Friday, December 28, 2007

Need Capital? Get to the Point!

I recently got into an exchange in an on-line forum for entrepreneurs over the best way to approach funding sources for capital. The question at hand - should the entrepreneur provide a detailed, 40 page business plan or a short, 3-5 page executive summary when asking for money?

The entrepreneur was told by his advisor from SCORE to use the executive summary to which I agreed. I'm a big proponent that small businesses prepare a request for money that doesn't exceed a few pages.

This recent article in Business Week entitled Attracting Venture Capital in 2008 provides entrepreneurs with similar advice from the founder of Rembrandt Venture Partners, Richard Ling.

The bottom line - focus on a good executive summary when seeking money (business loans or equity). But keep a detailed business plan in your hip pocket in the event you make it past the initial pre-screen.

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

Tags : business loan , debt , equity , venture capital , SCORE , Business Week , entrepreneur

Monday, December 17, 2007

Now that's a Credit Crunch!

According to a recent edition of The Economist, "back-of-the-envelope calculations from Goldman Sachs suggest that if banks suffer a $200 billion loss on subprime mortgage but want to keep their capital ratios at an average level of 10 percent, that would stifle lending by a whopping $2 trillion".

In other words, for each dollar of loan losses, banks might have to reduce loans by a multiple of ten times unless it can replenish its capital base.

CFO Magazine referenced a Bloomberg report which suggested that Wall Street's largest financial institutions alone could wind up writing down as much as $130 billion. The "largest" suggests that the number may not include some of the not so large U.S. financial institutions that have or will soon report subprime related losses. The same article suggests that the losses worldwide may be $300-400 billion!

Need help finding the right lender that may not be pulling in its horns as a result of the credit crunch? Read "Matchmaking for Business Loans" and give me a call!

Tags : credit crunch , business loans , CFO Magazine , capital ratios , subprime losses

Friday, December 14, 2007

I'm Swamped

I haven't been able to write for this blog in about a week. My phone has been ringing off the hook from small businesses seeking my help with obtaining business loans for expansion and working capital. I'm not complaining.

How to explain it? As you can see from my picture on the upper right, it's not my good looks. No, the upper right.

I can think of three possible factors in the increase in my deal flow.

  • Better marketing - This past summer, I re-branded my company to Funding 911. It quickly and more accurately defines what I do - I find business loans for companies with urgent funding needs, typically when the bank has said no. I don't just collect financial statements - my value is that I know which characteristics specific lenders are looking for in new loan opportunities, I develop creative solutions for my clients and I know how to tell the borrower's story the right way. As you can tell from some of my posts, I spend a lot of time meeting other professionals and getting the word out. I'm even getting calls from readers of this blog.

  • Fourth quarter activity - often business loan requests accelerate in the fourth quarter as companies are finalizing their budgets and forecasts for the new year. This year is no different.

  • Credit crunch - I'm hearing from both lenders and borrowers. It's tougher to get a business loan. Lenders are tightening their credit criterion and businesses are starting to experience reduced sales, margins and cash flow. The time has passed where a business owner can use their home equity as an ATM machine. I believe the credit crunch for small business is going to get a lot worse before it gets better.

So, what is keeping me so busy?

Factoring deals, vendor assurance agreements, purchase order financing, SBA loans and an equipment financing restructuring.

But, I'm not out of bandwidth yet. So if your small business needs help finding the right lender or telling your story the right way, read "Matchmaking for Business Loans" and give me a call!

Tags : SBA , small business , business loan , factoring , credit crunch , equipment financing , purchase order financing

Thursday, December 06, 2007

When Your Supplier Says No

Own a small or medium sized business that manufactures or distributes products to other businesses?

With the credit crunch gaining steam, chances are that your customers are taking a little more time to pay your invoices. Depending upon your working capital situation, you may be falling a bit behind on paying your own suppliers.

What will you do if your suppliers then cut off your credit leaving you without the ability to ship product to creditworthy customers?

This was exactly the predicament facing a distributor of safety products who sells to businesses, municipalities and government agencies. Fortunately for this business, their accountant was recently introduced to Funding 911 and gave them my phone number.

