m not quite ready to announce just yet, but things are coming. It’s going to be very exciting.

Bob Coleman: Chris, why did you pick the 504 product as the flagship product that you offer?

Chris Hurn: Well, I’ve become known in the industry for doing this. I’ve probably been doing this now for 18, 19 years. Most people know me as synonymous with the program, written the only book on it, I’ve testified before Congress a few times. I’ve done billions of production on this product, started another company that was a specialist in this space as well as my own here with Fountainhead. It’s still one of those products that it suffers from a little bit of an identity crisis unfortunately.

I often have called it the best kept secret in commercial financing. I think it’s the product that wins nine times out of ten when all available products are identified and put in front of a small business borrower who’s wanting to buy the owner occupied commercial real estate. I’m a big believer in niches as you know, we’ve talked about that many times. I’d rather be the dominant leading player in this space than be a generalist and try to do everything for all people. I think that’s a strategy that leads to failure in many cases if not mediocrity,