Show Me the Money

Asset Based Lending at California Bank & Trust

2010-05-03T06:00:00.000-07:00

This past week, I joined the asset based lending team at California Bank & Trust, an $11 billion commercial bank serving the needs of businesses throughout the state of California.

The Asset Based Lending Division offers revolving lines of credit secured by accounts receivable and inventory, a growing source of funding during the recent economic downturn as described in CFO Magazine's recent article, Lien on Me. These asset based financings have the flexibility to help even highly leveraged firms and those who may have struggled in the last 24 months. The interest rates will be lower than those offered by commercial finance companies and factoring companies.

Why did I make the move after seven years as a matchmaker for business loans?

In my opinion, bank lending is about to pick up significantly in the next six months. Political, populist and shareholder pressures combined with economic recovery will motivate banks to open the credit spigots to business borrowers by the second half of 2010. If the banks make a strong move to provide credit, I believe I'll be a much better resource to businesses by actually working for the funding source.

California Bank & Trust is a fiscally sound bank - the FDIC facilitated the acquisition by California Bank & Trust of two other California banks in the last 18 months or so. A good sign in my books. They are small and nimble enough to act quickly on deals and provide personalized service. Well capitalized enough to have a very competitive cost of funds. Big enough to provide credit facilities in excess of $10 million.

If you need help with an asset based loan of $1-10 million for your California business, give me a call at 213-593-2086!

Tags : California Bank & Trust , asset based lending , accounts receivable financing

Lunch Special of the Day

2010-03-12T10:29:00.000-08:00

A residential foreclosure contractor hired by Bank of America reportedly not only padlocked the wrong house, but confiscated the home owner's pet parrot, Luke.

Earlier this week, The New York Times DealBook section reported that Bank of America has been instructed to shrink as regulators focus on banks that "are too big to fail".

One reader not only rejected Bank of America's denial of the guidance, but commented on the "parrot-napping" as well.

In an unrelated cost savings move, Bank of America has announced that any pets seized in a property foreclosure action will, in the future, be served on the lunch menu in the employees’ cafeteria.

— MJA

By the way, a traumatized Luke was eventually returned to his owner by the contractor.

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 : Bank of America , too big to fail

Bank Lending - Sharpest Decline Since 1942

2010-02-24T09:23:00.000-08:00

Shocker! U.S. banks last year posted their sharpest decline in lending since 1942 according to today's Wall Street Journal (subscription required).

I'm trying to figure out why this article was front page headline worthy for The Wall Street Journal no less. It's old news.

Senior bank lending officers have been reporting for two years about tightening credit. In fact, they tightened credit so much, they can't tighten any more.

Many banks are still amongst the walking wounded due to troubled commercial real estate loan portfolios. Yesterday, the FDIC announced its problem bank list hit a 16 year high of 702 troubled institutions. Many of these banks will likely fail and others will be unable to lend in support of an economic recovery for a long time to come. The FDIC shuttered 140 banks in 2009 and 20 banks year-to-date 2010.

In the meantime, the Commercial Finance Association (CFA) just released its Quarterly Asset-Based Lending Index, Q4 2009, revealing continued stability and signs that U.S. businesses are seeking alternative sources of stable funding from non-bank, asset-based lenders. In the fourth quarter of 2009, total committed credit lines grew by 1.2 percent among asset-based lenders, while 50 percent of respondents reported an increase in new credit commitments.

By the way, Harry Reid's stripped down jobs bill just stripped out additional funding for SBA small business loans. The original $85 billion "jobs" bill included additional funding for the SBA to continue offering small businesses enhanced loans guarantees and elimination of guarantee fees. The SBA just exhausted its $855 million of stimulus funds which it claims resulted in over $20 billion of loans to small businesses in the last 12 months.

