Solid Cash Flow & More Collateral

With tighter lending standards, small businesses seeking financing now must have good credit, solid cash flow, more collateral and more cash for down payments according to Keith Leggett, senior economist at the American Bankers Association.

In USA Today, Leggett and others say that small firms with good credit quality still are able to land financing and grow. It is suggested these firms investigate financing from smaller community banks. Having avoided high-risk securities and poor lending practices, the smaller community banks haven't been humbled by the housing slump and subprime debacle.

What if your business doesn't qualify as a good credit? There is still plenty of money around. It's just being re-priced for risk.

Consider SBA loans, state backed loan programs, commercial finance companies, leasing companies and accounts receivable financing. You may pay a bit more for your money, but your business will have the working capital it needs to transition to better times.

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

Tags : USA Today , small business loans , Keith Leggett , American Bankers Association

Venture Funding for High Tech

For high tech companies seeking investments from venture capital providers, this week's edition of the Los Angeles Business Journal (subscription may be required) might be a good place to start.

In "Making it Click", the Los Angeles Business Journal provided brief bio's of 22 venture capitalists, deep pocketed angel investors, seasoned entreprenuers, and a group of lawyers and other enablers who play crucial roles in connecting new high tech ideas with money. Not surprisingly, my name is not on the list.

My guess is that these 22 resources don't limit their reach to only Los Angeles based entrepreneurs. So if you've got a good story, don't let geography hold you back.

Need to research any of the venture capitalists, go back and read this posting.

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

Tags : venture capital , angel investors , entrepreneurs , Los Angeles Business Journal

NFIB - No Credit Crunch

The National Federation of Independent Business (NFIB) joins Warren Buffet in the opinion that there exists no credit crunch for small business per today's Reuter's release.

"There is no credit crunch on Main Street for small businesses. Period," said William Dunkelberg, chief economist of the NFIB.

Dunkelberg's opinion is based upon the recently released survey of NFIB released earlier this week which predicts a recession.

The Reuter's release had two items that caught my eye:

• Many small businesses are seen heading for trouble because they used home equity loans to fund their businesses during the housing boom. In July 2006, I warned small businesses that home equity was in the process of declining and continued reliance on this would make financing their business more difficult.
• One borrower noted that his bank wanted his home, in which he has built up a lot of equity, as collateral rather than the assets of the business. He refused not wanting to mix his business assets and personal assets.

While most small business owners will still have to provide a personal guarantee, there are still plenty of lenders (including banks) that will look solely to the assets of a business as the collateral. Acceptable collateral includes purchase orders, accounts receivable, inventory, equipment and real estate.

On the other hand, if you don't have any assets in your business, be prepared to give a lien on your home if you've got one.

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

Tags : credit crunch , business loans , Warren Buffet , NFIB

Numerous Requests for Working Capital

My September 2006 posting entitled "How Do You Measure Working Capital" is the most frequent landing page in my entire collection of blog postings.

With a recession highly likely and a credit crunch gaining strength, more businesses will be focused on maximizing their cash flow and minimizing working capital because money tied up in working capital is money not available to grow the company.

While over 80 of my postings mention the term working capital, I thought I would give you a few links to some oldies but goodies. Enjoy!

• Unplanned Growth and the Cash Flow Squeeze
• Collect Your Cash Faster
• Improve Cash Flow through Accounts Receivable Outsourcing
• Inventories Stressing Working Capital
• When Your Supplier Says No

Need help with working capital challenge? Read "Matchmaking for Business Loans" and give me a call!

Tags : working capital , accounts receivable , factoring , DSO , DPO , DIO

Warren Buffet - Not a Credit Crunch

According to The LA Times, Warren Buffett does not think the economy is experiencing a credit crunch.

"I wouldn't quite call it a credit crunch," he said. "Money is available,and it's really quite cheap because of the lowering of rates that has taken place."

He added: "What has happened is a repricing of risk and an unavailability of what I might call ' dumb money,' of which there was plenty around a year ago."

