Thursday, January 22, 2009

California Declared Ineligible

A major commercial bank confirmed to me today that its borrowers could no longer include state of California accounts receivable as eligible collateral until further notice.

In California Cash Flow Problems, I warned of impending cash flow challenges for businesses with accounts receivable from the state of California. If other lenders should take the same tact, a major cash flow crunch could take place for any company doing business with the state or its agencies.

If you're conducting business with the state of California and borrowing against your accounts receivable, I suggest you check with your lender to see if its lending policies are being adjusted.

Doing business in another or with another state? Keep an eye on their state budget woes. This cash crunch could be playing in a theater near you.

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

Tags : accounts receivable , credit crunch , California , working capital , factoring

Monday, January 19, 2009

Rocket Fuel for Growth

A Southern California manufacturer and distributor of consumer electronics was searching for a $1.25 million revolving line of credit to fuel its growth. In its just completed first year of operation, it had achieved a revenue run rate in excess of $10 million and was profitable – an amazing accomplishment by any standard.

The company had excellent products, good accounts receivable, a solid business plan and a strong ownership team.

Yet, lacking a three year history of operating results, no commercial bank was willing to approve a loan especially during this period of an increasingly tight credit crunch.

Unable to find a cost effective source of working capital on its own, this hyper-growth company was referred to Funding 911 by a commercial banker.

Funding 911 introduced the company to two commercial bankers who each offered solutions not known by many financing advisors and not offered by many commercial banks. One was a revolving line of credit through a CAPLINE program guaranteed by the SBA. The other was a revolving line of credit offered through a state of California program.

My client has just closed a $1.25 million revolving line of credit with the commercial banker offering the CAPLINE product. This working capital facility will enable the borrower to receive loan advances tied to its accounts receivable and inventory at very attractive interest rates not available through any other sources. The CAPLINE program can currently support loan amounts up to $2 million.

My client now has the rocket fuel it needs to more than double in size in spite of a credit crunch which is strangling many businesses.

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

Tags : Working capital , accounts receivable , credit crunch , revolving line of credit , SBA , CAPLINE

Thursday, January 15, 2009

Twenty Percent Declined for Business Loans

Just over twenty percent of middle market businesses that recently changed banks said their original banks failed to give loans or financing when needed according to a survey from Greenwich Associates.

Perhaps as a result, 40 percent of middle market businesses were seeking or open to finding a new bank, as reported on For small businesses, the percentage increases to 50 percent!

While in the past, businesses would switch banks mostly due to price or service, access to capital and credit terms are clearly becoming more important.

Notwithstanding the credit crunch, there is money available for business loans from banks and a variety of non-bank lenders. You just need to know where to find it and how to convince the lenders that you're creditworthy.

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

Tags : credit crunch , accounts receivable , lines of credit , factoring , SBA loans , bridge loans , real estate

Monday, January 12, 2009

Overly Optimistic Cash Flow Assumptions

Bad commercial real estate mortgages held by banks continue to increase and may have almost doubled from the end of 2007.

Most of the bad commercial real estate mortgages were funded within the last few years when underwriting standards were loose and bankers let borrowers use cash flow assumptions that were too optimistic.

According to Foresight Analytics as reported in The Wall Street Journal (subscription required), the delinquency rate for commercial real estate mortgages held by banks has increased from 1.5% to as high as 2.6% at the end of 2008.

With banks holding almost 50% of all commercial real estate mortgages outstanding (estimated at $3.4 trillion), I estimate that this increase in delinquencies alone is equal to almost half ($170 billion) of the phase I bailout money to be invested bank balance sheets via the TARP program. So here's another reason why banks may not be lending the TARP money - they are saving it for the rainy day about to hit commercial real estate mortgage portfolios.

By the way, the other big source of commercial real estate mortgages was the commercial mortgage backed securities (CMBS) market. The CMBS market has been effectively shut down having also been the source of funding for many of the residential mortgages now in default.

So there are the two reasons it will be challenging to find a commercial real estate mortgage in the near term. The commercial banks are saving their balance sheets for a rainy day and the CMBS market is closed.

If you're having difficulty financing your commercial real estate property in California, give me a call. I'm working with one private money, bridge lender whose rates currently range from 8.5% to 10.0% (before points) for bridge loans secured by commercial real estate in California of all property types. The lender is able to fund loans of up to $50 million and is willing to consider properties in other western states.

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

Monday, January 05, 2009

A Little Less Conversation

A little less conversation, a little more action please. All this aggravation ain't satisfactioning me.

The words of Elvis Presley rung true in 2008 as business borrowers tired of hearing about TARP and TALF and were aggravated by the lack of action in the form of severely restricted business lending.

Will the new year ring in a little more action? Here's what I read in the last few days of 2008 which suggest early 2009 may not provide much action to business borrowers.
  • Don't expect the banks to aggressively lend their bailout proceeds. The corporate default rate for certain types of business loans may more than double to 8 to 10 percent putting further strains on bank balance sheets.

  • Is a bailout on the way for the commercial real estate industry? According to research firm Foresight Analytics LCC, $530 billion of commercial real estate mortgages will be coming due for refinancing in the next three years -- with about $160 billion maturing in the next year. Credit, meanwhile, is practically nonexistent and cash flows from commercial property are siphoning off. Default rates are expected to result in less lending to this sector. Some industry representatives have asked lawmakers to explore the idea of setting up a separate program aimed at boosting lending to commercial real estate only. Real estate bridge loan activity is likely to significantly increase.

  • Some asset based financing providers such as equipment lessors are seeing business decline. The Equipment Leasing and Finance Association said that new-business volume decreased 33.1 percent in November from the previous November.
There's still money out there if you know where to find it. I just closed an asset based revolving line of credit deal shortly before New Year's for a firm with a great growth story. I'll write more about this in a few days.

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

Tags : credit crunch , commercial real estate , leasing , asset based loans