Notwithstanding all of the backwards looking news, I am seeing the green shoots of recovery. A couple of very large banks may be feeling the populist pressure to pump up lending and are adding to their lending teams. Even Huntington Bank, notwithstanding five consecutive quarters of losses, has announced it is doubling its annual small business lending and has announced it will originate $4 billion of new loans in the next three years.

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 : small business , bank loans , SBA loans , asset based loans , Commercial Finance Association , Huntington Bank

Asset Based Lending Grows

2010-02-04T15:02:00.001-08:00

Asset based lenders have stepped up to fill the capital gap caused by the credit crunch for borrowers both large and small according to The Wall Street Journal (subscription required).

According the Journal, asset based lending may have increased by double digits in 2009 after an 8.3 percent increase in 2008. Given the article was focused on small business, it would have been more interesting had the Journal been able to learn the percentage growth of asset based lending for deal size less than $10 million.

The Journal notes that drawbacks of asset based loans include relatively high interest rates. Asset based loans can range as high as 35-40 percent per annum when a borrower is using factoring or purchase order financing. However, there are some lenders that will provide asset based loans at rates in the single digit range. Even the SBA has a program that provides asset based lines of credit at rates currently below 10 percent!

Also this past week, the Federal Reserve's January 2010 Senior Loan Officer Opinion Survey on Bank Lending Practices was released.

The January survey indicated that commercial banks generally ceased tightening standards on many loan types in the fourth quarter of last year but have yet to unwind the considerable tightening that has occurred over the past two years.

Expect to see asset based lending continue to grow in 2010!

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 : Asset based loans , factoring , purchase order financing , lines of credit , SBA loans

Who Will Fund Inventory Growth?

2010-02-02T06:00:00.000-08:00

GDP grew at its fastest pace in six years in the last three months of 2009, expanding at a 5.7 percent yearly rate over the previous quarter according to The Wall Street Journal (subscription required).

The largest portion of the growth, 3.4 percentage points, came from businesses shrinking inventories more slowly than in the previous quarter to accommodate increased demand. Shrinking inventories means increased production to prepare for future sales increases.

One can argue about how much of the inventory buildup came from one-time events such as government stimulus programs, but one thing is clear. Businesses will have to increase inventories as the economy recovers.

Where will the money come from to fund the inventory growth is a bigger question.

I know very few bank or commercial finance lenders eager to lend for inventory increases. In fact, one middle market commercial banker told me at lunch that inventory increases are the last thing he wants to fund. Don't expect to see improved appetite for inventory lending until cash flow improves.

Some asset based lenders will provide lines of credit when there the borrower is profitable and subject to sublimits tied to accounts receivable. I also know one lender who will lend against inventory only in amounts up to $10 million. The terms are tough and the pricing is not for the faint of heart.

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 : inventory loan , GDP growth , line of credit , working capital

Extend and Pretend

2010-01-20T13:21:00.000-08:00

The recent bank practice to "extend and pretend" was the focus of a commercial real estate panel discussion held last night at UCLA. The moderator, Jesse Sharf of Gibson, Dunn & Crutcher, questioned four leading members of the commercial real estate industry on a variety of topics including "when will deals reappear?".

About two hundred attendees listened attentively to the responses of John Brady (Oak Tree Capital Management), Samuel Freshman (Standard Management Company), Bill Lindsay (Pacific Coast Capital Partners) and Sean Mahon (Wells Fargo Bank).

Here are the highlights from my perspective:

The October 30, 2009 (the night before Halloween) guidance issued by the FDIC and other regulators has made it very easy for banks to extend and restructure commercial real estate loans that otherwise could have been classified as troubled assets.
Commercial real estate values will likely drop to 50 percent of their peak values as cap rates increase from 6% to 9%.
There is a HUGE shortage of capital available to re-finance all of the commercial real estate loans maturing in the next three to five years due to the implosion of the CMBS markets and balance sheet challenges faced by the commercial banking community.
Low interest rates are keeping a lot of commercial real estate loans from going into default. Look for the Federal Reserve to keep benchmark rates low for the foreseeable future.
Deal flow for commercial real estate loans and investor opportunities will not recover until the unemployment rate starts to drop.
All four panelists opined that commercial real estate values will continue to decline in 2010.