It's never a credit crunch unless it affects the ability of your business to obtain a business loan or other financing. Money is available, just not wheelbarrows of money for you to go join in on the poker game with Bill Gates.

Your business may not qualify for the lowest cost bank loan, but it may qualify for an SBA loan or asset based financing including revolving lines of credit, factoring and equipment leasing.

And yes, risk is being re-priced. So now your business loan may be priced a few percentage points over prime rate, or as high as four to five times prime!

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

Tags : credit crunch , business loans , Warren Buffett

Business Credit Getting Tighter

No big suprise here - the Federal Reserve says banks are getting more stingy when it comes to providing new business loans.

The latest Federal Reserve survey of senior bank-loan officers released today shows that one-third of domestic institutions reported having tightened their lending standards on business loans to small as well as to large and middle-market firms over the past three months.

While few banks are eager to admit publicly that they are scaling back, almost every banker I speak with tells me of tightening credit standards and deals not getting approved by investment committee as a fear mentality starts to take hold.

What's a small business to do that needs a business loan? Before you go to a lender, ask yourself what three sources of repayment are you offering in support of your business loan?

• Are you able to demonstrate that your business will generate sufficient cash flow to pay back the loan?
• What business collateral are your offering to secure the loan? This should include accounts receivable, inventory, equipment and real estate.
• What is the personal credit strength of the business owner(s)?

If you can answer those three questions satisfactorily, your lender should be willing to entertain your request for a loan.

If you can't answer those questions, keep my phone number handy because you'll probably be a victim of the credit crunch.

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

Tags : Federal Reserve , small business , business loans , credit crunch

Report Card on SBA Loans to Minorities

The Greenlining Institute produces an annual report card that grades the largest US banks on their SBA lending activities to minorities – specifically African Americans, Asian Americans and Latinos.

Only one bank got an “A”. There was a handful or so of “B” grades. As for the rest, they got a spanking on their hands with a ruler.

You can read the full report, but here’s a couple of highlights:

• No bank met Greenlining’s challenge to originate 60% of all its SBA loans in 2006 to minority entrepreneurs, split equally amongst African Americans, Asian Americans and Latinos. Citigroup came close at 56%. Bank of America scored #1 for largest number with 5,468 SBA loans to minorities.
• African American small businesses are the most underserved by financial institutions in terms of both the number and percentage of SBA loans originated to this group compared to other groups in the study. Bank of America was at the top of the list in both the number of SBA loans and the percentage of its SBA loans.
• Citigroup and PNC did the best in percentage of SBA loans to Asian Americans both surpassing Greenlining’s minimum lending goal of 20%. Bank of America was tops in the number of SBA loans to Asian Americans.
• Close, but no cigar for Citigroup who came close to meeting the 20% goal for Latinos with Bank of America not far behind. Bank of America had more than twice the number of SBA loans to Latinos than second place J.P. Morgan Chase.
• Three banks received overall “F’ grades – Key Bank, Capital One and Fifth Third. Ouch!

At the end of the day, the Greenlining Institute says the number of minority owned businesses in the United States is growing at two or three times the national average for all U.S. businesses, but the proportion of SBA loans going to minority entrepreneurs has remained constant at one-third of all SBA loans.

According to the Greenlining Institute, if banks would originate 60% of their annual SBA loans to minorities, this would double the number of SBA loans to minority owned businesses.

Here are two questions I have on this report card.

• Does it take into consideration the demographic and geographic footprint of each respective financial institution?
• What were the actual approval rates for SBA business loans to minorities of each respective financial institution?

Check out my earlier blog postings for other resources on loan program directed minorities!

• We Don’t Do Stupid
• Guia Para Obtener Prestamos - ABCs of Borrowing
• There's a New Bank in Town
• Unique Business Loans for Minorities
• Capital Access for the Hispanic Community
• More on Minority Loan Programs

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

Tags : SBA loans , minorities , African American , Asian , Latino , Greenlining Institute