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