Walmart Sneezes; Cott Catches a Cold

For any size business, too much revenue from one customer can lead to difficulty in obtaining a business loan to provide the working capital.

Walmart has driven home this lesson to Cott Corporation, a manufacturer of private label sodas and drinks. As reported in The Wall Street Journal (subscription required), Walmart has informed Cott that it will be reducing the amount of shelf space allocated in its stores for private label sodas and drinks. Walmart will be filling that shelf space with higher margin products from Cadbury Schweppes.

Walmart is Cott's biggest customer and represents approximately 38 percent (approximately $640 million) of Cott's annual revenue which totaled over $1.7 billion in 2007. While it is still unclear the specific dollar impact to Cott, the company concedes that the Walmart move "would be significant to Cott's business plans". In English - that means less future cash flow and nervous bankers.

You can see why from the viewpoint of the bank, once your revenues from a single customer exceed 10 percent of total sales, you become less bankworthy. If a customer exceeds 20 percent of total sales, your company may see a reduction in your borrowing base and higher interest rates. Customer concentration greater than 30% - better be using factoring!

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

Tags : Walmart , Cott , working capital , cash flow

Fast SBA Loan Approval

About two weeks ago, I received a phone call from a banker who had declined an SBA loan request. The prospective borrower was working with a consultant who had been struggling for eight months to get the deal approved.

I got an SBA loan approval from a different banker in less than a week.

How? I told the story the right way to the right set of ears.

Here are the key facts that needed to be highlighted for the SBA lender:

• While a start-up, the owner had extensive experience in the field.
• The owner had injected equity of more than 20% of the total project cost.
• Once I reformatted the pro-formas, it became clear that the new business could service the debt from cash flow.
• There were strong secondary and tertiary sources of repayment including equity in real estate.

It's been said that the definition of insanity is repeating the same action and expecting different results. If your SBA loan request is dragging for more than three weeks (please don't wait eight months), there is a strong likelihood your request is going to be denied.

Simply taking it to another lender without knowing if you're telling the story the right way to the right lender is a perfect example of insanity.

Pick up the phone and call me at 310-371-4011. I can probably tell you in a short phone call the odds of getting an approval. I can pre-screen your deal with an SBA lender on a "no-names" basis in as little as a couple of hours. There's no cost and no obligation.

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

Tight Cash Flow? Try Asset Based Lenders

This week's edition of the Los Angeles Business Journal (may require subscription) wrote about how the credit crunch is creating new opportunities for alternative lenders in the middle market.

For businesses with less cash flow, but good collateral and a strong story, alternative lenders such as St. Cloud Capital, Allied Capital Corporation and Ares Capital are able to provide a variety of capital solutions including senior debt, subordinated debt or equity.

While these and similar funding sources could be more flexible than a bank, they will also require a much higher interest rate than the bank for taking on more risk. In some cases, the alternative lenders may be more than happy to own the business of the borrower in the event of a default.

The key with any lender is to know what deal size, industries and risk profile the lenders may be seeking. Many of these lenders are not dealing with small businesses - too much aggravation and not enough return on their money.

There are a number of asset based lenders who can provide alternative solutions to small businesses when the banks cannot accommodate their borrowing needs. These lenders will not focus solely on cash flow, but will look to the borrower's assets - accounts receivable, inventory, equipment and real estate - to create a funding solution to meet the small business borrower's objectives. Like the alternative lenders focused on the middle market, the rates will be higher than the bank and you need to know what type of deal each lender is seeking.

So if the bank tells you "no", there may be other sources of money available - credit crunch notwithstanding. It will cost you more, but your business may live to see a better day.

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

Tags : credit crunch , Los Angeles Business Journal , asset based lenders

Solid Cash Flow & More Collateral

With tighter lending standards, small businesses seeking financing now must have good credit, solid cash flow, more collateral and more cash for down payments according to Keith Leggett, senior economist at the American Bankers Association.

In USA Today, Leggett and others say that small firms with good credit quality still are able to land financing and grow. It is suggested these firms investigate financing from smaller community banks. Having avoided high-risk securities and poor lending practices, the smaller community banks haven't been humbled by the housing slump and subprime debacle.

What if your business doesn't qualify as a good credit? There is still plenty of money around. It's just being re-priced for risk.

Consider SBA loans, state backed loan programs, commercial finance companies, leasing companies and accounts receivable financing. You may pay a bit more for your money, but your business will have the working capital it needs to transition to better times.

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

Tags : USA Today , small business loans , Keith Leggett , American Bankers Association

Venture Funding for High Tech

For high tech companies seeking investments from venture capital providers, this week's edition of the Los Angeles Business Journal (subscription may be required) might be a good place to start.

In "Making it Click", the Los Angeles Business Journal provided brief bio's of 22 venture capitalists, deep pocketed angel investors, seasoned entreprenuers, and a group of lawyers and other enablers who play crucial roles in connecting new high tech ideas with money. Not surprisingly, my name is not on the list.

My guess is that these 22 resources don't limit their reach to only Los Angeles based entrepreneurs. So if you've got a good story, don't let geography hold you back.

Need to research any of the venture capitalists, go back and read this posting.

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

Tags : venture capital , angel investors , entrepreneurs , Los Angeles Business Journal

NFIB - No Credit Crunch

The National Federation of Independent Business (NFIB) joins Warren Buffet in the opinion that there exists no credit crunch for small business per today's Reuter's release.

"There is no credit crunch on Main Street for small businesses. Period," said William Dunkelberg, chief economist of the NFIB.

Dunkelberg's opinion is based upon the recently released survey of NFIB released earlier this week which predicts a recession.

The Reuter's release had two items that caught my eye:

• Many small businesses are seen heading for trouble because they used home equity loans to fund their businesses during the housing boom. In July 2006, I warned small businesses that home equity was in the process of declining and continued reliance on this would make financing their business more difficult.
• One borrower noted that his bank wanted his home, in which he has built up a lot of equity, as collateral rather than the assets of the business. He refused not wanting to mix his business assets and personal assets.

While most small business owners will still have to provide a personal guarantee, there are still plenty of lenders (including banks) that will look solely to the assets of a business as the collateral. Acceptable collateral includes purchase orders, accounts receivable, inventory, equipment and real estate.

On the other hand, if you don't have any assets in your business, be prepared to give a lien on your home if you've got one.

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 Buffet , NFIB

Numerous Requests for Working Capital

My September 2006 posting entitled "How Do You Measure Working Capital" is the most frequent landing page in my entire collection of blog postings.

With a recession highly likely and a credit crunch gaining strength, more businesses will be focused on maximizing their cash flow and minimizing working capital because money tied up in working capital is money not available to grow the company.

While over 80 of my postings mention the term working capital, I thought I would give you a few links to some oldies but goodies. Enjoy!

• Unplanned Growth and the Cash Flow Squeeze
• Collect Your Cash Faster
• Improve Cash Flow through Accounts Receivable Outsourcing
• Inventories Stressing Working Capital
• When Your Supplier Says No

Need help with working capital challenge? Read "Matchmaking for Business Loans" and give me a call!

Tags : working capital , accounts receivable , factoring , DSO , DPO , DIO