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