Wednesday, February 01, 2017

Higher Sales and Improved Margins through Vendor Financing

“We would be out of business without vendor financing” according to the president of a distributor of commercial strength and cardio equipment.  Almost 65 percent of this company’s revenues are generated utilizing a vendor financing program implemented over ten years ago.   

Vendor financing programs provide manufacturers, distributors and dealers from a wide variety of industries the capability to offer customers a convenient way to acquire their products at the point of sale.  A few of the key benefits vendor financing provides include:

  • Improved vendor cash flow through pre-funding, or financing of the down payment, and reduced receivables through collection of the balance upon delivery of the product
  • Improved margins and higher sales by focusing the customer on monthly payments instead of price reductions
  • A faster selling cycle – fewer worries about whether your customer has the money in its capital budget or if they can (or will try to) find financing on their own
  • Transfer of the financing risk to a third party through non-recourse programs
  • The ability to open up new markets including selling your products

With programs that can provide financing in amounts as little as $5 thousand, vendor financing can be implemented to cover most asset types and a variety of customer credit profiles including start-ups and early stage companies.  For amounts up to $100 thousand (and higher), many financings can be approved in as little as one hour after your customer completes a one page application.  For larger transactions, approvals can be obtained as quickly as four hours following the submission of financial statements and tax returns.  Lease terms can extend from 12 to 60 months for equipment with long useful lives sold to qualifying credits.

According to one manufacturer of equipment, the flexibility, creativity and extraordinary support it enjoys through its vendor financing program provides it with a competitive advantage.  Its vice president of sales firmly believes that choosing the right programs and leasing company can be the difference in winning a sales competition.  A few questions to ask in selecting the best leasing company for your business include:

  • Flexibility – Can the financier fund my A, B & C credits?  Can soft costs be included in the financing amount?  Will all credits be financed without recourse to the vendor?
  • Minimums and maximums – How small and how large of a deal can the financier fund?  Any limitations on how much credit it can extend to any given buyer?  Any overall minimum or maximum volume requirements to create a program for your company?
  • Creativity – How many different programs structures and end user offerings can the financier provide?  Will the financier create unique programs to meet the special needs of certain customers? 
  • Risk Management – Will the financier help you evaluate the creditworthiness of prospective customers?
  • Service – What levels of support do you require for sales, marketing, administration and deal structuring?  Do your customers require a personal touch or will a highly automated system be a better fit with your sales methods?

If you can visualize your company as a one-stop solution provider to your customer’s needs through having the ability to offer fast and easy equipment financing, then vendor financing may provide you with new and profitable opportunities. 

Are you a small or medium sized manufacturer or distributor who needs assistance with a vendor financing program?  Marshall Lebovits of Asset Based Funding Solutions has over 30 years of experience in the secured financing industry and creates vendor financing solutions with Baycap.  He can be reached at (310) 344-2522 or via email at Marshall@Funding911.com.

Wednesday, February 10, 2016

Back in the Saddle…Again


After almost six years in commercial banking, I have returned to advising growing businesses throughout the USA on a wide variety of asset based funding solutions.

Companies who can benefit from my services are often non-bankable credits who lack access to capital for reasons including short time in business, hyper-growth sales, weak cash flow and highly leveraged balance sheets.  These companies will typically have revenues of $500 thousand to $30 million and will have B2B accounts receivable, inventory and equipment that can be offered to a lender as collateral for repayment of a loan.

If your business has receivables, inventory and receivables and needs over $50 thousand of financing, please contact me at 310-344-2522.

Friday, March 12, 2010

Lunch Special of the Day

A residential foreclosure contractor hired by Bank of America reportedly not only padlocked the wrong house, but confiscated the home owner's pet parrot, Luke.

Earlier this week, The New York Times DealBook section reported that Bank of America has been instructed to shrink as regulators focus on banks that "are too big to fail".

One reader not only rejected Bank of America's denial of the guidance, but commented on the "parrot-napping" as well.
In an unrelated cost savings move, Bank of America has announced that any pets seized in a property foreclosure action will, in the future, be served on the lunch menu in the employees’ cafeteria.

— MJA
By the way, a traumatized Luke was eventually returned to his owner by the contractor.

Need help finding the right lender or telling your story the right way for your California business? Read "Matchmaking for Business Loans" and give me a call!

Tags : Bank of America , too big to fail

Wednesday, February 24, 2010

Bank Lending - Sharpest Decline Since 1942

Shocker! U.S. banks last year posted their sharpest decline in lending since 1942 according to today's Wall Street Journal (subscription required).

