Wednesday, September 27, 2006

Matchmaking for Business Loans

Part of the feedback I received from Brian Brown of the Pajama Market was to tell you how I help small business owners obtain business loans. A great idea!

I run a matchmaking service for borrowers. What exactly does that mean?

Who calls me and why?

The phone rings with calls from companies of all sizes across the United States and their trusted advisors when the bank says “NO” to a request for a business loan. Frustrated, anxious and unsure of which way to turn, they need someone who can identify the right funding source and can help them tell their story in the right way so a lender will say “YES”. And they usually need this done fast – as in yesterday!

What’s the first step?

Every deal receives a free, no obligation pre-screen. Feedback about lender interest and indicative terms is often provided to the borrower as little as 24 to 48 hours.

If there’s no interest by lenders or by the borrower, we bid one another adieu and move along. I won’t take a deal if I can’t identify interested lenders during the pre-screen process.

When do I have to hire you?

If the borrower likes what they hear about interested lenders and indicative rates, then the borrower signs a consulting agreement with me. The key term - no funding, no compensation. I typically get paid only a “success” fee at closing – however, in a few limited cases of a very risky deal involving significant amounts of my time, I may request a retainer that will be credited against any success fee. By the way, on purchase order financing, factoring and some leasing transactions, I may not charge a success fee at all.

What services do you provide?

After my contract is signed, I officially become your advocate in obtaining the best deal available for a business loan. As your advocate, I offer a variety of services including preparation of a written “request for money”, introduction to interested lenders, review of any proposals received from the lenders, support in the due diligence process and assistance in negotiation with the lenders.

How long does the entire process take?

The time to complete a business loan funding varies by the type of funding and how quickly the borrower can provide the information needed by the lender to complete due diligence. For example, a factoring facility can be completed in less than a week with subsequent fundings taking place same-day. A lease financing for less than $100 thousand can be completed in as little as 3-4 days. An SBA loan might be funded within three weeks. A hard money loan secured by real estate might close within 10 days. Larger, more complex deals can require up to 30 days and longer.

Who funds your deals?

My business loan transactions are all funded by rock solid, financial institutions including commercial banks, factors, purchase order financiers, asset based lenders, commercial finance companies, leasing companies and real estate lenders. I am not a direct lender!

These lenders are looking for deals of all sizes with companies from most industries. Many of these lenders will fund business loans for companies with less than perfect credit. A little risk doesn’t scare them as long as there is strong collateral to support the business loan. The best collateral includes purchase orders, accounts receivable, inventory, equipment and real estate (both personal and commercial). If you don’t have any collateral, I probably can’t help you.

What interest rates do your lenders charge?

The rates vary by deal, but each lender will charge a “market” rate based upon the risk profile of the proposed business loan transaction. I will discuss the rates with you during the pre-screen process.

What if I’m talking directly to a lender or with another broker?

If you’re already talking directly to a lender, keep talking and call me if they say “no” or if they don’t give you acceptable terms.

If you’re already working with another broker, keep working with them and call me if their funding sources say “no” or if they don’t give you acceptable terms. If they have funding sources that can give you a “market” deal, it’s unlikely I can beat it. Furthermore, lenders are often reluctant to put forth effort and resources on a deal when it’s not under the control of one broker or intermediary.

What guarantees do you provide?

I guarantee that you’ll get a great advocate for your business loan request and be quickly introduced to lenders who want to lend money to your business! The lender is the only party that can approve financing which is why I structure most of my assignments on a “success” fee only basis.

To find the best match for your business loan, feel free to call me at 310-371-4011!

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