In less than a week, Funding 911 arranged for a vendor assurance letter and a factoring facility. Knowing it would receive the first proceeds from the factoring of the invoice, the supplier has agreed to ship product to fulfill three major purchase orders enabling the distributor to significantly grow its business.

The vendor assurance letter also enabled the distributor to avoid the costs of purchase order financing which can take a bite out of your margins.

Do you need help finding the right lender who can come up with a fast, creative and cost effective financing solution for your business? Read "Matchmaking for Business Loans" and give me a call!

Tags : factoring , accounts receivable , vendor assurance letter , working capital , cash flow

Tuesday, December 04, 2007

Is the Other Shoe About to Drop?

On November 8th, the credit crunch in California was the hot topic at the Milken Institute. The panelists for the evening suggested that one of the other shoes that could drop that could exacerbate the credit crunch would be an implosion in the commercial real estate markets.

Now less than a month later, the LA Times has suggested that a chill has spread to commercial real estate and prices are beginning to fall.

The culprit? No more easy money from the commercial securities market.

Much of the inexpensive credit for investing during the recent price run-up came from commercial mortgage-backed securities, which are pools of loans secured with commercial properties. They are traded like stocks, providing liquidity and diversification to investors and access to capital for lenders.
Sound familiar?

According to the article, commercial mortgage-backed securities funded about 35 percent of purchases during the peak this year.

The article does not mention any increase in loan defaults as a cause of a credit crunch in the commercial real estate markets. Instead, the article suggests that other collateral-backed securities may also be seizing up as a result of fallout in the residential subprime markets. I've recently seen hints in the broader business press that a similar crunch may be felt by the auto loan and credit card receivables collateral backed securities markets in the not too distant future.

Don't forget - I have a source offering bridge real estate loans in California at very attractive rates. These loans can be used by borrowers without strong credit profiles and for creditworthy borrowers who need to close their deal quickly.

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 , commercial real estate , bridge loans , subprime

Monday, December 03, 2007

Piercing the Corporate Veil

Last week, I listened to a presentation by Jim Hinds and Paul Shankman from the Law Offices of James Andrew Hinds, Jr. on whether or not an individual is personally liable for the acts of their corporation.

This issue is of significant concern to a lender when it provides a business loan. The lender needs to determine whether or not the corporation is a legal entity separate and distinct from its stockholder when evaluating the likelihood of repayment of the business loan. This may very well determine whether or not the lender requires a personal guarantee of the business loan obligation from the shareholder.

However, even if you did not provide a personal guarantee of the business loan obligation, you could be held responsible for its repayment by a court if you don't correctly conduct your business affairs.


Under the alter ego doctrine, if a corporation is used to perpetuate a fraud or accomplish some other wrongful purpose, a court may disregard the corporate entity and hold the individual who controls the corporation liable for the corporation's acts. This is known as "piercing the corporate veil".

Hinds and Shankman pointed out there are some important steps one can take to prevent a court (or lender) from holding a business owner personally responsible for the acts of their corporation.
  • Keep corporate formalities - have corporate meetings, maintain minutes, pay business taxes or fees as appropriate.
  • Don't commingle assets and keep separate corporate records and financial statements.
  • Document shareholder loans properly and in a timely manner.
  • Don't personally guarantee a corporation's debts.

This last one is pretty hard to avoid for almost all small businesses and many medium sized businesses.

There is no absolute protection from an alter ego claim. Following these and other steps recommended by Hinds and Shankman will greatly reduce the likelihood that a business owner will be held liable for the acts of their corporation or LLC.

Jim Hinds and Paul Shankman can be reached at 310-316-0500 if you would like to request a copy of their presentation or to ask them any questions.

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

Tags : piercing the corporate veil , business loans

Thursday, November 29, 2007

Lenders Tighten Flow of Credit

The New York Times reported today that business loans flowing to American companies are drying up at a pace not seen in years based upon data from the Federal Reserve.

The Federal Reserve continues to closely monitor this credit crunch and may again respond by lowering interest rates at its December meeting.