If you were looking for some good news from last night's meeting - well, they served a very nice chardonnay! Crisp, refined and a hint of pear.

I've still got some commercial real estate bridge lenders actively pursuing loan opportunities of at least $1 million. Give me a call if I can help!

Tags : extend and pretend , commercial real estate loans , FDIC , bridge loans , private money loans

Turnaround Management Association - A Hard Slog

2010-01-06T09:47:00.000-08:00

Nearly half (49%) of the respondents to the Turnaround Management Association's (TMA) distressed industries forecast think durable improvement in the economy is unlikely until at least the second half of 2010. About three out of ten think the worst is over, but nearly 20 percent suggest the economy has yet to hit rock bottom.

Access to capital remains a big question for how the economy will fare in 2010 according to 52 percent of respondents.

Three out of four respondents think the commercial real estate industry will fare the worst in 2010 as debt matures and lenders remain reluctant to refinance.

"Overleveraged balance sheets are one of the primary causes of industry problems," said William K. Lenhart, CTP, a partner with BDO Consulting in New York. "In 2009, many lenders were more willing to 'extend and amend' terms so borrowers were not in default. It is unclear if these companies took this opportunity to improve operations, reduce expenses and sell off underperforming assets to reduce debt."

My own sources have referred to many commercial bank lender's actions in 2009 as more like "extend and pretend" or "delay and pray".

Happy new year? We'll see.

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 : Turnaround Management Association , TMA , extend and pretend , commercial real estate , bridge loans

60 Minutes: You're Stupid and You're Fat!

2009-12-14T11:35:00.000-08:00

President Obama told 60 Minutes last night that it was "fat cat bankers" that caused the US financial systems to almost completely fail.

Watch CBS News Videos Online

No blame for Congressional members who were taking campaign contributions from the financial services industry and then failed to adequately supervise the likes of Fannie Mae, Freddie Mac and Bear Stearns.

No blame for borrowers who gorged on cheap money when the cash flow of their businesses couldn't demonstrate an ability to pay back those business loans.

Nope. Just the stupid bankers.

Now I'm not defending the fat cat bankers. Just trying to add some perspective that there's a lot of parties that should share in the blame of this financial fiasco.

However, that sound bite won't play as well on 60 Minutes. Or maybe something got left on the editing room floor.

I'm sure the President's meeting today with the banking community will go well when he tells them to lend more money while his regulators tell them don't be "stupid".

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 : fat cat bankers , stupid bankers , 60 Minutes , President Obama

Business Lending Down Six Percent

2009-11-30T08:00:00.000-08:00

Business loans in the third quarter of 2009 were down almost six percent according to The Wall Street Journal (subscription required).

No doubt this decline will pit those in Congress who claim that TARP funds should lead to increased lending against bankers who claim regulators are demanding that lenders take less risk in these troubled times. With a fear of a second round of troubled loans primarily in commercial real estate, banks are as risk averse as ever.

The FDIC's troubled bank list now totals 552 problem banks - approximately seven percent of all banks. Fifty banks failed in the third quarter - the most bank failures in a single quarter since the fourth quarter of 1992. "Failure Friday" took a holiday break over Thanksgiving weekend. Look for bank failures to re-commence sooner than later.

If your business loan request is already in process, you still have a chance of obtaining funding in 2009 if you are working with the right lenders. Otherwise, a 2010 funding is the more likely scenario.

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!

Related Tags: factoring, accounts receivable, p.o. financing, purchase order financing, bank loans, equipment leasing, working capital, cash flow

Walmart Shifts to Supply Chain Finance

2009-11-16T06:00:00.000-08:00

Wal-mart recently announced a new supply chain finance program according to this weekend's Wall Street Journal (subscription required). I first wrote about supply chain finance in April 2007.

