Lunch with the Chairman

Surviving the financial crisis was the focus of a lunch presentation by Ivo Tjan, Chairman and CEO of CommerceWest Bank. Along with about 75 business owners and professionals, I attentively listened to Tjan explain the origins of the financial crisis, what was getting done in Washington to rescue the economy and what borrowers should know when asking for a business loan.

Here's a few of the points I found most interesting:

• Shortly after inauguration, the new administration and congress will likely pursue a second stimulus package ranging from $700 billion to $900 billion. It will be heavy on infrastructure spending, not tax rebates.
• Economic recovery is not likely to occur before fourth quarter 2009.
• Ben Bernanke is not afraid of taking the fed funds rate to zero.
• Only three of every ten banks currently have the capacity to make new loans.
• Banks are focusing more and more on a business' ability to generate cash flow to repay a loan than on collateral.
• Banks will understand if a borrower's current performance is suffering provided that it is performing better than its peer group and management has identified its challenges and is implementing a plan to address those challenges.
• To ensure access to business loans, borrowers need to have strong relationships with the decision makers at their respective banks.

Not a bad deal - a lunch which included food to eat and food for thought!

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 : CommerceWest Bank , Ivo Tjan , business loans , credit crunch

Happy Holidays?

I attended the holiday parties for two major business associations this week - the Commercial Finance Conference of California (CFCC) and the Orange County Chapter of the Association of Corporate Growth (ACGOC).

I've been a regular attendee at the annual CFCC holiday party whose membership is primarily asset based lenders. Attendance was down significantly at this year's event to about 200 attendees. A typical year draws well over 300 guests. Why the decrease? Possibly industry layoffs. With restructurings at CIT, Textron, GMAC, Capital Tempfunds and others, perhaps there wasn't as much to celebrate or no one left to celebrate. I also saw very few back office and administrative types compared to previous years. One lender said that the tightened purse strings led them to send only the deal people this year. I also noticed very few bankers in attendance - must have been back at the office filling out more reports on troubled loans.

This was my first year attending the holiday party for the ACGOC. This group's membership has a significant number of service providers to the M&A industry. Attendance was similar to the prior year according to the event coordinator. I spoke with many of the attendees - most acknowledged that their business had declined these last six months. Quite a few mentioned their clients were experiencing cash flow problems and the impact of the credit crunch.

Hope your holiday parties are filled with cheer. Should you 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 : ACG , Commercial Finance Conference of California , Commercial Finance Association

Banker of the Year

This year's recipient of Banker of the Year is Ken Lewis, Chairman and CEO of Bank of America.

Yes the same Ken Lewis whose comment about "stupid bankers" I wrote about in May 2007 and again this past spring. Here's the quote - "we are close to a time when we'll look back and say we did some stupid things".

The same Ken Lewis who is hoping he won't be considered one of those stupid bankers for Bank of America's acquisition of Countrywide and Merrill Lynch.

Two time winner Lewis joins past American Banker honorees including:

• Kerry Killinger, ousted CEO of Washington Mutual
• Ken Thompson, ousted CEO of Wachovia
• Angelo Mozilo, ousted CEO of Countrywide

Congratulations to Ken Lewis and here's hoping he doesn't suffer the fate as the stupid bankers listed above. I meant former honorees.

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 , Ken Lewis , Banker of the Year

More Bank Failures on the Way

The FDIC expects more banks to fail according to FDIC chairman Sheila Bair.

The agency now characterizes 171 institutions, with combined asset values of $116 billion, as "problem" institutions. If I'm correct, this list was at 90 back in the middle of summer 2008.

While Bair claims that "most banks remain well-capitalized, profitable, and sound," that's still a dramatic increase in the number of problem banks. It's unclear if the 171 count includes Citigroup.

As to be expected, loan defaults rates are starting to rise on business loans as the cracks in the economy start to spread. The rising default rates will add further pressure to the balance sheets of the problem banks as well at to those banks considered healthy.

Notwithstanding the credit crunch, there are banks making business loans as well as commercial finance companies, factors, leasing companies and private money lenders. Be prepared to turn over a few more stones in your search for a business loan and expect to pay higher interest than perhaps a year ago. Collateral in the form of accounts receivable, equipment and commercial real estate will give comfort to a lender trying to determine if your loan will be repaid.