I'm trying to figure out why this article was front page headline worthy for The Wall Street Journal no less. It's old news.

Senior bank lending officers have been reporting for two years about tightening credit. In fact, they tightened credit so much, they can't tighten any more.

Many banks are still amongst the walking wounded due to troubled commercial real estate loan portfolios. Yesterday, the FDIC announced its problem bank list hit a 16 year high of 702 troubled institutions. Many of these banks will likely fail and others will be unable to lend in support of an economic recovery for a long time to come. The FDIC shuttered 140 banks in 2009 and 20 banks year-to-date 2010.

In the meantime, the Commercial Finance Association (CFA) just released its Quarterly Asset-Based Lending Index, Q4 2009, revealing continued stability and signs that U.S. businesses are seeking alternative sources of stable funding from non-bank, asset-based lenders. In the fourth quarter of 2009, total committed credit lines grew by 1.2 percent among asset-based lenders, while 50 percent of respondents reported an increase in new credit commitments.

By the way, Harry Reid's stripped down jobs bill just stripped out additional funding for SBA small business loans. The original $85 billion "jobs" bill included additional funding for the SBA to continue offering small businesses enhanced loans guarantees and elimination of guarantee fees. The SBA just exhausted its $855 million of stimulus funds which it claims resulted in over $20 billion of loans to small businesses in the last 12 months.

Notwithstanding all of the backwards looking news, I am seeing the green shoots of recovery. A couple of very large banks may be feeling the populist pressure to pump up lending and are adding to their lending teams. Even Huntington Bank, notwithstanding five consecutive quarters of losses, has announced it is doubling its annual small business lending and has announced it will originate $4 billion of new loans in the next three years.

Need help finding the right lender or telling your story the right way for your California business? Read "Matchmaking for Business Loans" and give me a call!

Tags : small business , bank loans , SBA loans , asset based loans , Commercial Finance Association , Huntington Bank

Thursday, February 04, 2010

Asset Based Lending Grows

Asset based lenders have stepped up to fill the capital gap caused by the credit crunch for borrowers both large and small according to The Wall Street Journal (subscription required).

According the Journal, asset based lending may have increased by double digits in 2009 after an 8.3 percent increase in 2008. Given the article was focused on small business, it would have been more interesting had the Journal been able to learn the percentage growth of asset based lending for deal size less than $10 million.

The Journal notes that drawbacks of asset based loans include relatively high interest rates. Asset based loans can range as high as 35-40 percent per annum when a borrower is using factoring or purchase order financing. However, there are some lenders that will provide asset based loans at rates in the single digit range. Even the SBA has a program that provides asset based lines of credit at rates currently below 10 percent!

Also this past week, the Federal Reserve's January 2010 Senior Loan Officer Opinion Survey on Bank Lending Practices was released.

The January survey indicated that commercial banks generally ceased tightening standards on many loan types in the fourth quarter of last year but have yet to unwind the considerable tightening that has occurred over the past two years.

Expect to see asset based lending continue to grow in 2010!

Need help finding the right lender or telling your story the right way for your business? Read "Matchmaking for Business Loans" and give me a call!

Tags : Asset based loans , factoring , purchase order financing , lines of credit , SBA loans

Tuesday, February 02, 2010

Who Will Fund Inventory Growth?

GDP grew at its fastest pace in six years in the last three months of 2009, expanding at a 5.7 percent yearly rate over the previous quarter according to The Wall Street Journal (subscription required).

The largest portion of the growth, 3.4 percentage points, came from businesses shrinking inventories more slowly than in the previous quarter to accommodate increased demand. Shrinking inventories means increased production to prepare for future sales increases.

One can argue about how much of the inventory buildup came from one-time events such as government stimulus programs, but one thing is clear. Businesses will have to increase inventories as the economy recovers.

Where will the money come from to fund the inventory growth is a bigger question.

I know very few bank or commercial finance lenders eager to lend for inventory increases. In fact, one middle market commercial banker told me at lunch that inventory increases are the last thing he wants to fund. Don't expect to see improved appetite for inventory lending until cash flow improves.

Some asset based lenders will provide lines of credit when there the borrower is profitable and subject to sublimits tied to accounts receivable. I also know one lender who will lend against inventory only in amounts up to $10 million. The terms are tough and the pricing is not for the faint of heart.

Need help finding the right lender or telling your story the right way for your California business? Read "Matchmaking for Business Loans" and give me a call!

Tags : inventory loan , GDP growth , line of credit , working capital