Why does a food truck lender ask about capital in reserve?

When I’m talking to a food truck buyer, particularly a first-timer, I ask whether or not they have any capital in reserve.  I need to know if something goes wrong they can still make their monthly loan payment.

They often respond “if I had any capital, I wouldn’t be coming to you for a loan!"

Here are two recent stories about food truck entrepreneurs who suffered the consequences of a fire or a blown engine.

http://www.newsobserver.com/living/article209872724.html

http://nooga.com/215767/rolling-js-food-truck-owner-launches-kickstarter-for-new-restaurant/#.WtYfKfRIsZk.twitter

If you’re acting as a lender or lessor, you should make sure your operators have either capital in reserve or the right insurance coverages!

Need help with a food truck loan?  Please let me know.

Are you a business who needs equipment financing or working capital?  Marshall Lebovits of Asset Based Funding Solutions has over 30 years of experience in the secured lending industry.  He can be reached at (310) 344-2522 or via email at Marshall@Funding911.com.

Equipment Lease Line of Credit – Rates too Low to Mention!

A major telecom services company was recently referred to me as they were unhappy with the service and lease rates they were receiving from their existing leasing company.

After a quick review of their financials, I introduced them to a major independent leasing company.

Within seven days, they received approval and accepted an offer for a $2 million lease line of credit to cover their 2018 IT equipment purchases.  The lease line was structured with a fair market value purchase option.

The CFO was pleased with a great solution that will enable the company to better manage residual risk and equipment obsolescence.

 

The rates?  If I told you, I would be in big trouble!

Are you a business who needs equipment financing or working capital?  Marshall Lebovits of Asset Based Funding Solutions has over 30 years of experience in the secured lending industry.  He can be reached at (310) 344-2522 or via email at Marshall@Funding911.com.

Higher Sales and Improved Margins through Vendor Financing

“We would be out of business without vendor financing” according to the president of a distributor of commercial strength and cardio equipment.  Almost 65 percent of this company’s revenues are generated utilizing a vendor financing program implemented over ten years ago.   

Vendor financing programs provide manufacturers, distributors and dealers from a wide variety of industries the capability to offer customers a convenient way to acquire their products at the point of sale.  A few of the key benefits vendor financing provides include:

• Improved vendor cash flow through pre-funding, or financing of the down payment, and reduced receivables through collection of the balance upon delivery of the product
• Improved margins and higher sales by focusing the customer on monthly payments instead of price reductions
• A faster selling cycle – fewer worries about whether your customer has the money in its capital budget or if they can (or will try to) find financing on their own
• Transfer of the financing risk to a third party through non-recourse programs
• The ability to open up new markets including selling your products

With programs that can provide financing in amounts as little as $5 thousand, vendor financing can be implemented to cover most asset types and a variety of customer credit profiles including start-ups and early stage companies.  For amounts up to $100 thousand (and higher), many financings can be approved in as little as one hour after your customer completes a one page application.  For larger transactions, approvals can be obtained as quickly as four hours following the submission of financial statements and tax returns.  Lease terms can extend from 12 to 60 months for equipment with long useful lives sold to qualifying credits.

According to one manufacturer of equipment, the flexibility, creativity and extraordinary support it enjoys through its vendor financing program provides it with a competitive advantage.  Its vice president of sales firmly believes that choosing the right programs and leasing company can be the difference in winning a sales competition.  A few questions to ask in selecting the best leasing company for your business include:

• Flexibility – Can the financier fund my A, B & C credits?  Can soft costs be included in the financing amount?  Will all credits be financed without recourse to the vendor?
• Minimums and maximums – How small and how large of a deal can the financier fund?  Any limitations on how much credit it can extend to any given buyer?  Any overall minimum or maximum volume requirements to create a program for your company?
• Creativity – How many different programs structures and end user offerings can the financier provide?  Will the financier create unique programs to meet the special needs of certain customers? 
• Risk Management – Will the financier help you evaluate the creditworthiness of prospective customers?
• Service – What levels of support do you require for sales, marketing, administration and deal structuring?  Do your customers require a personal touch or will a highly automated system be a better fit with your sales methods?

If you can visualize your company as a one-stop solution provider to your customer’s needs through having the ability to offer fast and easy equipment financing, then vendor financing may provide you with new and profitable opportunities. 