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 : FDIC , problem banks , credit crunch , factoring , accounts receivable

Commercial Real Estate Loan Defaults on Rise

The default rates for commercial mortgage-backed securities are increasing according to today's The Wall Street Journal (subscription required).

According to a Citigroup Inc. report, the overall number of commercial mortgages packaged into securities that are 30 days or more past due rose to 0.64% in October from 0.39% at the end of last year, with most of the increase coming in October. The latest figure, though low by historic standards, marked the highest delinquency rate in two years.

A key reason behind the increase in defaults sounds very similar to those in the residential world - the credit crunch has made it difficult to refinance commercial real estate loans upon maturity and existing lenders have been unwilling to extend loans under the same terms.

If you're having difficulty re-financing your commercial real estate property in California, give me a call. I'm working with one private money, bridge lender whose rates currently range from 8.5% to 10.0% (before points) for bridge loans secured by commercial real estate in California of all property types. The lender is able to fund loans of up to $50 million and is willing to consider properties in other western states.

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 : commercial real estate loans , private money loans , bridge loans , hard money loans , credit crunch , CMBS

TARP to the Rescue?

Want to know when the federal bailout of the banks will result in new loans to businesses?

Perhaps not anytime soon.

That was the short answer given today by Neel Kashkari, who, as the Treasury Department's interim assistant secretary for financial stability, runs its Troubled Asset Relief Program (TARP).

As reported on CFO.com, Kashkari is confident that banks will ultimately use the capital to extend business loans to creditworthy businesses and consumers. That being said, "the last thing we want," he added, "is to encourage banks to resume the poor lending practices that are the cause of the current economic problems."

In other words, just because there is bailout money, don't ask for any if your business cannot demonstrate the ability to repay the loan.

Don't wait for TARP to bail you out. If you need help finding the right lender or telling your story the right way and you have business assets to offer as collateral, read "Matchmaking for Business Loans" and give me a call!

Tags : TARP , business loans , credit crunch , Neel Kashkari

Cash-In, Cash-Out

With the credit crunch reducing the availability of cash, many companies are looking for working capital at the expense of their suppliers and vendors.

CFO.com reports that cash-in, cash-out is preoccupying finance departments in companies large and small. Watching your receivables like a hawk has become the mantra of the day.

Pitney Bowes CFO Michael Monahan talks to his treasurer every day. In addition, Pitney Bowes has been using new technology to keep on top of its customers via automatic phone calls to remind them of bills before they're due.

Jeffrey Henderson, CFO of Cardinal Health, now holds twice weekly meetings with his accounts receivable team as well as leaders in his treasury and finance departments to review trends, credit assessments of high-risk accounts, and customers' requests for payment extensions.

Charles Young, CEO of Detroit-based SDE Business Partnering, a $64 million logistics and staffing company, saw instant cash-flow problems when General Motors, one of the company's largest customers, extended its payment terms to 75 days. Previously, GM would pay its invoices to the company within 2 days after SDE submitted time cards. This move must be causing SDE significant cash flow problems and increasing its interest expense bill.

Are your customers stretching out your receivables? Need help finding the right lender to increase your working capital? Read "Matchmaking for Business Loans" and give me a call!

Tags : accounts receivable , credit crunch , CFO Magazine , DSO , working capital , factoring

Speaking of the Credit Crunch

Released today was the October 2008 Senior Loan Officer Opinion Survey on Bank Lending Practices. Over 80 percent of domestic banks reported having tightened lending standards on commercial and industrial (C&I) loans to small businesses and large and middle-market firms over the past three months.

About 85 percent of domestic banks reported having tightened their lending standards on commercial real estate loans over the past three months.

This week I'll be speaking to two organizations on alternative financing solutions for businesses caught by the credit crunch. The message - though business credit is extremely tight, there are banks and commercial finance companies lending to businesses of all sizes secured by receivables, equipment and real estate. Inventory secured loans are getting increasingly difficult to find under any scenario.

However, the interest rate on business loans have not necessarily dropped notwithstanding last week's cut in the prime rate. Floors on borrowing rates and higher spreads will keep many businesses from lowering their cost of capital during these crunchy times.

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 : credit crunch , Federal Reserve , business loans , asset based loans

Not the End of Main Street

While many in the mergers and acquisitions markets may be lamenting the lack of activity on Wall Street due to the credit crunch, there are still signs of life on Main Street.

