Rocket Fuel for Growth

A Southern California manufacturer and distributor of consumer electronics was searching for a $1.25 million revolving line of credit to fuel its growth. In its just completed first year of operation, it had achieved a revenue run rate in excess of $10 million and was profitable – an amazing accomplishment by any standard.

The company had excellent products, good accounts receivable, a solid business plan and a strong ownership team.

Yet, lacking a three year history of operating results, no commercial bank was willing to approve a loan especially during this period of an increasingly tight credit crunch.

Unable to find a cost effective source of working capital on its own, this hyper-growth company was referred to Funding 911 by a commercial banker.

Funding 911 introduced the company to two commercial bankers who each offered solutions not known by many financing advisors and not offered by many commercial banks. One was a revolving line of credit through a CAPLINE program guaranteed by the SBA. The other was a revolving line of credit offered through a state of California program.

My client has just closed a $1.25 million revolving line of credit with the commercial banker offering the CAPLINE product. This working capital facility will enable the borrower to receive loan advances tied to its accounts receivable and inventory at very attractive interest rates not available through any other sources. The CAPLINE program can currently support loan amounts up to $2 million.

My client now has the rocket fuel it needs to more than double in size in spite of a credit crunch which is strangling many businesses.

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 : Working capital , accounts receivable , credit crunch , revolving line of credit , SBA , CAPLINE

Twenty Percent Declined for Business Loans

Just over twenty percent of middle market businesses that recently changed banks said their original banks failed to give loans or financing when needed according to a survey from Greenwich Associates.

Perhaps as a result, 40 percent of middle market businesses were seeking or open to finding a new bank, as reported on CFO.com. For small businesses, the percentage increases to 50 percent!

While in the past, businesses would switch banks mostly due to price or service, access to capital and credit terms are clearly becoming more important.

Notwithstanding the credit crunch, there is money available for business loans from banks and a variety of non-bank lenders. You just need to know where to find it and how to convince the lenders that you're creditworthy.

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

Overly Optimistic Cash Flow Assumptions

Bad commercial real estate mortgages held by banks continue to increase and may have almost doubled from the end of 2007.

Most of the bad commercial real estate mortgages were funded within the last few years when underwriting standards were loose and bankers let borrowers use cash flow assumptions that were too optimistic.

According to Foresight Analytics as reported in The Wall Street Journal (subscription required), the delinquency rate for commercial real estate mortgages held by banks has increased from 1.5% to as high as 2.6% at the end of 2008.

With banks holding almost 50% of all commercial real estate mortgages outstanding (estimated at $3.4 trillion), I estimate that this increase in delinquencies alone is equal to almost half ($170 billion) of the phase I bailout money to be invested bank balance sheets via the TARP program. So here's another reason why banks may not be lending the TARP money - they are saving it for the rainy day about to hit commercial real estate mortgage portfolios.

By the way, the other big source of commercial real estate mortgages was the commercial mortgage backed securities (CMBS) market. The CMBS market has been effectively shut down having also been the source of funding for many of the residential mortgages now in default.

So there are the two reasons it will be challenging to find a commercial real estate mortgage in the near term. The commercial banks are saving their balance sheets for a rainy day and the CMBS market is closed.

If you're having difficulty 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 : real estate , private money loans , commercial real estate mortgages , bridge loans

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

Lunch with the Chairman

Surviving the financial crisis was the focus of a lunch presentation by Ivo Tjan, Chairman and CEO of CommerceWest Bank. Along with about 75 business owners and professionals, I attentively listened to Tjan explain the origins of the financial crisis, what was getting done in Washington to rescue the economy and what borrowers should know when asking for a business loan.

Here's a few of the points I found most interesting:

• Shortly after inauguration, the new administration and congress will likely pursue a second stimulus package ranging from $700 billion to $900 billion. It will be heavy on infrastructure spending, not tax rebates.
• Economic recovery is not likely to occur before fourth quarter 2009.
• Ben Bernanke is not afraid of taking the fed funds rate to zero.
• Only three of every ten banks currently have the capacity to make new loans.
• Banks are focusing more and more on a business' ability to generate cash flow to repay a loan than on collateral.
• Banks will understand if a borrower's current performance is suffering provided that it is performing better than its peer group and management has identified its challenges and is implementing a plan to address those challenges.
• To ensure access to business loans, borrowers need to have strong relationships with the decision makers at their respective banks.

Not a bad deal - a lunch which included food to eat and food for thought!

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 : CommerceWest Bank , Ivo Tjan , business loans , credit crunch

Happy Holidays?

I attended the holiday parties for two major business associations this week - the Commercial Finance Conference of California (CFCC) and the Orange County Chapter of the Association of Corporate Growth (ACGOC).

I've been a regular attendee at the annual CFCC holiday party whose membership is primarily asset based lenders. Attendance was down significantly at this year's event to about 200 attendees. A typical year draws well over 300 guests. Why the decrease? Possibly industry layoffs. With restructurings at CIT, Textron, GMAC, Capital Tempfunds and others, perhaps there wasn't as much to celebrate or no one left to celebrate. I also saw very few back office and administrative types compared to previous years. One lender said that the tightened purse strings led them to send only the deal people this year. I also noticed very few bankers in attendance - must have been back at the office filling out more reports on troubled loans.

This was my first year attending the holiday party for the ACGOC. This group's membership has a significant number of service providers to the M&A industry. Attendance was similar to the prior year according to the event coordinator. I spoke with many of the attendees - most acknowledged that their business had declined these last six months. Quite a few mentioned their clients were experiencing cash flow problems and the impact of the credit crunch.

Hope your holiday parties are filled with cheer. Should you 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 : ACG , Commercial Finance Conference of California , Commercial Finance Association

Banker of the Year

This year's recipient of Banker of the Year is Ken Lewis, Chairman and CEO of Bank of America.

Yes the same Ken Lewis whose comment about "stupid bankers" I wrote about in May 2007 and again this past spring. Here's the quote - "we are close to a time when we'll look back and say we did some stupid things".

The same Ken Lewis who is hoping he won't be considered one of those stupid bankers for Bank of America's acquisition of Countrywide and Merrill Lynch.

Two time winner Lewis joins past American Banker honorees including:

• Kerry Killinger, ousted CEO of Washington Mutual
• Ken Thompson, ousted CEO of Wachovia
• Angelo Mozilo, ousted CEO of Countrywide

Congratulations to Ken Lewis and here's hoping he doesn't suffer the fate as the stupid bankers listed above. I meant former honorees.

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 : Bank of America , Ken Lewis , Banker of the Year