Are you a small or medium sized manufacturer or distributor who needs assistance with a vendor financing program?  Marshall Lebovits of Asset Based Funding Solutions has over 30 years of experience in the secured financing industry and creates vendor financing solutions with Baycap.  He can be reached at (310) 344-2522 or via email at Marshall@Funding911.com.

Bankruptcy for CIT?

The $60 billion finance company, CIT, is negotiating for a government rescue while also having retained bankruptcy counsel.

The outcome is unclear as various press sources report that the US government does not feel that CIT's failure would create a systemic risk to the financial markets. Same conclusion that was reached with Lehman Brothers last fall and the outcome wasn't pretty.

CIT is a major asset based lender to small and medium size businesses offering products including factoring, accounts receivable lending, equipment finance, SBA loans and cash flow loans to a wide variety of industries. Its factoring and accounts receivable loans have been available to companies with revenues as little as $5 million.

Many of these borrowers are probably quite nervous at the moment. While the government may reach the opinion that J.P. Morgan Chase, Wells Fargo and Bank of America can replace CIT in the marketplace in the long run, the short term chaos in the meantime could be significant. These and other asset based lenders could be overwhelmed if the curtain came down on CIT and borrowers had to find replacement lenders on short notice.

Are you a current CIT borrower and worried about your options? Read "Matchmaking for Business Loans" and give me a call!

Tags : CIT Group , CIT , bankruptcy , factoring , accounts receivable 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

A Little Less Conversation

A little less conversation, a little more action please. All this aggravation ain't satisfactioning me.

The words of Elvis Presley rung true in 2008 as business borrowers tired of hearing about TARP and TALF and were aggravated by the lack of action in the form of severely restricted business lending.

Will the new year ring in a little more action? Here's what I read in the last few days of 2008 which suggest early 2009 may not provide much action to business borrowers.

• Don't expect the banks to aggressively lend their bailout proceeds. The corporate default rate for certain types of business loans may more than double to 8 to 10 percent putting further strains on bank balance sheets.


• Is a bailout on the way for the commercial real estate industry? According to research firm Foresight Analytics LCC, $530 billion of commercial real estate mortgages will be coming due for refinancing in the next three years -- with about $160 billion maturing in the next year. Credit, meanwhile, is practically nonexistent and cash flows from commercial property are siphoning off. Default rates are expected to result in less lending to this sector. Some industry representatives have asked lawmakers to explore the idea of setting up a separate program aimed at boosting lending to commercial real estate only. Real estate bridge loan activity is likely to significantly increase.


• Some asset based financing providers such as equipment lessors are seeing business decline. The Equipment Leasing and Finance Association said that new-business volume decreased 33.1 percent in November from the previous November.

There's still money out there if you know where to find it. I just closed an asset based revolving line of credit deal shortly before New Year's for a firm with a great growth story. I'll write more about this in a few days.

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

Tags : credit crunch , commercial real estate , leasing , asset based loans

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

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

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

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

Leasing Rates Increase

My small ticket leasing alliance partner just told me that interest rates on leasing transactions are being increased by a major bank leasing company. This funding source finds its business through a network of independent finance brokers and lessors.

Why is this lessor raising rates for "application only" and small commercial leasing deals?

First, the lessor's cost of borrowing has increased.

Second, delinquencies and defaults have also increased - higher risk goes hand-in-hand with higher rates.

Per my alliance partner, while this source was the first to increase rates, the news on the street is other lessors will soon follow.

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

Tags : Equipment leasing , leasing , app only , equipment finance

Top 5 Independent Leasing Companies

One of the major magazines for the leasing industry just published its first list of top private independent leasing companies. The list is based upon the dollar value of new leasing business closed in 2007.

Here are the top five:

1. CSI Leasing
2. US Express Leasing
3. Great America Leasing
4. ICON Capital
5. Relational Technology Solutions

Like any list, a prospective borrower needs to know the specific target markets of the lender. Does the lender have specific industries, asset types, credit profiles or deal sizes that it is willing to pursue?

For example, CSI Leasing specializes in technology equipment. ICON Capital looks for deals in the $10 million to $150 million size. US Express focuses on five main origination platforms - you wouldn't contact them to finance construction equipment.

