More on It's Raining Money

In my January 11th posting, It's Raining Money, I told you about the record $215 billion raised by private equity sources to invest in companies across the spectrum. I've got a bit more detail for you on the $25+ billion which was included in that amount for investing in start-ups and early stage companies.

In its weekly newsletter, OCTANe said that "driven by big interest in sectors such as medical technology and alternative energy, venture capital investment across the USA surged to a five-year high of $25.7 billion in 2006. Overall, seed- and first- round deals made up 36% of the deal flow in 2006, and the median round size for 2006 was $7 million, up from $6.5 million in 2005. "

"Southern California as a whole surpassed the Northeast as the second leading investment region in the nation, behind the Bay Area. Clearly, more "minds and money" are flowing to SoCal, with media, biotech, medical devices and communication strengths. What's more, the region is hot with $2 billion+ university R&D - something OCTANe will highlight at the Doing Business with UC program next month. "

OCTANe's source for its information was the The MoneyTree™ Report by PricewaterhouseCoopers and the National Venture Capital Association based on data from Thomson Financial.

Not every company can attract private equity. In some of those situations, finding the right lender might be the right solution. Read "Matchmaking for Business Loans" and give me a call!


Related Tags: private equity, OCTANe, venture capital, early stage, entrepreneur, The Money Tree Report, National Venture Capital Association

Real Estate Loans - New Source

Just had lunch with two colleagues in the real estate mortgage business - they wanted to tell me about some new private funding resources for real estate loans that they could make available to my clients. Let me share with you a quick summary about the products they have to offer.

One product is a "soft-money" mortgage focused on the California market that is historically served by "hard-money" lenders. This private money product provides first trust deeds only on most real estate types including residential, apartments, commercial, industrial, special purpose properties and entitled land. Loan amounts range from $500 thousand to $10 million (larger on an exception basis). Advance rates for these bridge loans (up to 18 months) range from 50% to a maximum of 75% which varies by property type. Interest rates for improved property are currently 9.90% and many of these deals can close in a week or less.

Their newest private money offering for real estate mortgage business allows them to finance properties outside of the California market as well as un-entitled land, hotels, condo conversions, and construction loans. While the interest rates will be a bit higher, I expect this private money offering to be very competitive when compared to traditional "hard money" loans. Besides, this money is also intended to be a "bridge" loan - hopefully, it is replaced with a more cost effective solution within a year or two. By the way, this private money source will provide second trust deed financing for the same property types.

Need help finding the right lender for your bridge loan? Read "Matchmaking for Business Loans" and give me a call!


Related Tags: hard money, real estate, mortgage financing, soft money, first trust deed, second trust deed, bridge loan

Micro-lending in the USA

On Forbes.com, I was reading In Manhattan, It Pays to Be Small. It discusses a program of micro-lending focused on the Upper Manhattan Empowerment Zone, a not-for-profit development corporation and funded by local and federal tax dollars, and ACCIÒN USA, the largest "micro-lending" organization in the U.S..

As you may know, the subject of micro-lending has received a lot of press since Grameen Bank and its founder Muhammad Yunus were awarded the Nobel Peace Prize for 2006 for their work in Bangladesh.

Now I don't know much about the efforts of ACCIÒN USA, but a quick review of its website shows that it is providing business loans in amounts ranging from $500 to $25,000 to small businesses that don't meet the stringent criteria that traditional banks must follow.

For some small business owners, this micro-lending option might be a great resource particularly when the option is a predatory loan shark.

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


Related Tags: small business, business loan, Forbes, micro-lending, ACCION, Muhammad Yunus, Nobel Peace Prize

Four Rules for Raising Capital

With Christine Comaford-Lynch’s article Rules for Raising Capital, Business Week initiates a new, ongoing series of columns on financing and growing a small business.

I’ll give you the readers digest version and you can check out the full column on-line. What I like most about the article is that these rules apply to any business of almost any size from any industry. The rules can also be applied to raising debt or equity. See if you agree.

