Credit Still Tight

The Turnaround Management Association’s Annual Trend Watch Credit Poll is out and the final word is in - business credit is still tight.

“The credit crunch is being exacerbated not only by the lack of availability of credit, but also by the lack of borrowing capacity of companies needing credit,” said TMA Chairman Arthur Perkins, co-head of the West Region Restructuring Practice of Deloitte Financial Advisory Services LLP in San Francisco.

In other words, borrowers suffer from lack of cash flow to service their debt and the banks suffer from lack of capital.

The end result to borrowers is an increase in interest rates and a tightening of loan conditions including a reduction in asset valuations used for collateral.

There is money sitting on the sidelines being loaned against accounts receivable, equipment and commercial real estate. But you have to know where to find it.

Need help finding the right asset based lender or telling your story the right way for your business? If you're in need of at least $1 million, read "Matchmaking for Business Loans" and give me a call!

Tags : credit crunch , Turnaround Management Association , TMA , Credit Poll , accounts receivable , commercial real estate , asset based loans

Top Five Bank Leasing Companies - 2009

The 2009 list of the top 100 equipment leasing companies was just published and there are not a lot of surprises.

New business volume was down approximately $12.5 billion due to softening demand and tighter underwriting criterion. GE Capital took the biggest dollar hit with its new business volume down $24.5 billion. No other leasing company was even close to taking as large a dollar volume decrease.

Portfolio quality took another body blow following up on its poor prior year performance. Over 60% of the respondents reported that delinquency rates, credit loss provisions and net charge-offs were higher. Lower net charge-offs were reported by only 9% of the survey respondents.

So who were the top five U.S. bank affiliate leasing companies based upon new business volume?

• CIT Group - was an independent until the financial bailout and generated almost $13 billion of new volume, down 23%
• Bank of America - at $10.9 billion, an increase of 6%
• Wells Fargo - at $9.8 billion, a 19% increase
• Key Equipment Finance - at $4.5 billion, a 29% decrease
• US Bank - at $4.0 billion, a 4% increase

From the tone of the publication, the current year is expected to be even tougher. Lessees beware!

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 : equipment leasing , leasing , equipment financing , Equipment Leasing and Finance Association

More Distributors and Manufacturers Seeking Loans

In the last ten days, I have been referred to four distributors and manufacturers for asset based lines of credit for amounts ranging from $1 million to $8 million. Included in the group are a manufacturer of cosmetics, a distributor of building supplies, a produce distributor and an electronics manufacturer.

In each case, these companies generated losses in 2008 and have been asked by their incumbent bank lenders to find a new source of funding. Across the board, the borrowers have already reversed their losses by taking actions to reduce their direct costs and overhead. However, the banks have either used the expiration of the credit facility or a breach in financial covenants as reason to terminate their lending relationship nonetheless.

When I spoke with the bank lenders, they cited a tightening of credit criteria or lender fatigue as the primary reason for asking these borrowers to find a new home.

I'm in the process of screening each of these asset based funding opportunities with banks, commercial finance companies and factors. Given that each has assets to offer as collateral (receivables, inventory and equipment), each of these borrowers will find a new lender. The issue will be at what cost. I expect that some of the borrowers will attract new loans in the 8% range while others will pay interest rates in the mid teens.

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 : manufacturer , distributors , lines of credit , asset based loan , factoring , accounts receivable , PACA

Bare Knuckle Asset Based Lending

It's a bare knuckle asset based lending environment with a back to basics approach of pure formula driven structures with reliance on hard assets according to May/June edition of The ABF Journal.

With businesses generating less cash flow and banks still rationing credit, more and more business borrowers are finding that it takes strong accounts receivable and valuable inventory to get a line of credit.

For those business borrowers who don't quite qualify for conventional bank financing, there are two good asset based lending programs being offered by select banks.

The first program is available to qualified business borrowers in the state of California and provides a revolving line of credit up to $1.5 million.

The second program is available to qualified business borrowers nationwide through select SBA lenders and provides a revolving line of credit up to $2.0 million.

Both asset based lending programs focus on accounts receivable and inventory as the primary source of repayment. The all-in rates on these loans are tied to the prime rate and currently range from about 7.75% to 8.75%.

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 : Line of credit , asset based lending , accounts receivable , SBA