Tuesday, January 29, 2008

Lease Financing Down in December

The Equipment Leasing and Finance Association's (ELFA) Monthly Leasing and Finance Index was just released for December 2007 and the numbers are down. While new equipment leasing business volume for December 2007 totaled $10.6 billion, this represents a decrease in of seven percent when compared to December 2006.

Why was equipment leasing business down?

The president of ELFA suggested a possible pullback on capital investment by businesses due to uncertainty in the economy as a whole.

Nice way of saying recession approaching quickly.

"The market is moving towards a better alignment of risk and return" according to the president of one major equipment leasing company.

Nice way of saying credit crunch not far behind.

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 , app only , equipment finance , ELFA

Monday, January 28, 2008

Top SBA Lenders in Los Angeles

According to The Los Angeles Times, the dollar volume of SBA loans in Los Angeles was down for the fourth quarter of 2007 while the number of loans increased. Interestingly, the number of SBA loans decreased nationwide while the dollar volume increased. Certainly adds a bit of intrigue as to whether the SBA will be stepping up to help small business through the credit crunch.

So who were the top SBA lenders in the Los Angeles district based upon number of loans? The top five included:

  • Innovative Bank
  • Bank of America
  • Washington Mutual
  • Capital One
  • Wells Fargo

Innovative Bank tripled its loan numbers compared with a year ago to replace Bank of America at the top of the heaps. According to The Times, Innovative Bank tends to make a lot of small loans (average of $22.6 thousand in 4th quarter) and is still implementing a number of changes resulting from a cease and desist order issued by the FDIC this past April.

The article points out that SBA lenders around the country are complaining about a new oversight fee that the SBA started charging this past fall. I wonder how much of that fee is being somehow passed through to borrowers.

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 , Bank of America , Innovative Bank , small business , credit crunch , Los Angeles

Wednesday, January 23, 2008

Business Loans - Where are the Wheelbarrows Now?

The impact of the credit crunch on small business was featured in today’s The Wall Street Journal on both Page One and the front page for Section C (subscription required).

As one economist described the situation, no longer are there wheelbarrows of money sitting out on the street unattended. Business owners commented that it takes longer to arrange a business loan and a borrower must be better prepared. A few pages of financial statements won’t get you a loan anymore.

Small businesses with less than perfect credit are being hit especially hard. If one can even find an interested bank, the banks are lending less money and taking more collateral. In fact, some borrowers are more focused on keeping the business loans in place rather than trying to obtain new credit.

Will today’s reduction (with the possibility of more to come) in interest rates by the Federal Reserve make a difference in small business lending by banks? Maybe.

The demonstrated ability to repay the loan from cash flow will be the focus of every banker reviewing a business loan application. Collateral including accounts receivable, inventory, equipment and real estate will be carefully evaluated to ensure a secondary source of repayment. Make sure your request for money is properly presented and airtight. Ask around and find out the names of bankers and other lenders who may be a good fit for your credit profile.

The last credit crunch for business lasted three years (1989-1992) – I don’t expect the current version to go away quickly. The bigger question being asked is “how deep and how long”.

Not convinced there’s a credit crunch? About two weeks ago, I noticed that The Wall Street Journal now has a page entitled “Credit Crunch”.

Remember, if you’re not bankworthy, there are other financing solutions that are available including asset based revolvers, factoring, purchase order financing and equipment leasing. Some are only marginally more expensive than bank debt. Others – well, it is a risk versus return formula.

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 , credit crunch , business loans , small business

Tuesday, January 22, 2008

Wells Fargo on the Federal Reserve Rate Cuts

Wow! A cut in interest rates from the Federal Reserve in between official meetings! What do you suppose that means?