Couple of key points in the article:
  • Borrowers with strong relationships with their banks are more likely to get approved for business loans.
  • If your industry is tied to real estate, automotive or other cyclical businesses, it will be more difficult to attract financing.
  • Half of American jobs come from small business who are considered by lenders to be more risky and thus more likely to suffer from the credit crunch.
  • Companies with collateral and a track record of cash flow will still have access to capital, often at increasingly favorable terms.
  • As the effects of the credit crunch unfold, alternative lenders including asset based lenders and community development groups like the Pacific Coast Regional Small Business Development Corporation will find more borrowers knocking on their doors.

If the credit crunch has already become a bit too close to home for your business, be prepared to consider the lenders who provide funding secured by purchase orders, accounts receivable and equipment. In some cases, the cost of these funds will be more expensive than traditional bank funding. Just remember, it's not necessarily forever - when the economy improves, your business may once again generate the cash flow necessary to obtain a bank loan.

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

Tags : New York Times , credit crunch , small business loans , cash flow , asset based lenders

Monday, November 19, 2007

California Capital Marketplace November Meeting

The California Capital Marketplace monthly meeting continues to attract a very stimulating mix of senior executives and professionals with at least 15 years of experience in areas including lending, investment banking, accounting, international trade and legal.

The November meeting featured a case study by Kevin Shultz of FTI Capital Advisors. Shultz described a situation where his team was retained to find capital for a struggling company in the fashion footwear business. The deal was named a 2006 finalist by The M&A Advisor for both the Middle Market Deal of the Year and the Consumer Products Financing of the Year.

The closed financing was very creatively structured and encountered many challenges and twists and turns over the course of many months. The efforts of FTI Capital Advisors clearly points out the value of a good intermediary whether it be for the small, middle or large corporate markets. FTI Capital Advisors brought in the right lender and helped the borrower present its story and proposed structure in a compelling way.

Shultz pointed out that given the change in the capital markets over the last six months, this deal would be hard pressed to close in the current credit environment. The borrower has also returned to some of its previous habits of bad decision making once again proving that the definition of insanity is making the same mistakes and expecting different results.

Here's a couple of quick comments from the roundtable discussion which followed:
  • The M&A markets are slowing down across the board as investors are waiting to see what direction the economy heads in 2008.
  • Both lenders and investors are focusing more on fundamentals - code word for "cash flow".
  • Here's the scariest one. No one really knows the extent of the subprime mess and the potential losses to be absorbed by lenders.
  • Expect a bumpy ride for the next 12 - 18 months. According to one intermediary, his phone is ringing quite a bit more these days. I'm experiencing the same.
  • The hedge funds still have lots of money and have to put it to use.

I'll be taking the rest of this week off to travel for Thanksgiving break. Wishing all of you a joyous start to the holiday season!

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

Tags : California Capital Marketplace , FTI Capital Advisors , cash flow , business loans

Wednesday, November 14, 2007

Early Success for Patriot Express

I received a call last night from a military veteran seeking assistance in obtaining financing for his start-up business. I suggested he consider the SBA Patriot Express program and learned he wasn't aware of its existence. He expressed surprise that I even asked him about being a veteran. As a matchmaker for business loans, it's my job to look for all possible angles that may help my client get the most cost effective financing that might be available.

As a result of this call, I decided to visit the SBA website to learn about the latest development for the Patriot Express Program. Here's what I found.

In the four months since its launch, the U.S. Small Business Administration’s SBA Patriot Express Loan Initiative has produced more than 500 SBA guaranteed loans amounting to $51 million, with an average loan amount of nearly $102,000.

The number of participating lenders is growing daily with more than 700 nationwide currently underwriting Patriot Express loans on much more flexible terms than offered in the SBA's standard 7(a) loan programs.

Patriot Express is available to military community members including veterans, service-disabled veterans, service members leaving active duty, Reservists and National Guard members, current spouses of any of the above, spouses of active duty members, and the widowed spouse of a service member who died during service, or of a service-connected disability.

By the way, one of my favorite funders has just changed jobs and is heading up an office for an SBA participating lender - he's been told to go out and aggressively seek new Patriot Express loan opportunities on a nationwide basis.