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

Tags : Equipment leasing , leasing , equipment finance , ELFA

Lease Financing Down in December

The Equipment Leasing and Finance Association's (ELFA) Monthly Leasing and Finance Index was just released for December 2007 and the numbers are down. While new equipment leasing business volume for December 2007 totaled $10.6 billion, this represents a decrease in of seven percent when compared to December 2006.

Why was equipment leasing business down?

The president of ELFA suggested a possible pullback on capital investment by businesses due to uncertainty in the economy as a whole.

Nice way of saying recession approaching quickly.

"The market is moving towards a better alignment of risk and return" according to the president of one major equipment leasing company.

Nice way of saying credit crunch not far behind.

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 , app only , equipment finance , ELFA

Equipment Leasing Continues to Grow

Equipment financing and leasing was used to acquire almost $600 billion worth of equipment last year or almost 55% of all fixed assets acquired by businesses.

At a time when most borrowers and lenders were focused on closing year end deals and holiday parties, the Equipment Leasing and Finance Association released its 2007-2008 U.S. Equipment Finance Study which describes in detail how popular this funding mechanism has become to businesses large and small.

I'll let you read the entire report if you choose - here's what I found interesting.

• The $600 billion estimate is triple the amount reported by lender surveys. That's a pretty big margin of error!
• Equipment finance is somewhat concentrated geographically with the top five states representing 37 percent of the national market. California leads all states in the use of equipment finance, at $72.8 billion or 12 percent of the U.S. market. Texas, New York, Florida and Illinois round out the top five states.
• One of the major factors to influence equipment financing methods is firm size. Small businesses are much more likely to finance equipment acquisitions out of available funds or cash and much less likely to utilize leases or term loans. Within the small business segment the dominant form of financing is through a line of credit, which includes the utilization of revolving balances available on credit cards.

Hopefully, this last point does not mean that small business is making the classic mistake of financing long term assets with short term money! Who am I kidding? I see that all the time!

For small businesses with a reasonably strong credit profile, there is a large number of leasing companies able to provide lease financing for amounts up to $100 thousand on the basis of a one page application. These "app only" financings are available for a wide variety of industries and equipment types. The largest "app only" program I have seen is for an amount of $250 thousand.

Need help finding the right equipment leasing company? Read "Matchmaking for Business Loans" and give me a call!

Tags : Equipment leasing , leasing , app only , equipment finance

Lease Delinquencies Double

My small ticket leasing partner shared with me a chart from Paynet showing that lessee payment delinquencies of greater than 90 days has almost doubled in the last 15 months.

This statistic is based on blind reporting by not only small ticket lessors, but all of the big boys as well including Wells Fargo, Bank of America, GE Capital and National City. It also reflects deals from a variety of industries and for a variety of credit types (A, B, C & D).

Notwithstanding the increase in delinquencies, the leasing market is currently so flush with money that a leading lessor which specializes in subprime credits and startups is seeing increased competition. New entrants are taking on more risk and charging lower rates.

With the slowdown in the economy, this market dynamic for lease financing is unlikely to last too much longer.

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 , Bank of America , Wells Fargo , GE Capital , National City

Top Five Construction Equipment Lenders

Yellow iron. The equipment financing sources love this stuff. It’s got long useful lives, slow obsolescence and a strong secondary market. From the September issue of a magazine for the leasing industry, here's the top five construction equipment financing sources.

1. Caterpillar Financial
2. CitiCapital Commercial
3. John Deere Credit
4. CNH Capital
5. Komatsu Financial

According to the article, these five equipment financing sources closed over 38% of all construction equipment financing deal in 2005 based upon UCC filings. Alternatively, these five construction equipment financing sources funded 73% of the top 25 funding sources.

Interestingly, with the exception of Citicapital, the top five consists of captive finance companies. CitiCapital was not included in the top five bank leasing companies I wrote about earlier. That being said, this list was based upon the number of UCC filings and not the dollar value of equipment financed.

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 financing , leasing , construction equipment , Caterpillar Financial , CitiCapital , John Deere Credit , CNH Capital , Komatsu Financial

Top 5 Bank Leasing Companies

Fresh from the August issue of a magazine for the leasing industry, here's the top five banks with the largest dollar increases in 2006 in equipment leasing activity.