According to one lower middle market investment bank, Green Manning & Bunch, both strategic and private equity buyers are actively acquiring businesses.

Why?

Strategic buyers are using the cash on their balance sheets and thus are not constrained by the lending limits of commercial banks. Private equity continues to raise record amounts of capital (on pace to exceed last year's record amount of more than $300 billion), which they need to put to use.

The companies being acquired have solid profit margins, prospects for growth, protected market niches and quality management teams.

Need help finding the right lender for an acquisition of a lower, middle market business? Read "Matchmaking for Business Loans" and give me a call!

Tags : Mergers and acquisitions , M&A , Green Manning & Bunch , credit crunch

SBA - Loans Decrease for Fiscal Year 08

At the beginning of the credit crunch in the summer of 2007, I wrote a posting, "Small Biz Credit Crunch: Will SBA Save the Day?".

With the release of its full fiscal year 2008 numbers, I believe the answer is in and there's really no surprise.

According to The Coleman Report, both SBA loan volume and SBA loan dollars were significantly lower in fiscal year 2008 for both the SBA's 7a and 504 loan programs.

In the 7(a) program, SBA loan activity for fiscal year 2007 totaled 99,606 loans for approximately $14. 3 billion. SBA loan activity for fiscal year 2008 totaled 69,434 loans for almost $12.7 billion. That's a reduction of 30,171, or 30.3 percent, in the total number of loans, and a reduction of $1.6 billion, or 11.3 percent in dollars loaned to small business.

In the 504 program, SBA loan activity for fiscal year 2007 totaled 10,669 loans for approximately $6.3 billion. SBA loan activity for fiscal year 2008 totaled 8,883 loans for almost $5.3 billion. That's a reduction of 1,786, or 16.7 percent, in the total number of loans, and a reduction of just over $1 billion, or 16.2 percent in dollars loaned to small business.

According to SBA director of financial assistance, Grady Hedgespeth, the lending decline reflects both banks' tightened credit standards and less demand from business owners. In general, larger, more mature businesses still have a healthy demand for loans than earlier stage, smaller businesses.

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

Tags : credit crunch , business loans , SBA loans

California Cash Flow Problems

Cash flow for the state of California is getting tight as the state is having difficulty accessing the credit markets. California may seek a short term loan from the US Treasury in the amount of $7 billion!

If your company is a vendor to the state of California or its counties, cities and school districts, you need to watch your receivables like a hawk. There's a good chance you'll see your days sales outstanding increasing over the coming weeks until the credit markets thaw out.

If your business has direct (or indirect) significant exposure to California government entities and affiliates, you may want to provide your own lender a heads up. If California related accounts receivable pile up, your business could run into either concentration issues or cross aging issues resulting in a reduction in your own lines of credit.

If you don't have a line of credit, you might find that you need one. Factoring of accounts receivable could be a working capital solution that can be arranged within days.

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 : credit crunch , accounts receivable , lines of credit , factoring , California

CFOs Worry About Access to Capital

The credit crisis is deepening and the uncertainty of a congressional bailout package has both the financial markets and CFO's alike worried about the continued impact.

According to a new survey by CFO Research Services, 61 percent of CFOs surveyed are concerned about their company's access to day-to-day financing. Even more - 65 percent, are worried about access to long term credit.

Many of the lenders with whom I speak say they are willing and able to lend, but the proof is in the pudding. Here's what I have personally experienced myself in the last few days.

• Closed a $250 thousand SBA loan for a manufacturer of food products.
• Closed a $500 thousand factoring deal for an importer of meat products.
• Received approval for a $500 thousand equipment financing for new trucks.
• Obtained a bank proposal on behalf of a consumer electronic products company for a $1.5 million working capital secured by accounts receivable and inventory. Formal due diligence starts next week.
• Submitted a $6 million proposal for Fannie Mae financing of a recently completed and fully leased, multi-family real estate property.

Debt financing is still flowing into the markets on a selective basis provided you can offer the right collateral to lenders. Rates are a bit higher reflecting lender perception of risk and the lack of liquidity amongst lenders.

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 : credit crunch , accounts receivable , lines of credit , factoring , SBA loans , bridge loans , real estate

Nervous Borrowers Draw Down Lines of Credit

The Wall Street Journal (subscription required) reported a growing number of companies are hoarding cash and tapping lines of credit they don't actually need.