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

Tags : Patriot Express , military veteran , SBA , 7(a) loan

Monday, November 12, 2007

Credit Crunch in California

The market for business loans is placing renewed emphasis on cash flow and business loan interest rate spreads are returning to historical levels.

This was just one of the juicy tidbits on business lending I heard at the November 8th event at the Milken Institute which focused on the credit crunch in California resulting primarily from the implosion of the residential subprime markets.

It was an impressive panel including California Secretary of State, Debra Bowen, and representatives of Wells Fargo Bank, The Milken Institute, Ares Capital Management and the private equity firm of Riordan, Lewis & Haden.

Here's what else I heard...

  • Underwriting of loans in the last few years has not been prudent to be sustainable in the long term. Too many marginal companies have been able to borrow at rates that did not compensate lenders for the risk entailed. Why? In my opinion, too much money and stupid bankers.
  • In the future, business borrowers will need to do a better job of showing their ability to repay a loan obligation from cash flow generated by the business. Notwithstanding the reduction in prime rate, small businesses might pay more to borrow money.
  • According to one panelist, the recent credit crunch experienced by large business borrowers has not been driven by performance issues such as non-payment or covenant defaults. In my opinion, this was one of the more curious comments of the night. The reason there haven't been many covenant defaults is that "covenant light" and "PIK" deals have made defaults very unlikely.
  • Other shoes that could drop and exacerbate a corporate credit crunch in California include an implosion in commercial real estate loans, a possible 10% across the board budget reduction for the state of California (worry about the multiplier effect), more writedowns in the residential subprime market by major lenders and a softening of the job market.
  • Government intervention in a credit crunch must be done very carefully, if at all. Too often when the government has intervened in the past, it has merely delayed the day of reckoning. Market forces will (and should be allowed to) work and determine who survives. Yes, some businesses will get hurt in the process. But that's capitalism.
While the panel all seemed bullish on California for the long run, it was predicted that the next 18 months could be quite challenging for business borrowers. Small business could find itself squeezed for capital to grow and survive.

If I heard her correctly, Madame Secretary Bowen stated that small businesses in California provide 88 percent of the state's jobs. If you're a small business in California, be prepared for a tightening of credit.

An impending credit crunch have you worried? Need help finding the right lender or telling your story the right way? Read "Matchmaking for Business Loans" and give me a call!

Tags : California , small business , credit crunch , Milken Institute , cash flow , business loans

Wednesday, November 07, 2007

Fed Sees Credit Tightening

Credit to businesses of all sizes is tightening according to the October 2007 Senior Loan Officer Opinion Survey on Bank Lending Practices published by the Federal Reserve.

In the October survey, domestic and foreign institutions reported having tightened their lending standards and terms on commercial and industrial (C&I) business loans over the previous three months.

About one-tenth of respondents—a fraction similar to that in the July survey—reported tightening their lending standards on C&I business loans to small businesses, and about one-fifth of domestic institutions reported charging higher loan rate spreads on such loans.

Two things to note.

First, this was the Fed's first poll of loan officers since the summer credit crisis. The next poll may be more telling once its known how many more Merrill Lynch and Citigroup type fiascoes are uncovered.

Second, the poll results were received prior to last week's reduction of key benchmark interest rates that led to a reduction in the prime rate by commercial banks. With the Fed reductions, banks may take a hint not to constrain the availability of credit to small business more than necessary.

All in all, it's another good data point, but not yet conclusive evidence of a system-wide tightening of credit for small business.

But keep my telephone number handy just in case a credit crunch becomes too real for your small business. Probably the only credit crunch you really care about.

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 , small business , Federal Reserve , business loans

Tuesday, November 06, 2007

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

Monday, November 05, 2007

Five Tips from B of A on Credit Cycle

This edition of CapitalEyes from Bank of America Business Capital offers businesses five tips on How to Navigate the Current Credit Cycle. I've written about most of them in the past, but it should be pretty obvious which one of the tips I like reading the most.
  • Provide your lenders with all the information they need to understand your business and be your advocate in front of their senior management.
  • Keep up with both market conditions and local conditions.
  • Seek the advice of a well-informed and active credit arranger.
  • Especially when times are tough, it's about relationship - make sure you've got a good relationship with your lender.
  • Manage your liquidity and collect your cash.