Rule #1 – Take more money than you think you’ll need, but only if you can get it cheap.

Rule #2 – Raise money before you need it because you’ll always need it sooner than you think.

Rule #3 - Only take money from someone you like and respect.

Rule #4 – Don’t be greedy!

By the way, take a look at Christine Comaford-Lynch’s biography – not bad for having neither a high school diploma nor college degree!

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

Related Tags: capital, business loan, BusinessWeek, Christine Comaford-Lynch

Bad Loans Rise

The Wall Street Journal reported that increases in bad business loans deepened worries that a downturn in credit quality has begun and could worsen. Based upon the fourth quarter results released by Wells Fargo, U.S. Bancorp and Marshall & Isley, loan losses from both commercial and real estate loans are on the uptick.

David Hendler, an analyst of independent research firm Creditsights Inc., believes that the long warned weakening of a weakening in credit quality is finally happening. He believes that the pain is likely to be felt by small and mid-sized banks that are less diversified and too reliant on construction and mortgage lending.

I've been wondering out loud for some time when banks would start to feel the pinch. The extreme competitive nature of the financial services sector has resulted in banks chasing marginal business loans for quite some time. That may work when the prime rate is at 4.0 percent. But when prime rate more than doubles in a short period of time to its current 8.25 percent, a number of companies will experience stress in meeting business loan covenants.

Don't be surprised if your bank is a bit more reluctant to provide you with a business loan in the near term as they tighten their credit requirements. Perhaps it's time to consider asset based loans including purchase order financing, factoring and leasing as a way of meeting your cash flow needs.

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


Related Tags: business loans, prime rate, factoring, purchase order financing, leasing, Wells Fargo, Wall Street Journal

Possible Changes at the SBA

Cyndia Zwahlen of The LA Times interviewed the new chairwoman of the House Small Business Committee, Nydia M. Velazquez (D-N.Y.), a 14-year member of the panel who was sworn in to lead it this month.

One of the most interesting exchanges was as follows:

How will you make changes at the SBA?

We want to modernize some of the programs. We need to revamp the disaster loan program. I also want to take steps to ensure small firms can access capital through the SBA 7(a) loan program. Thirty percent of all long-term financing in this country is done through 7(a) loans. We want to lower the fees that they have to pay. You can find small firms paying up to $50,000 on larger loans.

Personally, I couldn't agree more with the need to lower SBA loan fees. When I propose the SBA as an option to clients, I usually hear complaints about the time it takes to gain approval and the high fees. I understand that the SBA will often support business loans that no other institution will fund conventionally. But the sticker shock of the SBA up-front loan fees and the impact it has on the all-in borrowing rate often eliminate it as a viable alternative in the eyes of many business borrowers.

What's been your experience with SBA fees?

Related Tags: LA Times, SBA, business loans, 7(A)loan, House Small Business Committee, Nydia M. Velazquez

More on Minority Loan Programs

I've written a couple of postings on loans for minorities and capital for the Hispanic community, so I thought I would point you toward this Forbes Magazine article, Small Business Loans for Minority Entrepreneurs. Perhaps it will point you toward some resources of which you weren't aware!

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

Related Tags: entrepreneur, minorities, business loans, Forbes

Trouble for the SBA?

The New York Times reports that Business Loan Express is the focus of a growing investigation by federal regulators that it originated loans for the SBA based upon fraudulent information. This investigation, first initiated in 2004, highlights both a lack of appropriate financial controls at both Business Loan Express and the SBA.

Why would the finger be pointed at the SBA? Business Loan Express, owned by Allied Capital Corporation, has been an approved "preferred lender" authorized to originate loans for the SBA without submitting those loans in advance for approval. The NY Times points out that members of the program have undergone an exhaustive examination prior to becoming a preferred lender and as a result, virtually none of their loan applications are examined in advance by the SBA’s district or regional offices. While the SBA does conduct random audits of all loans it guarantees, it is a post funding audit which provides a lot of room to defraud the system before a perpetrator might be caught.

