Wednesday, May 28, 2008

SBA - Experience Wanted

No, I'm not referring to the open position at the SBA now that Small Business Administration chief Steven Preston has been nominated to lead HUD.

These days, SBA lenders increasingly require a prospective borrower to have relevant experience before approving a business acquisition loan for either a franchise or a non-franchised operation according to New Jersey Biz.

In a pre-screen I just completed, each of the SBA lenders I contacted expressed concern over the prospective buyer's lack of industry related experience as part of their respective decisions to decline interest in the acquisition 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 : SBA , 7a loan , 504 loan , Steven Preston , SBA loan

Tuesday, May 27, 2008 - Why are SBA Loans Drying Up?

The newspapers have recently been filled with stories of how SBA loan activity has declined.

Why? The answers are many according to Robb Mandelbaum of who wrote "Why Are SBA Loans Drying Up?". Tighter underwriting standards, higher borrower fees, higher lender audit fees and fear of the SBA not honoring the guarantees.

Here's what I have experienced and heard directly from lenders...

Home equity has dried up and most prospective borrowers aren't offering any collateral. It is becoming rare to find a lender who uses the SBA guarantee to shore up a lack of secondary collateral. More and more it seems the lenders are underwriting to conventional loan standards and taking the guarantee as icing on the cake.

Given that much of the decline in loan activity is the SBA Express product which only offers a 50% guarantee from the SBA, this makes a lot of sense. A bank is more likely take a 50% guarantee (rather than the 7a's normal 75% guarantee) when there's plenty of outside collateral in the form of real estate.

No real estate - fuggedaboudit!

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

Tags : Inc. Magazine , SBA loans

Thursday, May 22, 2008

Another Way to Accelerate Cash Flow

The May edition of Inc. Magazine wrote a great story about Beltmann Group, a company that wanted to collect its accounts receivable more quickly.

In the current economic environment, cash is king and an increase in accounts receivable can quickly result in increasing working capital not to mention a growing interest expense bill.

So how did Beltmann Group cut its accounts receivable and its days sales outstanding ratio?

Not by changing payment terms or calling its customers to harass them.

Beltmann Group focused on getting its invoices out more quickly. It cut its invoice processing time by almost half reducing its accounts receivable and freeing up $1.1 million in cash!

I can't help you with your invoicing. But if you need help accelerating the cash flow tied up in your accounts receivable, read "Matchmaking for Business Loans" and give me a call!

Tags : Inc. Magazine , working capital , cash flow , accounts receivable , Beltmann Group

Tuesday, May 20, 2008

Note to Self: Line Up Financing First!

According to Inc. Magazine, Sam Braunstein didn't wait until she lined up a million dollar deal with Walmart to line up her financing.

Braunstein was completely prepared before discussions proposing a national launch of her products with Walmart, including making financing arrangements. Her company, Wellgate Products, delivered and has achieved product placement at 8,500 stores for big retailers including Walmart, Target and Kmart.

If you're about to line up a big sale, check with your lender in advance to make sure they can support your requirements to increase accounts receivable and add extra inventory.

Consider financing solutions including vendor assurance agreements, purchase order finance and factoring if your existing lender can't accommodate your financing needs.

Need help finding the right lender who can support your big sale? Read "Matchmaking for Business Loans" and give me a call!

Tags : Inc. Magazine , working capital , cash flow , accounts receivable , Wellgate Products , Walmart

Wednesday, May 14, 2008

Stupid Bankers - Redux

Stupid Bankers is the title of a blog posting I wrote almost a year ago after Ken Lewis, CEO of Bank of America, stated "we are close to a time when we'll look back and say we did some stupid things".

Not surprisingly, banks were not just doing stupid things in the large corporate loan market, but in the small business loan market as well.

Today's Wall Street Journal (subscription may be required) reported that more and more banks are experiencing increased defaults in their portfolio of small business loans.

The culprit - loose underwriting standards that ignored a small business' ability to repay the loan from cash flow and a willingness to overlook the lack of secondary collateral.


While Suntrust and National City were also mentioned, it was reported that the Bank of America set aside in the latest quarter for soured business loans to small business was estimated at $660 million!

Just like the large corporate borrowers, small business will pay the price - much tougher underwriting standards, more expensive business loans and tighter loan terms.

I had meetings with three bankers today - each confirmed the dramatic change in their bank's credit appetite over these last few months. One admitted that it's subject to change each and every day.