This supply chain finance program will provide Wal-mart's suppliers with accounts receivable financing - a market which has experienced significant turmoil given the bankruptcy filing of CIT and the credit crunch, in general.

Wal-mart's partner banks, including Wells Fargo and Citigroup, will be providing factoring to Wal-mart's suppliers. It is unclear whether these rates will be any cheaper than those offered by other factors and accounts receivable financiers.

The article mentioned that other retailers, including Kohl's, are also experimenting with supply chain finance programs.

If you're having difficulty with your accounts receivable funding in light of the CIT situation or general market conditions, give me a call!

Tags : Walmart , CIT , supply chain finance , accounts receivable , factoring

CIT, Commercial Real Estate and Workouts

2009-11-03T13:37:00.001-08:00

Lots of issues to think about these days with respect to loan workouts, CIT's bankruptcy and commercial real estate.

Last week, I attended the Risk Management Association's panel discussion on loan workouts and restructurings. Panelists included three bankers from the loan workout departments and an attorney who crafts loan workout agreements. The panel's consensus was expect another year of increasing loan defaults in the world of commercial real estate and business loans. Until this workout activity starts to decline, new loan origination activity is not likely to pick up.
I still cannot figure out the real impact of the CIT bankruptcy. Many borrowers won't be able to find new lenders because CIT's advance rates against inventory was too high and their interest rates were too low relative to current rates. Some borrowers won't find new homes because they won't find another lender with the back-office capabilities of CIT that has traditionally provided.
The FDIC issued new guidance to commercial banks allowing them to keep commercial real estate loans on their books as "performing" even when the underlying property value has declined. I suppose this is similar to guidance issued for modification of residential real estate loans with the intent to avoid more losses for banks at a time when their balance sheets cannot afford the earning hit.

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 : CIT Group , CIT , bankruptcy , factoring , accounts receivable loans , commercial real estate , FDIC

$5 Million SBA Loans if Your Name is Joe or Doug

2009-10-21T15:00:00.000-07:00

Is the SBA considering increasing its guarantees for the SBA 7a loans program for loan amounts as high as $5 million?

Yes. But I think only if your name is Joe or Doug.

Here's a portion of what President Obama had to say about his thoughts on changes for the SBA ...

"The first thing we need to do is increase the maximum size of various SBA loans. So I am calling on Congress to increase the cap on what's called 7(a) loans to $5 million. These are the loans most frequently handed out by the Small Business Administration to help folks open their doors and buy machinery, equipment, land and buildings. These larger loans will help more small business owners and franchisees grow. We also need to increase the maximum size of what's called 504 loans to $5 million. These are the type of loans that Joe and Doug used to expand this business and create new jobs. And we should also increase the maximum size of microloans that go to start-ups and other smaller businesses."

By the way, the expectation remains that the current SBA loan stimulus money will be exhausted by the end of 2009. Don't wait if you want to take advantage of the current higher SBA guarantees and waiver of SBA loan guarantee fees.

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 : SBA loans , 7a loan , SBA lender , business loans , equipment loans , credit crunch

Commercial Real Estate - More Pain Ahead

2009-10-08T08:35:00.000-07:00

Commercial real estate losses could reach 45 percent next year according to an internal presentation at The Federal Reserve Bank.

As reported in The Wall Street Journal (subscription required), while not the central bank's formal opinion, the presentation by Atlanta Fed real estate expert, K.C. Conway, paints a bleak picture of sliding real estate values, increasing commercial real estate loan defaults and enormous amount of debt that will need to be re-financed in the next few years.

Banks have been slow to take losses on their commercial real estate loan portfolios because their balance sheets still have not recovered from their housing loan related losses. "Extend and pretend" has been the philosophy of some banks whose primary focus is capital preservation and avoiding enforcement actions by regulators.