If there are guilty parties at Business Loan Express, punishment of both individuals and the organization will be handed out. The bigger issue are the actions that might be taken by the SBA to prevent such abuses in the future. Any response will affect not only the preferred lenders who played by the rules, but ultimately the borrowers who might see not only an increase in delays to obtain an approval, but possibly increased costs and fees to account for the higher perceived risks.

Need help finding the right SBA lender? Read "Matchmaking for Business Loans" and give me a call!


Related Tags: SBA, New York Times, Business Loan Express, Preferred Lender, Allied Capital

It's Raining Money

According to the Wall Street Journal, over $215 billion of new money was raised by U.S. private equity funds in 2006 a third more than the amount raised in 2005. Leveraged buyout firms accounted for almost 70 percent of the total nearly half of which was collected by just eight firms involved in the largest transactions.

A little less than 12 percent of the capital raised, or $25.1 billion, was attributed to venture capital private equity who invest in start-ups and early stage companies. This was almost identical to the amount raised in 2005 by the venture capital funds.

Amazing! It just boggles my mind that the capital markets are awash with this much cash, but it continues to explain why the M&A markets continue to produce ever increasing sales price multiples.

When do you think the party will end? Or do you?

Having a hard time raising debt for your small or medium sized business? Give me a call!


Related Tags: private equity, M&A, venture capital, leveraged buyout

Unplanned Growth and the Cash Flow Squeeze

In The Problem With Unplanned Growth, Entrepreneur.com highlights a problem encountered by many businesses ranging from start-ups to more mature businesses. A company lands a big new contract and before you can say "let's have dinner party and order a new Mercedes Benz", all hell breaks loose.

One the most common challenges resulting from this unplanned growth is the cash flow squeeze. The company must buy the raw materials and equipment, pay for workers salaries and wages, lights and the gas bill before the first dime has ever been received from the new contract. Even when the invoices have been sent to the customer, it may be 30, 60 or 90 days before your customer remits payment.

The article's author, Tim Berry, suggests that you plan in advance and make sure to contact your bank about a line of credit line on receivables. However, this may not always be a solution that is timely let alone available.

My suggestion - consider purchase order financing to cover the up-front costs of providing a product or service and factoring to generate cash flow when the accounts payable department isn't paying those invoices in a timely manner. Both these financing options can provide a fast solution to your cash flow woes when you need it the most!

Need help finding the right factor or purchase order financier? Read "Matchmaking for Business Loans" and give me a call!


Related Tags: Entrepreneur, Tim Berry, purchase order financing, factoring, accounts receivable, invoices, bank loan, business loan, cash flow, working capital

Which Banks Do You Love?

Which banks do small and medium sized businesses love?

According to a J.D. Power and Associates Small Business Banking Satisfaction Study noted in this month's issue of SMB Finance, you love the big banks. PNC won the top spot for overall satisfaction with Wachovia, Suntrust, Washington Mutual and American Express filling out the top five.

The 2006 Small Business Banking Satisfaction Study is based on 4,996 responses from financial decision makers at small businesses with annual revenues from $100,000 to $10 million. Didn't see a single community bank on the top ranked list - seems if you did not have a national or regional presence, you were excluded from the survey results due to the small sample size.

So given that many small and medium sized businesses use community banks, how does a small or medium sized business get much value from the results?

The banks which rated the highest scored well on the criteria focused on relationships. Businesses know that choosing a bank isn't just about the lowest rate or who has the most product offerings. According to J.D. Power, "Satisfaction is highest among customers who identify a loan officer or bank manager as their primary contact".

Banking - it's still a relationship business.

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


Related Tags: small business, banking, J.D. Power, business loan, SMB, bank loan