Why?

Fear that their bank lender may withhold it or unable to deliver the funds down the road.

With liquidity crunches in the interbank lending markets and the commercial paper markets, many borrowers are not waiting to make sure their own liquidity needs go unmet. GM, Sally Beauty, Jarden Corp. and Fairpoint Communications are just a few borrowers that have recently tapped or announced intentions to tap their lines of credit. GM recently announced it intends to draw down the remaining $3.5 billion of its $4.5 billion secured revolving line of credit.

Typically, these lines of credit would be quickly paid down. I suspect some of these companies will be letting the money sit in their own accounts till the storm passes over.

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 : credit crunch , business loans , accounts receivable , cash flow , lines of credit

Very Crunchy, Indeed

The credit crunch will be felt even more in the months ahead as a result of the financial earthquake suffered on Wall Street this past Monday according to The Wall Street Journal (subscription required).

Those with less than stellar credit histories will have the most trouble borrowing money to run and expand their operations.

Need anecdotal evidence of a credit crunch?

One of my colleagues introduced me yesterday to six new deals - all for small and medium sized businesses seeking lines of credit ranging in amounts from $1 million to $10 million. In each case, the borrowers had been told by their lenders to find replacement sources of financing. All of the companies were offering accounts receivable and inventory for collateral.

Here are a couple of reasons these companies are having trouble finding lines of credit.

• operating losses accompanied by negative cash flow
• too much inventory relative to sales volumes
• significant exposure to foreign accounts receivable

Asset based lending will likely be the solution for most of these deals. The interest rates will likely be much higher than what they're currently paying.

I had two interesting conversations today with bankers. The first with an SBA lender who commented on a shrinking pipeline of deal flow. The second with a banker who spoke of cherry picking deals and increasing the interest rates charged to borrowers.

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 : credit crunch , business loans , accounts receivable , cash flow , lines of credit

Banks Cutting Lines of Credit

According to CFO.com, banks are downsizing companies' revolving lines of credit and pulling out of loan syndications.

Why?

First, to preserve liquidity and shore up balance sheets after large losses in their real estate portfolios. Second, to to put money to work in more profitable loans with borrowers who are using other lucrative bank services.

Easy companies to target for a reduction are those with little if any outstanding balances on revolving lines of credit. Use it or lose it if you want your bank to keep it in place seems to be the message.

According to Oliver Wyman consultant, John Walenta, middle market companies and small businesses may be at greatest risk to modifications to their revolving lines of credit. With these customers, the banks may have contractual rights to demand full repayment at any time.

I'm hearing of more banks cutting back on revolving lines of credit to customers that are in both payment default and those in violation of covenants. Most of the banks I know also won't consider a loan in this environment without a deposit relationship. The asset based lenders are much more active as bank lending continues to tighten.

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 : CFO Magazine , credit lines , credit crunch , lines of credit

Line Up International Receivables Financing First

While the dollar is not as weak as it was earlier this summer, The Wall Street Journal (subscription required) reports that many businesses are still looking to exports to fuel growth to offset economic weaknesses in domestic markets.

A few companies have approached me as of late with cash flow challenges resulting from working capital tied up in international accounts receivable.

While there are sources of accounts receivable financing that will provide funding tied to international accounts receivables, those lenders typically want the exporters to have at least a few months of experience at selling overseas with open credit terms. As always, those customers should be creditworthy.

As I've written in the past, if you're extending credit terms to your customers, you're a lender. Take extra precautions when you're providing credit terms to foreign customers as your own funding sources may not be prepared to provide you with a loan secured by foreign accounts receivable. Or they might be willing to advance your loan, but only to the extent your customers are deemed bankworthy.

Ask your lender in advance of providing terms to your foreign clients so you don't get caught short on the working capital needed to keep the doors open.

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

Tags : accounts receivable financing , exports , working capital , credit terms , international factoring

Beige Book Notes Credit Crunch

The latest Beige Book released this week notes that all twelve reporting districts reported tightening business loan standards. Federal Reserve officials are openly discussing a credit crunch.

Boston Federal Reserve Bank President Eric Rosengren said "the financial problems that initially created a liquidity crunch have now evolved into a more traditional credit crunch," in prepared remarks made available to reporters.