I have personally seen three bank commercial real estate loans in recent weeks where the banks are in trouble on construction loans and first trust deeds gone sour. I'm working on sale leaseback solutions on two of the three that will necessitate the banks taking a significant discount on the loans. On the third, the value of the property is so low relative to the loan balance, it's not clear where the solution lies.

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 , commercial real estate , bank failures , real estate bridge loans , private money loans

Do You Really Want to be Banker of the Year?

2009-09-30T15:06:00.000-07:00

Less than a year ago, then Chairman and CEO of Bank of America, Ken Lewis, was named Banker of the Year for the second time by American Banker.

Today, The Wall Street Journal (subscription required) announced that Mr. Lewis will retire from Bank of America by year end. This announcement comes just months after Mr. Lewis losing his chairman title over the Merrill Lynch debacle.

Mr. Lewis now joins Kerry Killinger (ousted CEO of Washington Mutual), Ken Thompson (ousted CEO of Wachovia) and Angelo Mozilo (ousted CEO of Countrywide) on the list of former Banker of the Year honorees who thereafter lost their jobs!

Sounds a bit like the Sports Illustrated cover jinx. Do you think any banker in their right mind wants to win next year's award?

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 : Banker of the Year , American Banker , Ken Lewis , Bank of America

Lack of Refinancing Options for Maturing CMBS Loans

2009-09-21T14:37:00.000-07:00

In Two Kinds of Pain for Commercial Real Estate Loans, I wrote that about the shortage of funding to refinance commercial real estate loans as they come due.

In a study for The Wall Street Journal (subscription required), Trepp, which tracks the commercial real-estate market, found that, year-to-date, 528 commercial mortgage backed securities (CMBS) loans valued at $4.7 billion weren't able to refinance when they matured. About 75 percent of these commercial real estate loans were backed by properties that were throwing off more than enough cash to service their debt!

A quick calculation shows that the average loan size for these 528 CMBS loans was approximately $8.9 million. That's not really a large number - this lack of re-financing capacity is likely to impact small and medium sized commercial real estate owners.

At last week's ACG Conference in Los Angeles, I listened to a bank presentation on the state of the debt markets. This bank has tightened their lending criterion for loans including those secured by commercial real estate in part by raising the minimum debt service coverage ratio. If I recall correctly, a 1.35x debt service coverage ratio is the current minimum. By the way, this bank is not lending on commercial real estate without the borrower bringing its entire relationship to the bank.

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 , commercial real estate , bank failures , real estate bridge loans , private money loans , California

45 Days and Counting!

2009-09-15T20:01:00.001-07:00

This afternoon, I dropped by the 2009 M&A Business Conference for the Association of Corporate Growth's Los Angeles chapter. Both the lobby and the Capital Connection room were buzzing with activity.

The Capital Connection room was filled with representatives of over 100 private equity firms with one lender and one commercial real estate sale-leaseback firm thrown in for good measure. The room was packed with deal makers trying to figure out how to get a piece of the $400 billion of equity overhang that everyone keeps talking about!

Spoke to a few of the lenders milling about and each one confirmed the same. If you've got a business loan that needs to be funded by year end, you need to submit the deal to a lender (preferably with a complete due diligence package) by Halloween. After that, there's a reduced likelihood the deal could close by New Year's Eve.

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 : Association of Corporate Growth Los Angeles , sale leaseback , business loans

Credit Crunch Officially Over

2009-09-08T06:00:00.000-07:00

The credit crunch is officially over - at least for one of my clients, an operator of barges and a tugboat.

When referred to me by a Southern California chief financial officer, the borrower had to complete a refinancing of purchase money debt within 25 business days. They were in discussions with six commercial banks, but getting nowhere fast. The bankers were quite interested in the company's deposit potential, but had absolutely no interest in providing the equipment loan.