It doesn't matter if your business is small, medium or large, these are five tips worth thinking about as the credit cycle changes. Especially the third one.

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: Tags : Bank of America , Capital Eyes , business loans , credit cycle

Thursday, November 01, 2007

SBA Gets Grilled by Senate

The SBA just announced its sixth straight year of record loan volume, but the U.S. Senate still found plenty to question during the SBA's recent visit to Capitol Hill.

I'll let you read the article, but here's what caught my eye.

The SBA estimates that its 7(a) loan default rate is 6.96% over the 25 year life of the loans. No one seems to be sure if that's comparable to loan default rates on commercial loans from FDIC-insured banks. But according to the article, the default rate for commercial loans from FDIC-insured banks is currently 1.5% a year.

Just because a loan goes into default doesn't mean the entire loan is a loss, but that seems to be a pretty high default rate. As a taxpayer, I think that the SBA should be doing a better job of managing its risk.

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

Tags : SBA , 7a loan , small business

Wednesday, October 31, 2007

Happy Halloween!

May the lenders you approach only offer you treats and no tricks! And beware of black cats dressed as pumpkins!

If your lender offers you a trick rather than a treat, read "Matchmaking for Business Loans" and give me a call!

Related Tags:

Angel Investors - Not Just Tech Anymore

Angel investor groups are expanding their investment outlook beyond tech and Internet start-ups according to The Wall Street Journal.

To diversify their portfolios and accommodate their investors varied backgrounds, angel groups are branching out into food and beverage makers, consumer product firms and retail stores.

Some of the angel investor groups are even focused on a specific mission. Golden Seeds makes angel capital investments only in companies where a woman holds a central role. 12 Angels Investment Group invests only in firms that help prevent or treat addictions, such as alcoholism.

One thing that has not changed - if you're seeking an investment from an angel investor group, you must still have a viable business model with an exit strategy so that the angel investors can cash out and earn their expected return.

For more information on angel groups including a directory, the article references the Angel Capital Association.

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

Tags : angel investor , Golden Seeds , venture capital , Angel Capital Association

Tuesday, October 30, 2007

Bernanke on Microfinance

Small business lender ACCION Texas is organizing its first Summit on Microfinance in the country and has received a commitment from Federal Reserve Chairman Ben Bernanke to deliver the keynote address.

The summit will be held Nov. 6-7 at the Henry B. Gonzalez Convention Center. Bernanke will deliver his presentation on Tuesday, Nov. 6, at noon. ACCION officials are anticipating upwards of 1,000 people in attendance. He will highlight the importance of microfinance and microenterprise to the national economy.

"Microfinance is a proven and effective tool for getting capital to entrepreneurs," says ACCION Texas Chairman Ken Olson. "The summit will highlight the great work currently underway and, more importantly, bring together leaders to discuss ways to expand the impact of microfinance in the U.S.".

As a microlender itself, ACCION Texas works to provide access to capital to small businesses that do not have access to loans from traditional banking sources.

"ACCION Texas helps low-income people start or grow a business and develop financial knowledge and skills, which, in turn, builds assets and long-term financial stability," founding President and CEO Janie Barrera says.

"ACCION Texas invests in people by giving them a hand up not a hand out," she says.

The San Antonio-based microlender has 11 offices in nine cities in Texas.

Need help finding the right lender or telling your story the right way?

Read "Matchmaking for Business Loans" and give me a call!

Monday, October 29, 2007

Bank of America - Top SBA Lender

Bank of America announced it has been named the top Small Business Administration (SBA) lender in the nation for the tenth consecutive year. Bank of America made 10,878 SBA 7(a) loans with an average amount of $30,863 and totaling $335.73 million to entrepreneurs during the 2007 SBA fiscal year, which runs from October 1, 2006 to September 30, 2007.

I don't know the source on the raw data so I can't tell you how Bank of America supports this claim to a tenth consecutive national championship. It's unclear if this national championship includes the SBA 504 program for real estate loans.

