Entrepreneur’s New Business Aims to Fill the Small Business Financing Gap
The Founder of Cleveland Advanced partners, who has run the company supporting independent recruiting firms for two decades, has a new business adventure: financing small businesses neglected by banks.
Joel Adelman started Advance in 1998, growing the startup without any acquisition of a workforce of two to 175 employees all working from the company’s headquarters in Beachwood (his individual earnings are kept private).
The company provides financing and various services, such as payroll management, tax preparation and billing services, to small recruiting companies across the country. It was acquired by Rochester, a public company based in New York Paychex inc. in 2015 – for $ 296.1 million, according to documents filed by the company – as that company looked for more work in the small and medium-sized businesses in the market.
It was a good deal for Adelman, who stayed with the company after the acquisition until this month, as he officially launches AdCap Management at Pepper Pike.
Adelman said he likely would have stayed with the company had Paychex not come up with a compelling deal and repossessed ownership, noting that the company has been “very good to us.” He leaves amicably, remaining involved with Advance as a consultant.
“I actually stayed a bit longer (than planned) because I was committed to making the transition as smooth as possible,” Adelman said. “But there comes a time when an owner-founder feels, at least in my case, that I felt like I maximized the transition process. And I’m proud that my management team who worked for me for many years is still intact there. ”
So, Adelman said, the time had just come to move on.
Starting Advance – which Adelman says has worked with over 1,000 recruiting companies – was in itself something he didn’t really expect to do.
Prior to Advance, Adelman worked for his father, Sheldon, who ran Blue Coral Inc., a manufacturer of auto care products. The Cleveland-based company was making around $ 100 million a year in revenue when it was acquired by a Texas-based company. Quaker state in 1996. Adelman junior was then national sales manager.
The family remained involved for about six months after the transaction. After that, Junior Adelman, hungry for new work, wasn’t sure what to do next.
“If someone told me a year ago that I would be in the recruiting agency fundraising business, I wouldn’t believe them,” Adelman said.
But as he searched for opportunities in and outside of Northeast Ohio during this time, he discovered the need for capital in the recruiting industry. His family had money from the sale of Blue Coral. So, sensing an opportunity, he attended a trade show in Palm Springs, Florida, where he learned about the concept of small independent recruiting firms – a segment of the business world rarely considered by traditional banks in terms of funding because it is an industry with no real and solid assets behind it.
“A light bulb exploded,” he said. “There were over 10,000 small family temp agencies: babysitting companies, nursing agencies, light industrial manufacturing.”
Companies that provide personnel to these sectors are inherently negative cash flow companies. To grow, these businesses must pay more entrepreneurs, who must be paid weekly. And workers must also be paid at a regular rate. These people are compensated in advance, while the recruiting company remains on the receivables for several weeks.
Adelman therefore decided to channel his resources behind what has become Advance Partners. Through this, the company could lend money to these cash-hungry recruiting firms and manage their back office operations.
With AdCap Management, Adelman continues to focus on helping small entrepreneurs underserved by banks, noting, “I don’t want to lose this connection.”
He does this by creating what amounts to a family office, an alternative hybrid lender that gives him the freedom to work with more than just recruiting firms.
“My idea is that there are a number of specialist funding opportunities other than staffing that require a loan,” he said. “We can move capital forward in areas that banks are reluctant to do. “
Adelman, who said he has identified “a few” families to work with, is not currently sharing the money he has in AdCap. He said there was no immediate need for further outside capital, but that he might consider it in the future.
“What interests me the most is continuing with a network to help me find opportunities to work with small businesses,” he said.
AdCap’s funding will be a mix of equity and debt. And while the intention is not to buy out other companies like a private equity firm, Adelman’s intention is to consult and mentor the entrepreneurs his company works with, as these companies tend to. do it after an investment.
Besides recruiting agencies, some examples of businesses and people he sees serving include real estate agents working on commissions, commercial real estate bridging loans, providers of cash advances to traders, and even law firms. lawyers.
Adelman also has his eyes on a more meta service: financing other finance companies.
“It’s an area that I find interesting,” Adelman said. “There are small, specialty finance companies that have their own challenges accessing capital and getting their own financing. And I kinda like that.”
Adelman launches the third chapter of his commercial career. And he feels that the future is quite bright.
“I was incredibly proud of Advance. If Paychex weren’t here I would probably still own the business today,” he said. “But now we’re focusing on where the banks don’t lend. These industries I mentioned are underbanked and growing. There will be a lot of opportunistic lending situations.”