Within days of being hired, I submitted a completed application and full due diligence package to an SBA lender. A cooperative and well prepared client was a huge plus! We received an approval for an SBA 7a loan within 10 days, subject to an appraisal. The deal closed the last week of August with days to spare before the borrower's deadline.

Why is the credit crunch over for this borrower?

Funding 911 knew the right lender and presented a convincing story on why the SBA lender should expect full and timely repayment of the loan. The borrower can now focus on growing a successful company and not worry about finding money.

A couple of quick notes on the SBA loan market...

According to many sources including this CNN report, SBA loan volume has picked up significantly compared to earlier this year primarily because the secondary markets for SBA loans has healed itself - without much assistance from the government. The ability to quickly replenish their coffers and the attractive premiums once again available for selling these loans have enticed lenders to make more SBA loans.

By the way, as part of the spring stimulus passed by Congress, the SBA was granted over $700 million to increase guarantees and waive borrower paid guarantee fees. Sources say that these funds may be completely utilized by the end of the calendar year. If your business is considering an SBA loan and wants to avoid the stiff guarantee fees, don't wait to apply!

Tags : SBA loans , 7a loan , SBA lender , business loans , equipment loans , credit crunch

Tightening the Screws on Cash

2009-09-02T20:00:00.000-07:00

Money tied up in working capital is not available to grow the business - or in today's environment, not available to help a company survive the economic turmoil.

So it's not surprising that The Wall Street Journal (subscription required) gave front page coverage to the most recent study by REL Consultancy on how big firms are expediting cash collections and slowing cash payments - particularly at the expense of the smaller or weaker companies with whom they conduct business.

The largest companies are particularly good at this cash flow exercise. Companies over $5 billion of annual revenues remit their payables on average in 55.8 days and collect their receivables in as little as 41 days - a net of almost 15 days of working capital in their favor.

Companies below $500 million in revenues are not quite as successful in managing cash flow. The cash is going out the door faster than it comes in! The small and mid size enterprises take almost 59 days to collect their receivables while remitting payments in a fraction over 40 days - a net of almost 19 days of working capital to their detriment.

Many of the small and mid sized companies that I see are experiencing a similar working capital crunch. As a result, some of these companies lack the cash to take advantage of new orders that could lead to a return to profitability as the economy improves.

In an environment where credit is tight and more expensive, it pays to carefully watch one's working capital and cash flow!

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 : working capital , cash flow , accounts receivable , credit crunch , REL Consultancy

Two Kinds of Pain for Commercial Real Estate Loans

2009-09-01T06:00:00.000-07:00

Just when it looks like the banks may be putting the residential mortgage mess behind them, commercial real estate loans are a reminder that the real estate sector is just getting ready for round two. This next wave of pain could put a number of bank lenders into the hurt locker.

The Wall Street Journal (subscription required) reminds us the $700 billion of commercial mortgage backed securities (CMBS) outstanding are experiencing their first major downturn. The sector will likely suffer two kinds of pain.

First - sloppy underwriting for commercial real estate loans resulted in overly optimistic cash flow assumptions by stupid bankers. With the economic downturn, vacancy rates have cut cash flow well below the ability of many commercial real estate properties to service their debts.

Second - Over $150 billion of CMBS simply mature in the next three years. Given the CMBS market has collapsed and isn't available for refinancing purposes, there is little hope that there will be sufficient loan capacity in the weakened bank market to re-finance many of these loans.

The end result - values will drop further as CMBS go into default causing banks to have to lower commercial real estate valuations in their own portfolios. At some point, banks could be forced into devaluing commercial real estate loans on its own books even if they are performing!

Need help finding the right lender to finance your California commercial real estate? Read "Matchmaking for Business Loans" and give me a call!