Here are a few excerpts from an email that I received this morning from Scott Anderson, Senior Economist of Wells Fargo Economics.
  • The Fed is responding to an economy and financial system going into cardiac arrest. This will require emergency room style policy action from the Fed.
  • We now place about a 50 percent probability of an economic recession in the United States within the next 6 months, if not sooner.
  • The reason for the Fed rate cut had more to do with continued deterioration in the U.S. economic outlook, and the potential for further tightening of credit for consumers and businesses.
  • Large money center banks have virtually frozen their balance sheets, reluctant to lend even to good credit.
  • Our current view is that the Fed will cut another 75 basis points by the end of April, bringing the Fed funds target rate to 2.75.

Pretty self explanatory - strap your seat belts on tightly. Turbulence ahead.

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

Tags : Wells Fargo , Federal Reserve , credit crunch , interest rates , business loans

Monday, January 21, 2008

No Hats, No Hoods, No Sunglasses

Apparently, the state of Florida is having some problems with the bank hold-ups and has put in some new rules to curb heists.

The program, dubbed "No Hats, No Hoods, No Sunglasses," stops short of denying service to clients wearing the offending clothing or accessories. Bank personnel for participating banks will direct those who refuse to remove hoods, hats or sunglasses to areas of the bank with more experienced tellers and heightened security.

I'm sure many of you may be at wits end when seeking a business loan. The credit crunch is likely to make the process of finding a loan all the more challenging.

A word of caution - be careful about how you dress when entering a Florida bank.

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

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Wednesday, January 16, 2008

Best Practices for the Coming Recession

Best practices recommended to your clients in anticipation of a recession was this month's discussion topic for a meeting for the networking group, Provisors, to which I belong.

In attendance were approximately thirty five professionals who all serve businesses in the manufacturing and distribution sectors. My fellow attendees work for investment and commercial banks, law firms, insurance brokers, marketing consultants and operations consultants to name a few. Each works closely with top level executives at their clients.

Here are a few of their suggestions on how to get ready to ride out a recession - many you've previously read here on my blog.
  • Diversify - don't get caught with too few customers or too few vendors.
  • Forecast your cash flow, not just your sales or profits.
  • Manage your working capital and keep a sharp eye on DSO, DPO and inventory turns.
  • Inventory is your enemy - keep it lean!
  • Develop a good relationship with your banker and share information regularly.
  • Fire your bad customers!
  • Develop a strong online presence to generate new sources of revenue.
  • Don't forget to pay attention to your human resources - invest in training and make sure you have succession plans that are current.

Funny how the majority of the recommendations focused on things that a banker will look at most closely in determining if a company is "bankworthy".

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

Tags : Provisors , PNG , cash flow , working capital

Monday, January 14, 2008

No Reduction in SBA Fees

Don't count on any reductions in SBA loan fees.

The SBA's $569 million budget for this fiscal year includes $69 million in congressional earmarks but doesn't include $80 million that could have been used to reduce fees on SBA loans. The House's original SBA funding bill included an extra $80 million in funding for the agency's 7(a) business loan program, a popular source of long-term financing for small businesses.

The SBA's budget for this year is a miniscule part of the $555 billion omnibus appropriations bill that the House sent to President Bush in December.

With all the candidates in both primaries focused on economic stimulus, someone at a town hall meeting or debate should ask them about a reduction in fees for small business loans guaranteed by the SBA.

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

Thursday, January 10, 2008

Good Times and Bad

A lender’s willingness to work with them during good times and bad is a CFO's most important consideration when choosing a lender for senior financing according to the latest CFO outlook commissioned by Bank of America Business Capital.

With a variety of markets experiencing a credit crunch and discussions of a recession increasing, you can bet this concern will remain at the top of the list for some time.

Banking - it's a relationship business!

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

Tags : Bank of America , Capital Eyes , business loans , credit crunch , CFO

Tuesday, January 08, 2008

Get Ready - Buyers Get Picky

According to The Wall Street Journal in "Want to Sell a Business? You May Not Be Ready", most small business owners trying to sell their business have not prepared their company properly for sale. With the changes in the marketplace and buyers getting picky, many sales will take longer than expected if they occur at all.