1. Bank of America Leasing
2. Wachovia Equipment Finance
3. National City Commercial Capital Corporation
4. Key Equipment Finance
5. Regions Equipment Finance

According to the survey, these five banks closed over $21.5 billion of new leasing business in 2006.

Again, this survey includes bank owned leasing companies only thus excluding big industry players like GE Capital and CIT. I'll fill you in when the industry numbers are published which includes all types of equipment leasing funding sources.

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 , Bank of America , Wachovia Equipment Finance , National City Commercial Capital , Key Equipment Finance , Regions Equipment Finance

WSJ on Venture Funding Twist

Venture capital backed start-up and early stage businesses are increasingly taking on debt according to a February 14th article in The Wall Street Journal. Venture lenders are providing loans of $100 thousand to $10 million and more to provide leverage to companies in a wide variety of industry sectors. As always, though, high tech seems to be the hot ticket. As a result, the venture lending market seems to be at its highest levels since the late 1990s tech boom.

Though the article didn't make a distinction, here's a quick explanation of the differences between a venture loan and a venture lease.

Venture loans typically provide operating capital for general corporate uses that can be used to fund product development, product or geographic expansion or acquisition of complementary technologies. The cost of such capital is normally interest, with principal, paid over a fixed period of time (usually 24 to 48 months, depending on the company’s risk profile) and a small pledge of stock warrants. The goal - a 30% or higher return on its loan. The venture lender will typically require a blanket lien on all of the assets of the borrower.

In a typical venture leasing transaction, the lessor will lease equipment to early stage companies for two to three years. The lessor receives a monthly payment which usually provides the lessor with a 12-15% rate of return. To achieve a return closer to its goal of 30% and higher, the lessor may also receive warrants to buy shares of the company when the company goes public or is otherwise sold. In lieu of warrants, some lessors may enhance its yield by selling the equipment to the lessee at a fair market value at lease expiration. The venture lessor will typically receive an ownership interest in specific assets, but not a blanket lien.

I'm working on a large venture leasing opportunity right now - as in other secured lending transactions, each funding source has its own unique set of criterion. Some like only high tech or bio-tech, others like all industries. Some will only fund deals below $2 million. Others won't look unless the deal exceeds $5 million. Some funding sources will only lend while some will only structure leases. Some will only fund to very early stage companies in product development while others look for companies who have already validated the concept and are about to go to market.

A key consideration for many funding sources is whether or not the borrowing company is already funded by a well recognized venture capital firm with which they are comfortable. The lender or lessor wants to know that someone else they trust has already validated the investment and has deep pockets to bail out the company in the event everything doesn't go to plan.

It's a jungle out there. If you need help finding the right lender or right lessor for your venture, read "Matchmaking for Business Loans" and give me a call!

Related Tags: venture, leasing, funding, lending, Wall Street Journal, venture capital

New Funding Source – Equipment Leasing

From time to time, I’ll tell you about a new financing source that I’ve met. It could be for bank loans or any type of asset based financing including purchase order financing or factoring. Today, I spent some time getting to know a new source of equipment leasing.

This source of leasing is run by an individual with over 25 years in the equipment finance industry. Operated with a lean staff, they are seeking deals ranging from as little as $500 thousand into the tens of millions. Their “sweet” spot is a transaction in the $1 million to $5 million range.

So what’s the big deal about this source? This equipment leasing source works with borrowers when the bank says “no” but there’s still a viable business operation and good people running the business. They look for transactions with a group of borrowers I call “the weak, the weary and the sub-prime”. Deals with a bit of hair. Companies with less-than-perfect credit. Prior bankruptcies or current restructuring candidates are not reason for an automatic rejection. Their attitude is “if it’s an easy deal, go see your banker”.

They can structure equipment leases, term loans and sale-leasebacks and will fund throughout the United States. All asset types and industries will be considered, but long lived assets work best including transportation, manufacturing and materials handling equipment. The equipment can be new or used.

Obviously, pricing, advance rates and other terms will be determined by the facts of the deal.

Need help finding the right lender or telling your story the right way? Read "Matchmaking for Business Loans"




Related Tags: factoring, accounts receivable, purchase order financing, bank loans, equipment leasing, working capital, cash flow, term loans, sale-leaseback, bankruptcy, work-out, term debt, restructuring