Tags : commercial real estate loans , commercial real estate , bank failures , real estate bridge loans , private money loans

Tracking the Nation's Bank Failures

2009-08-28T17:39:00.000-07:00

The FDIC announced that its "problem bank" list has grown to 416 banks, an increase of 111 banks since last quarter according to The Wall Street Journal (subscription required). If my math is correct (and my logic sound), the problem bank list has actually grown by close to 160 banks when one considers that bank failures in the last quarter totaled almost 50 banks.

While concerns grow that the FDIC's insurance fund is about to be consumed, the questions intensify over whether or not the FDIC may soon be forced to borrow from its $100 billion line of credit at the Treasury Department.

Within the online version of The Wall Street Journal (subscription required), they created this great little interactive tool to show readers which banks have failed this year, the size of the institution, the name of the rescuing bank and the cost to the FDIC

Honors for costing the FDIC insurance fund the most - IndyMac Bank at $8.9 billion.

Honors for being the biggest failure by asset size - Washington Mutual with $307 billion of assets.

The problem bank list still represents only 5 percent of all banks. There is still money available for all types of business borrowers with a variety of risk profiles. Even bank money.

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 : Problem Bank List , Failed Banks , FDIC , Washington Mutual , IndyMac Bank

Wells Fargo Claims Top Ranking from CIT

2009-08-19T11:21:00.000-07:00

Wells Fargo is the new king of SBA loans.

According to a study by Foresight Analytics, Wells Fargo funded 7.7% of all SBA loans in the first nine months of the fiscal year while struggling CIT Group's 1.1% market share dropped it to 16th place in the rankings.

When taking into account the Wells Fargo acquisition of Wachovia Bank, their combined market share of SBA loans rises to 9.3% of the market.

CIT Group had held the top spot in SBA loan production for nine years until its recent challenges put an end to its marketplace dominance.

For those borrowers who qualify, now is a good time to consider an SBA loan. Between the fee waivers and the recovery of the secondary markets for SBA loans, activity levels are picking up. There are a lot of smaller, regional banks looking to add to their SBA loan portfolio.

Need help finding the right SBA lender? Read "Matchmaking for Business Loans" and give me a call!

Tags : SBA loans , 7a loan , Wells Fargo , CIT Group , top SBA lender

Latest in Lending Developments

2009-08-18T13:36:00.000-07:00

Here are a couple of things I have read in the last few days about the business loan and commercial real estate loan environment.

According to the July 2009 Senior Loan Officer Opinion Survey, demand for business loans and commercial real estate loans continues to be weak. Credit is still tight, though the number of banks increasing credit underwriting guidelines is lower than it was in the peak of year end 2008. Don't count on lending returning to "normal" before late 2010 or 2011 for either bank loans or commercial real estate loans.

Bank closings continue at a record pace with eight bank closings in the first half of August bringing the year to date bank total to 77. Over 300 banks were on the FDIC's troubled bank list as of the end of May according to The Wall Street Journal (subscription required). Don't expect the pace of bank closings to slow anytime soon.

It is increasingly difficult to tell if CIT's fortunes are improving if you were to read this August 13th Written Agreement with the FDIC. Regardless of who your lender is, it's not a bad idea to know your options at a time like this. I imagine there are plenty of lenders who finance accounts receivable that are licking their chops as CIT tries to overcome its challenges.

The spring stimulus bill has been good news for the SBA. SBA loan volumes have significantly increased and there is some concern that its allocation of stimulus money to waive guarantee fees may run out by the end of the calendar year. I'm in the process of closing a $1.3 million SBA 7a loan which was approved in less than ten 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 : Bank loans , commercial real estate loans , CIT Group , troubled bank list , SBA loans , accounts receivable financing

Vulture Lenders Are Back!

2009-08-12T06:00:00.000-07:00

Vulture lending is back according to The Wall Street Journal (subscription required). New data from Dealogic pointing to 140 distressed debt deals valued at over $84 billion in which creditors used their debt positions to seize control of troubled companies.