According to Rosengren, "the tightening already appears to be more widespread than it was during the early 1990s, and portends more difficulty in financing business fixed investment and commercial real estate projects in the second half of this year."

The Beige Book is simply a collection of anecdotal information on current economic conditions gathered through through reports from Bank and Branch directors and interviews with key business contacts, economists, market experts, and other sources.

Too bad they didn't call me - I'm overflowing with anecdotal evidence of a credit crunch for both business loans and commercial real estate loans. More and more deals are finding their ways to asset based lenders as many commercial bankers are declining new loan opportunities and spending their time looking for cheap deposits.

Do you 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 : credit crunch , business loans , commercial real estate , bridge loans , Beige Book

Credit Crunch Impact on Middle Market M&A

The credit crunch is being felt by middle market merger and acquisition deals according to emails I received today from both Bank of America and W.Y. Campbell & Company.

Here are five key points I gleaned from these two newsletters:

• Purchase price multiples have declined to 6.8 times EBITDA (earnings before interest, taxes, depreciation and amortization - a proxy for cash flow) from a peak of 8.8 times EBITDA in the third quarter of 2007.
• Acquisition leverage has declined with senior cash flow loans down to 2.5 to 3 times EBITDA from as much as 3.5 to 4 times EBITDA from 12 months ago.
• Asset based loans are playing more of a role in financing acquisitions as lenders are becoming more conservative in underwriting criterion.
• While benchmark rates such as Prime and LIBOR have declined in the last year, credit spreads have increased as much as 200 basis points for mid range middle market acquisition loans.
• Equity injections by buyers are now approaching 40% of the purchase price compared to approximately 30% in 2006 and 2007.

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

Tags : Bank of America , Capital Eyes , W.Y. Campbell , EBITDA , acquisition loans , credit crunch , asset based loans

Hedge Funds Providing Real Estate Bridge Loans

With fewer banks making commercial real estate loans due to the credit crunch, hedge funds are becoming increasingly willing to fill the gap by providing commercial real estate bridge loans.

In today's The Wall Street Journal (subscription required), it is reported that as many as 140 hedge funds are actively pursuing providing "hard money" loans at rates ranging from 10% to 20%.

Not only borrowers with bad credit or tough deals are using these bridge loans which typically mature in under two years. Borrowers with good credit are using bridge loans to close deals much faster than commercial banks can fund.

I am also seeing more requests these days for commercial real estate bridge loans. Lately, I've seen requests for private money loans to fund the acquisition of gas stations, to refinance an automobile dealership, to refinance a single purpose property and to re-finance a construction loan for an office building.

As I have previously mentioned, I'm working with one private money, bridge lender whose rates currently range from 8.5% to 10.0% (before points) for bridge loans secured by commercial real estate in California of all property types. The lender is able to fund loans of up to $50 million and is willing to consider properties in other western states.

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

Tags : commercial real estate , hard money loans , bridge loans , private money loans , hedge funds , California

Next Shoe to Drop - Commercial Real Estate Loans

Ten months ago, I noted that some feared commercial real estate loans could be the next shoe to drop.

Today's New York Times cited evidence suggesting that time may be here.

Delinquencies and default rates are increasing, the availability for new commercial real estate loans is drying up and prices for commercial properties are softening. Moody’s/REAL Commercial Property Price Index has dropped nearly 12 percent since its peak last October.

I spent a lot of time this past week talking with bankers and commercial real estate lenders. I heard about cease and desist orders on construction lending, inability to lend against commercial real estate, tenants no longer qualifying as "credit-tenants", reduced loan to value advance rates, tighter underwriting criterion and a need for more bridge loans.

The other shoe is dropping.

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

Tags : commercial real estate loans , private money loans , bridge loans , hard money loans , credit tenant leases , California

Fixed Rate Equipment Financing

Fixed rate or floating rate equipment financing? That's the question posed to me by the business strategy advisor to a transportation company.

The trucking equipment being acquired is brand new and according to the borrower, has a useful life of 6 to 7 years. The equipment financing options include a 6 year, fixed rate loan from a major commercial finance company or a 7 or 10 year, floating rate loan from a commercial bank through the SBA 7a loan program. The initial interest rate on the SBA loan options is marginally lower than that of the fixed rate equipment financing.

