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