Got assets? Especially accounts receivable? There's plenty of money for the lending!

Need help finding the right lender for your particular financing requirement 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 , Bank of America

Tuesday, May 13, 2008

Fast Funding and $250 Thousand Lower Interest Expense

A Southern California distributor for office furniture needed to obtain a replacement revolving line of credit. Its current bank had given the company notice of its intent to not renew its loan facility. Why? The borrower had reported a 2007 loss as a result of a one time event. Unable to find a replacement lender on its own, their CPA suggested that the owner call me at Funding 911.

Funding 911 received the call with a request to help the company find the best available factoring facility with the bank’s deadline looming just a few days away.

The company has a strong business model, excellent supplier relationships, solid financial reporting systems and major creditworthy clients. A factoring facility would have been implemented easily, but could have resulted in a tripling of interest expense over the course of a one year contract.

Instead, Funding 911 introduced the company to an asset based lender who was willing to provide a revolving line of credit secured by accounts receivable.

In less than ten days, the lender issued a proposal, conducted its audit and obtained its internal approvals to provide a revolving line of credit for an amount more than twice the size of the borrower’s existing bank loan facility.

The interest rate on the asset based revolver is significantly less than the cost of factoring. The borrower could save as much as $250 thousand and more in interest expense over the course of a one year agreement!

The office furniture distributor is now focused on what matters most – running a successful business instead of running around looking for financing.

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

Tags : line of credit , asset based loan , factoring , accounts receivable , interest expense , Funding 911

Thursday, May 08, 2008

Top Ten Concerns of CFOs

According to CFO Magazine, concern over credit markets and interest rates is the number two worry for chief financial officers.

More specifically, chief financial officers are worried about their customers' creditworthiness, the financial health of their suppliers and their own companies' access to capital as well.

For the complete top ten list of chief financial officer concerns, check out the list at CFO Magazine.

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 , chief financial officer , CFO Magazine , access to capital

Tuesday, May 06, 2008

Fed - Tighter Standards for Small Business Loans

It continues to get tighter for small businesses seeking loans according to the April 2008 Senior Loan Officer Opinion Survey on Bank Lending Practices just released by the Federal Reserve.

Tighter lending standards - lenders are being pickier.

Tighter price terms - business loans are costing more.

Tighter non-price terms - loan terms are shorter, more collateral is required and covenants are more restrictive.

This survey confirms what lenders have been telling me for the last 90 days.

But for those who know how to tell their story the right way to the right lenders, availability of business loans exists.

Which lenders are providing the loans?

SBA lenders, community development financial institutions, credit unions and a variety of asset based lenders including factors, commercial finance companies, equipment lessors and purchase order financiers.

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

Tags : Federal Reserve , small business , business loans , factoring , asset based loans , SBA

Thursday, May 01, 2008

Loan Options When the Bank Says No

Today's Wall Street Journal (subscription required) wrote about three creative ways companies are obtaining working capital loans from alternative lenders during the credit crunch.

The first financing option is obtaining a business loan from a credit union. Back in mid 2006, I commented on an LA Times article discussing a possible paradigm shift of credit unions moving into small business lending. The Wall Street Journal article focuses on business loan matchmaker, Zopa, which offers loans through various credit unions. I didn't realize Zopa was tied into credit unions - I thought it was strictly a peer-to-peer lending system. Zopa loans are unsecured, range in amounts from $1 thousand to $25 thousand and focus on borrowers with FICO scores of at least 640. If you need more than a micro-loan, it might be better to go to your local credit union.

With corporate cash flow suffering, many borrowers are pursuing asset based loans. I'm working a lot with these solutions. These asset based loans come in a variety of products - purchase order financing, accounts receivable financing, asset based revolvers and equipment leasing to name a few. Plus, there are lenders targeting a wide range of loan sizes - you can find lenders providing asset based loans from as little as $100 thousand to hundreds of millions and larger. The asset based credit lines are typically secured by accounts receivable and inventory which the lender can seize in the event of a default. In select cases, the interest rate for asset based loans is only marginally higher than conventional bank loans.

The last solution mentioned was business loans provided by government-funded, non-profits. Credit criterion may be a bit more flexible as lenders have another motivation. Typically these loans are available in return for a commitment from the borrower to create or retain jobs in the region.

Need help finding the right alternative lender when the bank says "no"? Read "Matchmaking for Business Loans" and give me a call!

Tags : Wall Street Journal , credit crunch , business loans , asset based loans , credit unions , Zopa