One thing seems clear. With an average loan amount of just over $30,000, Bank of America is serving small business.

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

Tags : SBA , Bank of America , 7a loan , small business

Tuesday, October 23, 2007

SBA Loans - Sixth Year of Record Growth

For the sixth consecutive year, the U.S. Small Business Administration (SBA) set records for the number and volume of the loans it guaranteed in its fiscal year 2007, which ended September 30th.

The SBA approved 110,275 loans totaling about $20.6 billion under its two primary small-business loan programs (the 7(a) and 504) in 2007, compared with 107,233 loans worth $20.25 billion in 2006, according to a news release.

The total does not include an additional $2.65 billion in venture capital funding provided by SBA-licensed Small Business Investment Companies to more than 2,000 small businesses.

About 99,600 loans were approved under the 7(a) loan guaranty program, which most often is used for working capital. That is up from 97,290 loans in 2006. Although the total number of loans increased, the dollar volume fell slightly to $14.29 billion from $14.52 billion.

The SBA approved 10,668 loans worth $6.31 billion under the 504 program, up from 9,943 loans worth $5.73 billion in 2006. Loans under this program are used for the purchase of real estate and fixed assets.

Nearly a third of all loans went to start-ups, and a third went to minority borrowers. In fact, loans to minority groups increased by 7 percent, with the largest increase coming in loans to African Americans, which increased by 23 percent, from 7,238 to 8,903. Smaller volume increases were recorded to business owned by Asian Americans, Native Americans and women, while loans to Hispanics declined slightly. Overall, loans to businesses in under served areas amounted to more than 36 percent of total loan approvals.

No details were included in the press release about the new Patriot Express loan program targeting military veterans.

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 , Patriot Express , 7a loan , 504 loan , working capital , business loan , small business

Monday, October 22, 2007

Bank Loans Jump Through the Roof!

According to today's Wall Street Journal (Prior Loans, Future Pain?), commercial and industrial business loans has risen at a 52% annual rate since late July. Based upon Federal Reserve data, this increase in business loans is the fastest growth rate for an 11-week period in more than 30 years.

The Wall Street Journal explained this increase in part on banks having to extend loans for M&A activity for which they had committed, but expected to lay off to investors and never hold on their books. Interestingly, the only small business mentioned in the article said that the bank said no - Bank of America declined Morgan Bros. Bag Co. when it requested an increase in its line of credit.

Sure would like to see the report the Journal used as a basis for this report - it's not consistent with the information I hear directly from my bank funding sources in the small and middle markets.

What have you heard?

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

Tags : business loans , credit crunch , small business , Wall Street Journal , bank loans

Friday, October 19, 2007

CFO Prison

I'm always interested in the search terms used to find my blog.

One of the more interesting search terms used today was "CFO prison".

That reader found my posting "CFOs - Pinstripes or Prison Stripes?"

Very interesting...

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

Tags : CFO , CFO prison

Monday, October 15, 2007

We Don't Do Stupid

I recently served on an access to capital panel with Michael Banner, president and CEO of the Los Angeles Local Development Corporation (LDC). A community development financial institution (CDFI), the mission of the LDC is to provide business loans to people and communities under-served by traditional financial institutions.

Targeting distressed communities and under-served ethnic groups (such as Latinos, African Americans and Asians) in the greater Los Angeles area, Banner and his team use a common sense approach to structuring creative loans to solve complicated problems a typical bank might shun. While the LDC may go where others fear to tread, Banner is an experienced banker and proudly claims that “we are prepared to take more risk, but we don’t do stupid”.

Since assuming the leadership role in 1995, Banner has grown the LDC’s assets to over $14 million from $4 million by focusing on business loans which are catalytic in nature. The impact to the community is even greater than the numbers would suggest as LDC often convinces other, more hesitant lenders and socially responsible investors to participate once it takes the lead. The loan amounts range from $25 thousand to over $5 million. The interest rates charged on all loans reflect the risk entailed and are often competitive with interest rates charged on SBA loans – don’t expect to see interest rates lower than what a bank might charge but Banner does say, “we don’t pretend, we just lend”. Success stories include loans to Homeboy Industries’ Silkscreening Division, the Big Saver Foods Shopping Center and Mao Foods.

