Commercial Real Estate Loan Defaults on Rise

The default rates for commercial mortgage-backed securities are increasing according to today's The Wall Street Journal (subscription required).

According to a Citigroup Inc. report, the overall number of commercial mortgages packaged into securities that are 30 days or more past due rose to 0.64% in October from 0.39% at the end of last year, with most of the increase coming in October. The latest figure, though low by historic standards, marked the highest delinquency rate in two years.

A key reason behind the increase in defaults sounds very similar to those in the residential world - the credit crunch has made it difficult to refinance commercial real estate loans upon maturity and existing lenders have been unwilling to extend loans under the same terms.

If you're having difficulty re-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!

Tags : commercial real estate loans , private money loans , bridge loans , hard money loans , credit crunch , CMBS

TARP to the Rescue?

Want to know when the federal bailout of the banks will result in new loans to businesses?

Perhaps not anytime soon.

That was the short answer given today by Neel Kashkari, who, as the Treasury Department's interim assistant secretary for financial stability, runs its Troubled Asset Relief Program (TARP).

As reported on CFO.com, Kashkari is confident that banks will ultimately use the capital to extend business loans to creditworthy businesses and consumers. That being said, "the last thing we want," he added, "is to encourage banks to resume the poor lending practices that are the cause of the current economic problems."

In other words, just because there is bailout money, don't ask for any if your business cannot demonstrate the ability to repay the loan.

Don't wait for TARP to bail you out. If you need help finding the right lender or telling your story the right way and you have business assets to offer as collateral, read "Matchmaking for Business Loans" and give me a call!

Tags : TARP , business loans , credit crunch , Neel Kashkari

Cash-In, Cash-Out

With the credit crunch reducing the availability of cash, many companies are looking for working capital at the expense of their suppliers and vendors.

CFO.com reports that cash-in, cash-out is preoccupying finance departments in companies large and small. Watching your receivables like a hawk has become the mantra of the day.

Pitney Bowes CFO Michael Monahan talks to his treasurer every day. In addition, Pitney Bowes has been using new technology to keep on top of its customers via automatic phone calls to remind them of bills before they're due.

Jeffrey Henderson, CFO of Cardinal Health, now holds twice weekly meetings with his accounts receivable team as well as leaders in his treasury and finance departments to review trends, credit assessments of high-risk accounts, and customers' requests for payment extensions.

Charles Young, CEO of Detroit-based SDE Business Partnering, a $64 million logistics and staffing company, saw instant cash-flow problems when General Motors, one of the company's largest customers, extended its payment terms to 75 days. Previously, GM would pay its invoices to the company within 2 days after SDE submitted time cards. This move must be causing SDE significant cash flow problems and increasing its interest expense bill.

Are your customers stretching out your receivables? Need help finding the right lender to increase your working capital? Read "Matchmaking for Business Loans" and give me a call!

Tags : accounts receivable , credit crunch , CFO Magazine , DSO , working capital , factoring

Speaking of the Credit Crunch

Released today was the October 2008 Senior Loan Officer Opinion Survey on Bank Lending Practices. Over 80 percent of domestic banks reported having tightened lending standards on commercial and industrial (C&I) loans to small businesses and large and middle-market firms over the past three months.

About 85 percent of domestic banks reported having tightened their lending standards on commercial real estate loans over the past three months.

This week I'll be speaking to two organizations on alternative financing solutions for businesses caught by the credit crunch. The message - though business credit is extremely tight, there are banks and commercial finance companies lending to businesses of all sizes secured by receivables, equipment and real estate. Inventory secured loans are getting increasingly difficult to find under any scenario.

However, the interest rate on business loans have not necessarily dropped notwithstanding last week's cut in the prime rate. Floors on borrowing rates and higher spreads will keep many businesses from lowering their cost of capital during these crunchy times.

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 , Federal Reserve , business loans , asset based loans

Not the End of Main Street

While many in the mergers and acquisitions markets may be lamenting the lack of activity on Wall Street due to the credit crunch, there are still signs of life on Main Street.

According to one lower middle market investment bank, Green Manning & Bunch, both strategic and private equity buyers are actively acquiring businesses.

Why?

Strategic buyers are using the cash on their balance sheets and thus are not constrained by the lending limits of commercial banks. Private equity continues to raise record amounts of capital (on pace to exceed last year's record amount of more than $300 billion), which they need to put to use.

The companies being acquired have solid profit margins, prospects for growth, protected market niches and quality management teams.

Need help finding the right lender for an acquisition of a lower, middle market business? Read "Matchmaking for Business Loans" and give me a call!

Tags : Mergers and acquisitions , M&A , Green Manning & Bunch , credit crunch

SBA - Loans Decrease for Fiscal Year 08

At the beginning of the credit crunch in the summer of 2007, I wrote a posting, "Small Biz Credit Crunch: Will SBA Save the Day?".

With the release of its full fiscal year 2008 numbers, I believe the answer is in and there's really no surprise.

According to The Coleman Report, both SBA loan volume and SBA loan dollars were significantly lower in fiscal year 2008 for both the SBA's 7a and 504 loan programs.

In the 7(a) program, SBA loan activity for fiscal year 2007 totaled 99,606 loans for approximately $14. 3 billion. SBA loan activity for fiscal year 2008 totaled 69,434 loans for almost $12.7 billion. That's a reduction of 30,171, or 30.3 percent, in the total number of loans, and a reduction of $1.6 billion, or 11.3 percent in dollars loaned to small business.

In the 504 program, SBA loan activity for fiscal year 2007 totaled 10,669 loans for approximately $6.3 billion. SBA loan activity for fiscal year 2008 totaled 8,883 loans for almost $5.3 billion. That's a reduction of 1,786, or 16.7 percent, in the total number of loans, and a reduction of just over $1 billion, or 16.2 percent in dollars loaned to small business.

According to SBA director of financial assistance, Grady Hedgespeth, the lending decline reflects both banks' tightened credit standards and less demand from business owners. In general, larger, more mature businesses still have a healthy demand for loans than earlier stage, smaller businesses.

Need help finding the right SBA 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 , business loans , SBA loans

California Cash Flow Problems

Cash flow for the state of California is getting tight as the state is having difficulty accessing the credit markets. California may seek a short term loan from the US Treasury in the amount of $7 billion!

If your company is a vendor to the state of California or its counties, cities and school districts, you need to watch your receivables like a hawk. There's a good chance you'll see your days sales outstanding increasing over the coming weeks until the credit markets thaw out.

If your business has direct (or indirect) significant exposure to California government entities and affiliates, you may want to provide your own lender a heads up. If California related accounts receivable pile up, your business could run into either concentration issues or cross aging issues resulting in a reduction in your own lines of credit.

If you don't have a line of credit, you might find that you need one. Factoring of accounts receivable could be a working capital solution that can be arranged within days.

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 , California