As the financing options are not mutually exclusive, I've recommended that the borrower accept both the fixed rate and floating rate financing offers.

In my opinion, interest rates are more likely to increase than to decrease over the next 5 years. The company can minimize a portion of its future interest rate risk by locking in the rate on a portion of its financing requirements today.

What course of action would you recommend?

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

Tags : Equipment leasing , leasing , equipment finance , SBA loan , SBA 7a , fixed rate financing

Credit Tightening Results in New Asset Lenders

According to the July 2008 Senior Loan Officer Opinion Survey on Bank Lending Practices, at least 60 percent of domestic banks reported having tightened lending standards on commercial and industrial (C&I) loans to small businesses and large and middle-market firms over the past three months.

About 80 percent of domestic banks reported having tightened their lending standards on commercial real estate loans over the past three months.

Both of these statistics point out why new lenders are jumping into the lending markets for both asset based business loans and real estate bridge loans.

On Monday I met with a new lender offering asset-based loans ranging in amounts from $500 thousand up to $10 million, an under-served niche within the asset-based lending market.

This lender is a new joint venture backed by a very large, east coast based fund. They will primarily lend against collateral consisting of any combination of machinery & equipment, rolling stock, inventory, accounts receivable, real estate, and intellectual property. Typical clients include small business owners, turnarounds, start-ups, businesses needing bridge loans, and companies needing bankruptcy exit financing.

The main target for these asset based loans will be small businesses with no financing alternatives due to the liquidity crunch and tightening credit requirements in regional banks.

Targeting businesses throughout the United States, this asset based lender looks strictly at asset value and does not require the borrower to have audited financial statements.

Expect pricing to reflect the risk profile of the borrower and the quality of the assets. In other words, don't expect bank rates!

If this lender sounds like a good fit for your financing needs, read "Matchmaking for Business Loans" and give me a call!

Tags : Federal Reserve , business loans , credit crunch , asset based loans , accounts receivable , equipment , inventory , collateral loans

Top 5 Bank Leasing Companies

A major industry leasing publication just published its list of top 50 bank affiliated leasing companies in the U.S. ranked by net assets based upon 2007 activity.

Holding onto its number one ranking from 2006 was Bank of America Leasing. Interestingly, the order of the top 5 did not change from 2006.

1. Bank of America Leasing
2. Wachovia Equipment Finance
3. Citicapital
4. Key Equipment Finance
5. Wells Fargo Equipment Finance

Of the top 5, Wachovia and Citicapital both booked less business than the prior year. Wells Fargo had the biggest increase in net assets growing over 50% in one year.

I expect the rankings to look different next year as Citicapital has sold off significant leasing assets to both CIT and GE Capital.

One other interesting note, more than 40% of the top 50 banks reported increases in delinquencies, credit loss provisions and net charge-offs. Just like other types of lending, the leasing arms are probably "cherry picking" deals and increasing rates in 2008.

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

Tags : equipment leasing , leasing , Bank of America Leasing , Wachovia Equipment Finance , Citicapital , Key Equipment Finance , Wells Fargo Equipment Finance

Single Tenant, Net Leased Market Changes

According to the July edition of Real Estate Forum, the balance sheet problems of commercial banks and the collapse of the CMBS markets are resulting in market terms for debt financing for single tenant, net leased properties reverting to conditions last seen before the in the 1999-2001 era.

Here's what that means according to the article by Michelle Napoli.

• local and regional banks are now the "go-to" source of mortgage financing
• full or partial recourse is back on the table
• leverage is lower and interest rates are higher
• loan term durations don't exceed the length of the lease

The lenders with whom I speak cite similar changes to the debt financing markets for all commercial real estate property types.

One bridge lender interviewed in the article claims to be seeing a lot more deal flow as borrowers "cannot get financing through avenues they typically use".

A private money, bridge lender that I show deals to has experienced the same increase in deal activity. This lender's rates currently range from 8.5% to 10.0% (before points) for bridge loans secured by commercial real estate in California of all property types. The lender is willing to consider properties in other western states.

Need help with an introduction to a bridge lender for commercial real estate properties? Read "Matchmaking for Business Loans" and give me a call!