With a double bottom line focus, LDC always asks how much of a difference the loan makes to the community. As real estate and fixed assets are often a visible symbol of that impact, real estate loans and term loans comprise almost 75 percent of LDC’s total loan portfolio. The balance of the loan portfolio consist of a wide variety of credits ranging from revolving lines of credits, equipment loans, and asset based working capital facilities to middle market borrowers, but LDC often leads participations or co-lends with other lenders to meet the larger borrowing needs of its clients.

LDC can help a business with its business loan requirements in a number of ways and thus serve many more borrowers than one would think given its small number of employees. In addition to being a direct lender, LDC can bring in other lenders as partners, syndicate entire loans and also serve as an advisor in structuring tax exempt loans for the acquisition of business real estate. Well connected within the financial community, LDC can direct borrowers to the right place even when they are not the solution themselves.

Don’t live in the Los Angeles area? More than 1,000 CDFIs operate in low-wealth communities in all 50 states and the District of Columbia. CDFIs can be banks, credit unions, loan funds, venture capital funds, community development corporations or micro enterprise loan funds. All are united in their primary mission of community development. Check out the CDFI website for a similar organization in your neighborhood!

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

Tags : Los Angeles LDC , Michael Banner , CDFI , business loans , SBA

Wednesday, October 10, 2007

Don't Call Them Vultures

According to the LA Times, the good times may be back for the vulture lenders. Oh, excuse me. I meant the investors in distressed debt.

The economic turmoil caused by the sub-prime meltdown and ensuing (and don't call it a) credit crunch, has led to happier times for those in the "loan to own" industry. They expect to be quite busy for some time to come.


Stupid businessmen and the stupid bankers who gave them loans they could never realistically expect to pay back, according to one of the distressed debt investors.

Worried about how to identify which lenders are vultures? Read here!

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

Tags : vulture lender , distressed debt , credit crunch , LA Times , business loans , cash flow problems

Tuesday, October 09, 2007

Daily Breeze - A Penchant for Procuring Loans

Guess which matchmaker for business loans was featured on the front page of the business section in today's Daily Breeze?

That would be Funding 911!

Daily Breeze columnist Muhammed El-Hasan writes a weekly feature highlighting various businesses in the South Bay. The newspaper has a circulation of approximately 70,000 readers in 14 communities located from Los Angeles International Airport to the Port of Los Angeles in San Pedro.

"A Penchant for Procuring Loans" does a great job of explaining how Funding 911 helps companies in need of business loans typically when the bank says no. Usually, these companies are experiencing hypergrowth or might be experiencing cash flow problems. These companies always have assets to offer a lender as collateral including accounts receivable, inventory, equipment and real estate.

If I could make one little change in the article, it would be the following. In some cases, Funding 911 can close business loans in as little as a few days!

The article is available online at the Daily Breeze website.

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

Tags : matchmaker for business loans , business loans , Daily Breeze , Muhammed El-Hasan , Funding 911 , cash flow problems , working capital

Friday, October 05, 2007

PNC - No Credit Crunch

It's official. According to the Fall 2007 Economic Outlook survey of PNC, the bank that small business loves, there's no credit crunch.

According to this just released survey, 87 percent of small and mid-sized business owners who need credit say availability is the same or easier than three months ago.

Approximately 55% of 1,344 owners contacted were from PNC's primary footprint with the balance of those surveyed coming from across the nation.

In case you weren't contacted and the credit crunch is real for your small business, check out Tips for Weathering a 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 : PNC , credit crunch , small business

Wednesday, October 03, 2007

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

Monday, October 01, 2007

You Don't Qualify

You don't qualify.

These words were still ringing in the ears of a food industry entrepreneur when recently introduced to me by one of the local economic development offices. The still lingering words came from the mouth of a loan broker without further explanation. The loan broker probably looked at this emerging manufacturer of specialty snack foods and decided the company was too small to justify his time.

I saw it differently.

