Warren Buffet - Not a Credit Crunch

According to The LA Times, Warren Buffett does not think the economy is experiencing a credit crunch.

"I wouldn't quite call it a credit crunch," he said. "Money is available,and it's really quite cheap because of the lowering of rates that has taken place."

He added: "What has happened is a repricing of risk and an unavailability of what I might call ' dumb money,' of which there was plenty around a year ago."

It's never a credit crunch unless it affects the ability of your business to obtain a business loan or other financing. Money is available, just not wheelbarrows of money for you to go join in on the poker game with Bill Gates.

Your business may not qualify for the lowest cost bank loan, but it may qualify for an SBA loan or asset based financing including revolving lines of credit, factoring and equipment leasing.

And yes, risk is being re-priced. So now your business loan may be priced a few percentage points over prime rate, or as high as four to five times prime!

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 , business loans , Warren Buffett

Business Credit Getting Tighter

No big suprise here - the Federal Reserve says banks are getting more stingy when it comes to providing new business loans.

The latest Federal Reserve survey of senior bank-loan officers released today shows that one-third of domestic institutions reported having tightened their lending standards on business loans to small as well as to large and middle-market firms over the past three months.

While few banks are eager to admit publicly that they are scaling back, almost every banker I speak with tells me of tightening credit standards and deals not getting approved by investment committee as a fear mentality starts to take hold.

What's a small business to do that needs a business loan? Before you go to a lender, ask yourself what three sources of repayment are you offering in support of your business loan?

• Are you able to demonstrate that your business will generate sufficient cash flow to pay back the loan?
• What business collateral are your offering to secure the loan? This should include accounts receivable, inventory, equipment and real estate.
• What is the personal credit strength of the business owner(s)?

If you can answer those three questions satisfactorily, your lender should be willing to entertain your request for a loan.

If you can't answer those questions, keep my phone number handy because you'll probably be a victim of the 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 : Federal Reserve , small business , business loans , credit crunch

Report Card on SBA Loans to Minorities

The Greenlining Institute produces an annual report card that grades the largest US banks on their SBA lending activities to minorities – specifically African Americans, Asian Americans and Latinos.

Only one bank got an “A”. There was a handful or so of “B” grades. As for the rest, they got a spanking on their hands with a ruler.

You can read the full report, but here’s a couple of highlights:

• No bank met Greenlining’s challenge to originate 60% of all its SBA loans in 2006 to minority entrepreneurs, split equally amongst African Americans, Asian Americans and Latinos. Citigroup came close at 56%. Bank of America scored #1 for largest number with 5,468 SBA loans to minorities.
• African American small businesses are the most underserved by financial institutions in terms of both the number and percentage of SBA loans originated to this group compared to other groups in the study. Bank of America was at the top of the list in both the number of SBA loans and the percentage of its SBA loans.
• Citigroup and PNC did the best in percentage of SBA loans to Asian Americans both surpassing Greenlining’s minimum lending goal of 20%. Bank of America was tops in the number of SBA loans to Asian Americans.
• Close, but no cigar for Citigroup who came close to meeting the 20% goal for Latinos with Bank of America not far behind. Bank of America had more than twice the number of SBA loans to Latinos than second place J.P. Morgan Chase.
• Three banks received overall “F’ grades – Key Bank, Capital One and Fifth Third. Ouch!

At the end of the day, the Greenlining Institute says the number of minority owned businesses in the United States is growing at two or three times the national average for all U.S. businesses, but the proportion of SBA loans going to minority entrepreneurs has remained constant at one-third of all SBA loans.

According to the Greenlining Institute, if banks would originate 60% of their annual SBA loans to minorities, this would double the number of SBA loans to minority owned businesses.

Here are two questions I have on this report card.

• Does it take into consideration the demographic and geographic footprint of each respective financial institution?
• What were the actual approval rates for SBA business loans to minorities of each respective financial institution?

Check out my earlier blog postings for other resources on loan program directed minorities!

• We Don’t Do Stupid
• Guia Para Obtener Prestamos - ABCs of Borrowing
• There's a New Bank in Town
• Unique Business Loans for Minorities
• Capital Access for the Hispanic Community
• More on Minority Loan Programs

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 loans , minorities , African American , Asian , Latino , Greenlining Institute

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

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

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

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