Tags : commercial real estate , private money loans , bridge loans , hard money loans , Real Estate Forum , credit tenant leases

Factoring and Asset Based Lending Grows

With cash flow on the decline and commercial banks taking a bath on their real estate portfolios, more borrowers are turning to factoring and asset based lending solutions to meet their working capital requirements according to CFO.com.

Factoring, a trillion dollar industry worldwide, grew in the US to $135 billion in 2007 representing a six percent increase over 2006. Asset based lending in the US increased to $545 billion in 2007, an 11 percent increase over 2007.

In times of economic challenges, borrowers will utilize their purchase orders, accounts receivable, inventories, equipment and real estate to give lenders comfort to extend business loans. As is often the case when using factoring and asset based lending, borrowers should expect that the interest rates and terms will be more expensive and tighter.

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

Tags : factoring , accounts receivable , asset based lending , working capital , cash flow

Top 5 Banks with Declining SBA Volume

As reported in the Coleman Report, the decline in SBA loan volume at five banks - Capital One, Bank of America, RBS Citizens, Washington Mutual Bank and Wells Fargo Bank - amounted to 75 percent of the nation's decline in SBA lending.

"This isn't to suggest in any way that these banks have done something wrong," SBA spokesman Mike Stamler wrote. "It's simply an illustration of how changes in strategy by a handful of national lenders can affect SBA's loan program."

This was the extent of the information available in the Coleman report. It's not clear if the decline was based upon number of loans or dollar value of loans. I also don't know the time period for which the decline is reported or whether the decline is in the 7a or 504 programs. I couldn't find anything on the SBA's website which provided more detail.

Need an SBA loan for at least $1 million and need help finding the right SBA lender? Read "Matchmaking for Business Loans" and give me a call!

Tags : SBA , 7a loan , 504 loan , working capital , Coleman Report

Construction Loans Don't Mix with Hard Money

Construction loans and private, hard money loans turned into a lethal combination for Scott Coles and Mortgages Ltd., one of Arizona's biggest private lenders during the real-estate boom.

The front page of today's Wall Street Journal (subscription required) highlighted the risks inherent in making hard money loans for commercial real estate construction projects. For Scott Coles, it resulted in the Chapter 11 filing for the business his father built and his own presumed suicide.

Many of these hard money lenders are learning the same lessons as the many commercial banks who made loans to real estate developers in the last two or three years of the real estate boom. Bet on the right horse and know your exit strategy if events turn against you.

According to The Wall Street Journal, "hard-money lenders that didn't overextend themselves during the boom, and still have capital to lend, are poised to cash in as the credit crunch spurs traditional lenders like banks to stay on the sidelines."

I'm working with a couple of hard money lenders that fit this description. While they won't extend construction loans, these private money lenders will lend from $1 million to $50 million against commercial real estate. For California commercial real estate, the interest rates current start at 9-10% for 12-18 month loans. With points averaging 4.5 and loan to values as high as 70%, these loans can be extremely helpful in acquisitions or re-financings.

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

Tags : commercial real estate , hard money loans , construction loans , private money loans

The Return of Mezzanine Loans

Bank of America Business Capital reports in its latest edition of Capital Eyes that mezzanine debt is experiencing a rise in popularity as a way to finance the acquisitions of private equity firms.

Second lien loans, a quite popular funding tool in this decade until the first half of 2007, have disappeared for all practical purposes.

Why?

According to Capital Eyes, second lien loans have become extremely expensive and there is concern how second lien lenders will behave in a workout situation.

Mezzanine lenders are filling their coffers in expectation of more active lending days ahead. The article notes that this past quarter saw $20.5 billion in fundraising dollars go to mezzanine funds, which is four times more than was raised in all of 2007.

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

Tags : Bank of America , Capital Eyes , second lien loans , subordinated loans , mezzanine financing

Construction Loans May Crush Some Banks

Having a hard time getting a construction loan for your commercial real estate project? It's only going to get tougher.

Today's Wall Street Journal (subscription required) reported that a number of regional and community banks may soon report significant losses related to real estate construction loans gone bad.

With the residential construction industry in the toilet and interest reserves running out, more and more banks will be forced to report an increase in construction loans that developers cannot repay.

More writedowns means less capital on the balance sheet.

Less capital means you better know your bank's appetite for any type of loan before you go in with your loan request. Real estate loans or business loans - the bank may have less money or no money to lend.

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

Tags : commercial real estate , hard money loans , construction loans