The company had a product that already had market acceptance. It was being sold in two chains of upscale grocery stores including one private label arrangement. Two other major national grocery chains and a major national camping equipment chain had orders pending. Distributors had already agreed to terms. With the right funding solution, this company could grow into a multi-million dollar revenue company in a matter of months.

A few days later, one of my funding sources approved both purchase order financing and factoring of accounts receivable. It's a perfect solution to enable a small business with hyper-growth potential to get the rocket fuel it needs for take-off.

The business owner is overjoyed and has told his sales force to go full steam ahead in pursuit of new orders and accounts.

By the way, the small business owner is also a minority who may qualify for certain advantageous loan programs down the road. In the spring, we'll revisit his situation and see if other asset based funding solutions may be a good fit once he's established his borrowing credentials and created a well diversified customer base.

Has your lender or loan broker said the words, "you don't qualify"? Read "Matchmaking for Business Loans" and give me a call!

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Friday, September 28, 2007

There's a New Hispanic Bank in Town

There's a new bank in town and this time it's focused on the ever growing target market of Hispanic owned businesses.

Recent Hispanic-owned bank start ups include Security One Bank in the Washington D.C. area, AztecAmerica Bank in Chicago, Solera National Bank in Denver, Plaza Bank in Seattle and two banks in the greater Los Angeles area - Americas United Bank in Glendale and Promerica Bank in downtown Los Angeles.

Why this surge? According to the October 2007 issue of Hispanic Business Magazine, Hispanic owned businesses are looking for a real relationship with their banker and not just lip service. These businesses are not just looking for the special Hispanic targeted marketing programs of a bigger bank.

With the recent turmoil in the credit markets, every business should be focusing on building and maintaining its relationship with its banker.

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

Tags : Hispanic , Hispanic Business , Americas United Bank , Promerica Bank

Monday, September 24, 2007

Collect Your Cash Faster!

Today's Wall Street Journal provides readers with three ideas on improving their collections of cash. As I've written in the past, money tied up in working capital is not available to grow the business.

The first idea was to "cut off rogue customers". If you provide open credit terms, you're a lender. You won't find a bank in town that will extend a loan to a business that won't pay it back on schedule. Why should you? Each day the collection of accounts receivable is delayed reduces your profit margin. As Jim Slack, Jr., of Slack & Co. Contracting, reminded readers, don't confuse volume with profits.

The second idea is to enlist the sales team. Nicholas & Co., a large food distributor, reduces its sales rep's commissions if their customers don't pay on time. I can see why a sales rep might not like this one, but it's improving cash flow. The company estimates that it has $15 million more in the bank each day as a result of faster payments. Again, don't confuse volume with profits.

The third idea is to formulate a real credit policy. Set up guidelines within your company and stick to them. It is acceptable to provide some clients with shorter or longer than others - you don't have to give everyone net 30. Consider your margins and the client's payment record in considering deviations from your policy.

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

Tags : Wall Street Journal , working capital , cash flow , accounts receivable

Friday, September 21, 2007

Lack of Financing Biggest Stumbling Block

The lack of risk management plans among smaller firms pursuing overseas expansion may be scaring lenders away according to Mary Leone of Here are a few highlights from the full article.

According to research by RSM McGladrey, small and mid-size companies say that the biggest stumbling block to expanding overseas is "lack of financing," specifically obtaining bank loans. Moreover, the funding problem is directly tied to risk management, asserts Tom Murphy, executive vice president of RSM's manufacturing and wholesale distribution practice.

Of 947 senior executives polled by RSM McGladrey, 54 percent, most from small (under $15 million in revenues) and mid-size (between $15 million and $499 million) companies, admitted to having adopted none of what RSM considers the three basic risk management processes. Those missing pieces leave smaller companies "vulnerable" to fraud, non-compliance with regulations, and lack of preparedness for catastrophic disasters, says Murphy, risks that lenders shun.

The three basic risk processes of a good risk management plan according to RSM McGladrey are: an independent audit committee to oversee risk management activities; a corporate risk management assessment process; and an internal audit function to manage the risk.
It all boils down to giving the lender comfort on how its loan will be used and how it will be repaid.

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

Tags : CFO Magazine , RSM McGladrey , business loans , risk management