If your small business is not properly prepared, you will also face increasing difficulty in finding the most cost effective financing that may be available. Sixteen months ago, I noted that if you want to make it easier to obtain financing for your business, run your business as if it’s about to be sold. With dark clouds gathering in the credit markets, those words are equally valid today.

If you recall from September 2006, I invited Jim Biedenbender of BizValPlus to share with us The Ten Commandments for Selling a Business. I encourage you to go back and take a look - Jim's advice is right on target whether you're trying to find a business loan or sell your business. By the way, Jim Biedenbender of BizValPlus can be reached at 310-850-5014 if you need advice on preparing to sell your business or with a valuation.

And if you need help preparing your small business to approach the right lender or to tell your story the right way, read "Matchmaking for Business Loans" and give me a call!

Tags : small business , Wall Street Journal , financing , Jim Biedenbender , BizValPlus

Monday, January 07, 2008

Equipment Leasing Continues to Grow

Equipment financing and leasing was used to acquire almost $600 billion worth of equipment last year or almost 55% of all fixed assets acquired by businesses.

At a time when most borrowers and lenders were focused on closing year end deals and holiday parties, the Equipment Leasing and Finance Association released its 2007-2008 U.S. Equipment Finance Study which describes in detail how popular this funding mechanism has become to businesses large and small.

I'll let you read the entire report if you choose - here's what I found interesting.

  • The $600 billion estimate is triple the amount reported by lender surveys. That's a pretty big margin of error!
  • Equipment finance is somewhat concentrated geographically with the top five states representing 37 percent of the national market. California leads all states in the use of equipment finance, at $72.8 billion or 12 percent of the U.S. market. Texas, New York, Florida and Illinois round out the top five states.
  • One of the major factors to influence equipment financing methods is firm size. Small businesses are much more likely to finance equipment acquisitions out of available funds or cash and much less likely to utilize leases or term loans. Within the small business segment the dominant form of financing is through a line of credit, which includes the utilization of revolving balances available on credit cards.

Hopefully, this last point does not mean that small business is making the classic mistake of financing long term assets with short term money! Who am I kidding? I see that all the time!

For small businesses with a reasonably strong credit profile, there is a large number of leasing companies able to provide lease financing for amounts up to $100 thousand on the basis of a one page application. These "app only" financings are available for a wide variety of industries and equipment types. The largest "app only" program I have seen is for an amount of $250 thousand.

Need help finding the right equipment leasing company? Read "Matchmaking for Business Loans" and give me a call!

Tags : Equipment leasing , leasing , app only , equipment finance

Wednesday, January 02, 2008

Will Exports Impact Your Cash Flow?

In the last few weeks, I have seen articles in The Los Angeles Times, The Wall Street Journal and SMB Finance addressing the anticipated growth in exports for U.S. based businesses in 2008.

With the weak dollar making U.S. goods seem relatively inexpensive, small business is taking advantage of the opportunity to sell more of its goods and services abroad. While the information is a bit dated, SMB Finance notes that the amount of loans to small business by the SBA's Office of International Trade almost doubled in 2006 compared to 2003.

While many small businesses will find a willing partner in the SBA or commercial banks, some small businesses will see their cash flow suffer from an increase in accounts receivable to foreign buyers.

As I've written in the past, if you're extending credit terms to your customers, you're a lender. Take extra precautions when you're providing credit terms to foreign customers as your own funding sources may not be prepared to provide you with a loan secured by foreign accounts receivable. Or they might be willing to advance your loan, but only to the extent your customers are deemed bankworthy. Ask your lender in advance of providing terms to your foreign clients so you don't get caught short on the working capital needed to keep the doors open.

Need help finding the right lender who will help fund your foreign accounts receivable? Read "Matchmaking for Business Loans" and give me a call!

Tags : accounts receivable , exports , SBA , working capital , credit terms , small business