There's a New Hispanic Bank in Town

There's a new bank in town and this time it's focused on the ever growing target market of Hispanic owned businesses.

Recent Hispanic-owned bank start ups include Security One Bank in the Washington D.C. area, AztecAmerica Bank in Chicago, Solera National Bank in Denver, Plaza Bank in Seattle and two banks in the greater Los Angeles area - Americas United Bank in Glendale and Promerica Bank in downtown Los Angeles.

Why this surge? According to the October 2007 issue of Hispanic Business Magazine, Hispanic owned businesses are looking for a real relationship with their banker and not just lip service. These businesses are not just looking for the special Hispanic targeted marketing programs of a bigger bank.

With the recent turmoil in the credit markets, every business should be focusing on building and maintaining its relationship with its banker.

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

Tags : Hispanic , Hispanic Business , Americas United Bank , Promerica Bank

Collect Your Cash Faster!

Today's Wall Street Journal provides readers with three ideas on improving their collections of cash. As I've written in the past, money tied up in working capital is not available to grow the business.

The first idea was to "cut off rogue customers". If you provide open credit terms, you're a lender. You won't find a bank in town that will extend a loan to a business that won't pay it back on schedule. Why should you? Each day the collection of accounts receivable is delayed reduces your profit margin. As Jim Slack, Jr., of Slack & Co. Contracting, reminded readers, don't confuse volume with profits.

The second idea is to enlist the sales team. Nicholas & Co., a large food distributor, reduces its sales rep's commissions if their customers don't pay on time. I can see why a sales rep might not like this one, but it's improving cash flow. The company estimates that it has $15 million more in the bank each day as a result of faster payments. Again, don't confuse volume with profits.

The third idea is to formulate a real credit policy. Set up guidelines within your company and stick to them. It is acceptable to provide some clients with shorter or longer than others - you don't have to give everyone net 30. Consider your margins and the client's payment record in considering deviations from your policy.

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

Tags : Wall Street Journal , working capital , cash flow , accounts receivable

Lack of Financing Biggest Stumbling Block

The lack of risk management plans among smaller firms pursuing overseas expansion may be scaring lenders away according to Mary Leone of CFO.com. Here are a few highlights from the full article.

According to research by RSM McGladrey, small and mid-size companies say that the biggest stumbling block to expanding overseas is "lack of financing," specifically obtaining bank loans. Moreover, the funding problem is directly tied to risk management, asserts Tom Murphy, executive vice president of RSM's manufacturing and wholesale distribution practice.

Of 947 senior executives polled by RSM McGladrey, 54 percent, most from small (under $15 million in revenues) and mid-size (between $15 million and $499 million) companies, admitted to having adopted none of what RSM considers the three basic risk management processes. Those missing pieces leave smaller companies "vulnerable" to fraud, non-compliance with regulations, and lack of preparedness for catastrophic disasters, says Murphy, risks that lenders shun.

The three basic risk processes of a good risk management plan according to RSM McGladrey are: an independent audit committee to oversee risk management activities; a corporate risk management assessment process; and an internal audit function to manage the risk.

It all boils down to giving the lender comfort on how its loan will be used and how it will be repaid.

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

Tags : CFO Magazine , RSM McGladrey , business loans , risk management

Prime Rate Cut - Does it Matter?

There was an interesting crowd at last night's mixer for the Los Angeles chapter of the Turnaround Management Association. I spoke with about half of the forty plus attendees which included only a handful of business lenders (what does that say?). Most of the attendees with whom I spoke were either attorneys or service providers focused on bankruptcy and turnaround situations.

Not surprisingly, business activity is on the rise for the attorneys and the turnaround specialists.

The sentiment was that the damage caused by the subprime fallout, the price of oil and interest rates was already ingrained into the economic cycle. A fifty basis point drop in the prime rate won't be decreasing their work loads anytime soon.

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

Tags : Turnaround Management Association , TMA , bankruptcies , turnaround , prime rate

Fed Cuts Key Interest Rates

The Federal Reserve announced today that it is lowering the key interest rates that will likely result in a decrease in the Prime Rate of 50 basis points, or one-half a percent.

At this very moment, the stock market is giddy with excitement and the Dow Jones Industrials are celebrating with a 300+ gain as of 4:00 pm. EST.

Will this decrease enable the U.S. economy to step back from the edge of a recession and avoid a credit crunch or will it simply stoke inflationary pressures?

I'll be at an evening event tonight for the Los Angeles chapter of the Turnaround Management Association. Between bites of crudites, I'll be asking my fellow attendees for their thoughts on how this interest rate cut will impact business loans. Will report back to you on Wednesday or Thursday.

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

Tags : Federal Reserve , interest rates , prime rate , credit crunch

Capital for Growth

Last week, I was one of four panelists at the CEO Forum hosted by Pacific Community Ventures (PCV). Capitalizing growth, or acquiring and managing the money to grow your business, was the focus of the discussion led by Mari Riddle of PCV.

In addition to myself, the other three panelists include Jeff Rice of First Regional Bank, Trevor Smith of Pacific Community Ventures and Michael Banner of Los Angeles LDC. The panel members were selected to offer insight into growth equity, bank debt, community development loan funds and asset based lending products.

So here are the highlights of last Wednesday's panel and breakout sessions on debt and equity.

