Rule Number 2 in Action

There's never a shortage of stories about a business which lands a big contract and then gets hit by a cash flow squeeze.

Hispanic Business adds another story to the list in The Doors Open Wider. Precision Task Group Chief Executive and President Massey Villarreal has learned over the course of 27 years in business that when a small business wins a big contract, it is "like swallowing a watermelon because if you don't have the financing, you can't get it."

So this is where Rule #2 comes into play - raise money before you need it because you’ll always need it sooner than you think.

In Villarreal's case, he's raised money before his business needed a loan by developing a long term relationship with a bank that was willing to finance his growth. As many of you know, becoming "bankworthy" doesn't happen overnight.

But even if you're not bankworthy, there are other options to obtain a business loan if you have assets to offer as collateral. Purchase order financing, accounts receivable financing, equipment leasing and minority business loans are some of the options that might enable your firm to digest that big contract. It doesn't always matter if you don't have a long enough track record or a pristine credit profile.

So focus on rule #2 and start looking for appropriate sources of financing before your cash flow gets squeezed!

Need help finding the right lender in anticipation of landing the big contract? Read "Matchmaking for Business Loans" and give me a call.


Related Tags: Hispanic Business, business loan, accounts receivable, cash flow, Precision Task Group, Massey Villarreal

The Banks Said No

Twice last week I received phone calls from banks saying they were declining a borrower's request for a business loan. In both cases, the borrower had a credit profile a bit too challenging for a bank lender. Likewise, in both cases, the borrower had accounts receivable that were from creditworthy customers.

Faster than a speeding bullet, I made the appropriate introductions of those borrowers to a factor who was prepared to give them money for their accounts receivable. The deals are both done and the borrower can now get back to running their companies and growing their revenues instead of worrying about how to fund their growth.

Need help finding the right lender in a hurry? Read "Matchmaking for Business Loans" and give me a call!


Related Tags: business loan, bank, factoring, accounts receivable

More on It's Raining Money

In my January 11th posting, It's Raining Money, I told you about the record $215 billion raised by private equity sources to invest in companies across the spectrum. I've got a bit more detail for you on the $25+ billion which was included in that amount for investing in start-ups and early stage companies.

In its weekly newsletter, OCTANe said that "driven by big interest in sectors such as medical technology and alternative energy, venture capital investment across the USA surged to a five-year high of $25.7 billion in 2006. Overall, seed- and first- round deals made up 36% of the deal flow in 2006, and the median round size for 2006 was $7 million, up from $6.5 million in 2005. "

"Southern California as a whole surpassed the Northeast as the second leading investment region in the nation, behind the Bay Area. Clearly, more "minds and money" are flowing to SoCal, with media, biotech, medical devices and communication strengths. What's more, the region is hot with $2 billion+ university R&D - something OCTANe will highlight at the Doing Business with UC program next month. "

OCTANe's source for its information was the The MoneyTree™ Report by PricewaterhouseCoopers and the National Venture Capital Association based on data from Thomson Financial.

Not every company can attract private equity. In some of those situations, finding the right lender might be the right solution. Read "Matchmaking for Business Loans" and give me a call!


Related Tags: private equity, OCTANe, venture capital, early stage, entrepreneur, The Money Tree Report, National Venture Capital Association

Real Estate Loans - New Source

Just had lunch with two colleagues in the real estate mortgage business - they wanted to tell me about some new private funding resources for real estate loans that they could make available to my clients. Let me share with you a quick summary about the products they have to offer.

One product is a "soft-money" mortgage focused on the California market that is historically served by "hard-money" lenders. This private money product provides first trust deeds only on most real estate types including residential, apartments, commercial, industrial, special purpose properties and entitled land. Loan amounts range from $500 thousand to $10 million (larger on an exception basis). Advance rates for these bridge loans (up to 18 months) range from 50% to a maximum of 75% which varies by property type. Interest rates for improved property are currently 9.90% and many of these deals can close in a week or less.

Their newest private money offering for real estate mortgage business allows them to finance properties outside of the California market as well as un-entitled land, hotels, condo conversions, and construction loans. While the interest rates will be a bit higher, I expect this private money offering to be very competitive when compared to traditional "hard money" loans. Besides, this money is also intended to be a "bridge" loan - hopefully, it is replaced with a more cost effective solution within a year or two. By the way, this private money source will provide second trust deed financing for the same property types.

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


Related Tags: hard money, real estate, mortgage financing, soft money, first trust deed, second trust deed, bridge loan

Micro-lending in the USA

On Forbes.com, I was reading In Manhattan, It Pays to Be Small. It discusses a program of micro-lending focused on the Upper Manhattan Empowerment Zone, a not-for-profit development corporation and funded by local and federal tax dollars, and ACCIÒN USA, the largest "micro-lending" organization in the U.S..

As you may know, the subject of micro-lending has received a lot of press since Grameen Bank and its founder Muhammad Yunus were awarded the Nobel Peace Prize for 2006 for their work in Bangladesh.

Now I don't know much about the efforts of ACCIÒN USA, but a quick review of its website shows that it is providing business loans in amounts ranging from $500 to $25,000 to small businesses that don't meet the stringent criteria that traditional banks must follow.

For some small business owners, this micro-lending option might be a great resource particularly when the option is a predatory loan shark.

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


Related Tags: small business, business loan, Forbes, micro-lending, ACCION, Muhammad Yunus, Nobel Peace Prize

Four Rules for Raising Capital

With Christine Comaford-Lynch’s article Rules for Raising Capital, Business Week initiates a new, ongoing series of columns on financing and growing a small business.

I’ll give you the readers digest version and you can check out the full column on-line. What I like most about the article is that these rules apply to any business of almost any size from any industry. The rules can also be applied to raising debt or equity. See if you agree.

Rule #1 – Take more money than you think you’ll need, but only if you can get it cheap.

Rule #2 – Raise money before you need it because you’ll always need it sooner than you think.

Rule #3 - Only take money from someone you like and respect.

Rule #4 – Don’t be greedy!

By the way, take a look at Christine Comaford-Lynch’s biography – not bad for having neither a high school diploma nor college degree!

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

Related Tags: capital, business loan, BusinessWeek, Christine Comaford-Lynch

Bad Loans Rise

The Wall Street Journal reported that increases in bad business loans deepened worries that a downturn in credit quality has begun and could worsen. Based upon the fourth quarter results released by Wells Fargo, U.S. Bancorp and Marshall & Isley, loan losses from both commercial and real estate loans are on the uptick.

David Hendler, an analyst of independent research firm Creditsights Inc., believes that the long warned weakening of a weakening in credit quality is finally happening. He believes that the pain is likely to be felt by small and mid-sized banks that are less diversified and too reliant on construction and mortgage lending.

I've been wondering out loud for some time when banks would start to feel the pinch. The extreme competitive nature of the financial services sector has resulted in banks chasing marginal business loans for quite some time. That may work when the prime rate is at 4.0 percent. But when prime rate more than doubles in a short period of time to its current 8.25 percent, a number of companies will experience stress in meeting business loan covenants.

Don't be surprised if your bank is a bit more reluctant to provide you with a business loan in the near term as they tighten their credit requirements. Perhaps it's time to consider asset based loans including purchase order financing, factoring and leasing as a way of meeting your cash flow needs.

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


Related Tags: business loans, prime rate, factoring, purchase order financing, leasing, Wells Fargo, Wall Street Journal