PEPP LLC Launches; Calls on Fortune 1000 Companies and Major Private Equity Firms to Step Up and Provide Impact Investing to Create Jobs

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Private Employment Partners Program (PEPP) forms to provide loan guarantees to and to develop a standard valuation methodology for intangible assets of Small and Medium Enterprises.

“Access to capital and access to debt are critical for small and growing businesses if they are to live up to the expectations placed on them as job creators." - Kevin Yancey, CEO of SCORE

With the goal of facilitating job creation through loan guarantees by making debt capital affordable to small and medium-sized enterprises, Private Employment Partners Program (PEPP LLC), a commercial loan guarantee facility funded by the private sector, will host a launch event on Wednesday, July 25, 2011 at Noon ET.

The Employment Dilemma that PEPP LLC Addresses:

While there is a great shift underway, from an economy driven by tangible assets, to one in which the vast majority of the value of an enterprise is held in intangible assets, debt markets still cling to the requirement of tangible assets as collateral when issuing loans. Intangible assets are those non-monetary assets that cannot be seen, touched or physically measured and can come in either the form of legally-protected intellectual property or competitive intangibles that, while not legally protected, offer a valuable source of competitive advantage and directly impact costs, revenues, customer service, satisfaction, market value and share price.

Drivers of Job Creation
Rapidly Growing Enterprises (RGEs), companies with revenues of $30 - $100 million, have always been the engine of productivity and job creation in the United States; nearly all employment growth over any four year time period derives from RGEs. For example, Apple has directly or indirectly created more than half a million U.S. jobs; 210,000 of which can be attributed to the app revolution.

The value of RGEs to the economy extends beyond revenue and job creation. Many RGEs are rich in intangible assets, but poor with respect to hard assets eligible for lending collateral. With the proper support, RGEs are uniquely positioned to scale up quickly and provide real growth for the economy.

For RGEs, the disconnect between the real value of the enterprise’s assets and the value that banks recognize on the balance sheet represents a raising capital conundrum. RGEs facing this conundrum are unable to access affordable debt capital. When profitable RGEs are unable to get affordable working capital loans, this has a direct impact on employment. For example, affordable capital is not within their reach because:

•Intangible assets are not included as balance sheet assets, and make up a large percentage of company assets.
•Companies are borrowing against receivables with collection lag times of up to 190 days.
•Credit scores by banks (FICO) do not reflect current cash flow analysis and a company’s ability to repay a loan.
•Banks collect payments once a month and sell SBA guarantees on a secondary market, increasing loan loss.
•Tighter government regulation of banks has made them more risk adverse.

Additionally, SBA loan guarantees require tangible collateral with excludes many RGEs and without and industry standard for intangible assets, pro growth public sector policies cannot succeed.

In the July 2012 White Paper “Fueling Rapid Growth Enterprises: Job Creation and Access to Credit in the United States For Intangible Rich Companies,” by Andrew J. Sherman, Patrick FitzGerald, Entrepreneurship Professor at Wharton School of Business asserts:

“Banks right now are insanely reluctant to give out money, and when you have a dead end, someone has to provide an open road.”

Ken Yancey, CEO of SCORE agrees:

“Access to capital and access to debt are critical for small and growing businesses if they are to live up to the expectations placed on them as job creators. Logical and efficient steps must be taken by both the public and private sector to ensure an environment where worthy companies can get the funding they need and where there is a level of economic certainty.”

PEPP creates a private sector solution to these problems by removing the risk for the banks to lend to RGEs, providing immediate job creation as a condition of each loan guarantee to a qualified RGE and a standard for the valuation of intangible assets. PEPP LLC will make direct investments in RGEs with whom it has a loan guarantee agreement.

“Corporate America is sitting on well over $2 trillion in idle capital and at the same time is being criticized for not hiring people,” said Lynn Sullivan, Founding Partner of Capital J LLC. “PEPP will target many of the biggest job creators and is a way for these companies to indirectly hire in their respective industries and through our loan guarantees and the valuation of their intangible assets, RGEs will be uniquely positioned to scale up quickly and provide real growth for the economy.”

PEPP LLC offers a technology-enabled “straight through processing solution” through a combination of Crown Philanthropic Solutions Donor First™ platform (online Trust accounting), Boefly.com (private label Cloud access to loan underwriters), and OnDeckCapital.com (cash flow based credit scoring and daily loan collections).
Capital J LLC, is the member manager of PEPP LLC and Jones Day is PEPP LLC’s legal partner.

This event and working meeting will bring together leaders of Fortune 1000 companies, entrepreneurs, trade associations, financial institutions, economic thought leaders, media and PEPP’s leadership to formally launch PEPP LLC.

WHAT:         PEPP Launch Event Luncheon
WHEN:        Wednesday, July 25, 2012, 12pm – 2pm
WHERE:            Jones Day, 51 Louisiana Avenue, NW
                    Washington, DC 20001

For more information on PEPP LLC, please visit http://pepploanguarantee.com

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Lisa Throckmorton
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