• When should a business seek capital? Before you need it! Start well in advance and establish a relationship with a potential funding source to best match your needs with the strengths and personality of the funding source.
• A small business seeking capital should understand the different types of growth capital and how each can best meet their needs and objectives. When seeking debt capital, business owners should know whether their need is short term and best met by a revolving line of credit or longer term and a better fit with a term loan. The panel emphasized that term loans are best used to finance assets with a value to the business greater than a year.
• It's all about cash flow. Whether a lender or investor, the funding source is more willing to provide growth capital when the business is generating cash flow - especially when the cash flow is primarily a result of operating earnings.
• Never sell short the power of information. A key factor both lenders and investors will consider in providing capital is the ability of a business to provide timely and accurate financial reports. Plus, the more money you're seeking, the more important it is to have a higher level of financial reporting from a recognized CPA firm. In other words, if you're seeking more money, it's time to think about upgrading from simply providing tax statements or compiled financial statements.
• Along that line, the panel was asked how best to prepare for a request for money. A small business owner can utilize the many free or low cost services available at the local small business development centers (SBDCs) or even SCORE. Also, check out some of my earlier postings, "What Will a Banker Ask Me?" and "Am I Bankworthy?".
• Trevor Smith's breakout discussion, Introduction to Equity, was an excellent primer on the key issues a small business owner needs to consider when evaluating using equity rather than debt to grow a business. I can email you a copy if you leave a comment below requesting one. PCV is a double bottom line equity fund focusing on both a financial return and a social return when it makes an investment decision. PCV will drill down on the following related to lower income ("designated") employees in the company - headcount, average hourly wages, types of benefits provided to designated employees, whether or not designated employees are offered wealth building programs and types of training programs offered designated employees.

Finally, a comment on an exchange between myself and one of the attendees. Perhaps there was some confusion as to why an intermediary or broker such as myself was included on a panel of direct lenders and an equity investor. Mari Riddle of PCV summed it up best. The panel was selected to show the wide variety of funding solutions available and how all of these funding solutions work together to make sure that companies are best matched with the appropriate source of funds.

A broker, intermediary or investment banker plays a valuable role in the marketplace by making introductions, helping tell the story the right way and educating businesses of solutions that are not readily known. In this case, my role was to represent all of the asset based lending solutions such as p.o. financing, factoring, asset based revolvers and equipment leasing to name a few. To have representatives from each of those product areas, the panel would have had to included twice as many people!

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

Tags : CEO Forum , Access to Capital , Pacific Community Ventures , capital , debt , equity , cash flow

The Chill in the Air

There will be a lot of hemming and hawing over whether or not there is or will be a credit crunch for small business borrowers in the next 6 to 12 months. No bank or lender will likely publicly acknowledge a credit crunch until we're in the midst of one.

That being said, these two articles caught my eye in the last day.

First, the Wall Street Journal reported that "more than a quarter of chief financial officers responding to a survey due out today (9/11) from Duke's Fuqua School of Business and CFO Magazine said their companies were being affected by the crisis spreading through the credit markets". In response, these CFOs were delaying or reducing capital spending and hiring. I would love to see the survey to see what size companies these CFOs represent.

Second, I received an email from CFO.com about the latest quarterly Wells Fargo/Gallup Small Business Index. Optimism about the business environment is falling among owners of smaller firms. Only 48% of small business owners nationwide now say that credit is easy to obtain, down from 53% in the prior quarter. Wells Fargo senior economist, Dr. Scott Anderson, said "the chill of tighter credit is curbing small business owner optimism".

Is your business experiencing a credit crunch? Read "Matchmaking for Business Loans" and give me a call!

Tags : credit crunch , small business , CFO Magazine , CFO

CEO Forum on Access to Capital

I've recently become a Los Angeles area business advisor to Pacific Community Ventures as part of their program providing advisory services to small businesses located in or hiring from low to moderate income communities.

On Wednesday, I'll be one of four panelists for a CEO Forum on Access to Capital sponsored by Pacific Community Ventures. The other three panelists include Jeff Rice of First Regional Bank, Trevor Smith of Pacific Community Ventures and Michael Banner of Los Angeles LDC.

Approximately 25 attendees are expected to this rather intimate gathering to be held on the campus of USC to provide the company representatives the chance to learn more about how to fund their businesses using debt and equity.

I promise to take notes from the panel and the other breakout session that I'll attend and report back here to you early next week.

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

Tags : CEO Forum , Access to Capital , Pacific Community Ventures

It's Official - There's No Small Biz Credit Crunch

According to the Federal Reserve as reported in The LA Times, the credit crunch that has been experienced these last few months has been limited to the real estate markets.

"Outside of real estate, reports that the turmoil in financial markets had affected economic activity during the survey period were limited," according to the Fed's report.

So can small business go back to work and stop worrying about how to raise money for working capital and expansion?

Not yet. CNNMoney.com reported that businesses who relied on the equity in real estate as a source of capital for their businesses, are now singing the blues about the difficulty in obtaining business loans.

How will the Federal Reserve reconcile these two opposing views? Will the Federal Reserve lower its target for the Fed Funds rate paving the way for a cut in the Prime Rate? You'll have to wait until September 18th to find out!

In the meantime, if your business has assets to offer as collateral in support of a business loan, there's financing available.

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

Tags : LA Times , CNNMoney.com , credit crunch , Federal Reserve , working capital