The deals cited included corporate takeovers resulting from bankruptcies, restructurings, recapitalizations or liquidations.

The front page article suggests that many of today's vulture lenders are hedge funds who are increasingly thinking about a "loan to own" strategy. However, it is hard to know if the hedge fund lenders in these corporate takeovers were merely executing upon one of their exit strategies to recover their loan balances or if their original intent was to own the company.

In late 2006, I provided a few tips on how to identify if your lender is a vulture. If your considering new lenders, it's a good time to revisit those tips. If you've already got lenders who are beginning to act suspiciously, it's probably too late to do anything about it.

Here are three questions you might ask to determine if your lender is a vulture...

1. What actions has this lender taken with its other borrowers in the event of a default?

2. Are the proposed covenants tighter than a company can realistically expect to achieve if anything goes wrong with the plan?

3. Is the financing transaction structured in a way that creates a situation in which the new lenders or investors have better claims on a company's assets and income than do existing common shareholders and lenders?

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 : vulture lender , distressed debt , loan to own , business loans , cash flow problems

Forecast Your Cash

2009-07-22T06:00:00.000-07:00

I’m struggling with a manufacturing client that is not able to generate a financial model which can provide comfort to a bank that the company can repay its debts. Without a forecast which is based upon solid and defensible assumptions, this manufacturing company could be forced to obtain capital at much higher interest rates than a bank would charge.

By hiring a third party resource to create a robust, dynamic financial model, the manufacturer could generate multi-period reports that would help the company and its lenders answer such questions as:

· How much capital will I need?
· How long will my cash last under various scenarios?
· How will I be able to repay my loans?

But the client is hesitant to spend the money even though it could potentially save over $150 thousand of annual interest expense. The cost to hire an expert to create the financial model? In this case, less than 5 percent of the savings.

I recently spoke with Daniel Feiman of Build It Backwards, a management consulting and training services firm, which develops financial models for businesses ranging from start-ups to established firms with annual revenues exceeding billions of dollars. Feiman just published “What Everyone Needs to Know About Financial Modeling” and here’s one portion of our discussion I found particularly compelling.

"A common mistake in financial models is not having a solid understanding of what CASH is and is not. Revenues are not cash. Gross margins are not cash. Profits are not cash. Only cash is cash. Slight changes in the timing between cash receipt and disbursement - even just a couple of weeks - can bankrupt your business. Therefore, a good model will reflect not only cash flows generated by your firm but also their timing."

From your lender's perspective, a good financial model understands cash and can answer the three questions shown above. If you cannot answer these cash flow questions for your banker, the teller’s window will be closed.

If you would like a copy of “What Everyone Needs to Know About Financial Modeling”, click here. Daniel Feiman can be reached at 310-540-6717.

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 : Financial Models , cash flow , bank loans , Daniel Feiman , Build It Backwards

Bankruptcy for CIT?

2009-07-13T08:56:00.000-07:00

The $60 billion finance company, CIT, is negotiating for a government rescue while also having retained bankruptcy counsel.

The outcome is unclear as various press sources report that the US government does not feel that CIT's failure would create a systemic risk to the financial markets. Same conclusion that was reached with Lehman Brothers last fall and the outcome wasn't pretty.

CIT is a major asset based lender to small and medium size businesses offering products including factoring, accounts receivable lending, equipment finance, SBA loans and cash flow loans to a wide variety of industries. Its factoring and accounts receivable loans have been available to companies with revenues as little as $5 million.

Many of these borrowers are probably quite nervous at the moment. While the government may reach the opinion that J.P. Morgan Chase, Wells Fargo and Bank of America can replace CIT in the marketplace in the long run, the short term chaos in the meantime could be significant. These and other asset based lenders could be overwhelmed if the curtain came down on CIT and borrowers had to find replacement lenders on short notice.

Are you a current CIT borrower and worried about your options? Read "Matchmaking for Business Loans" and give me a call!

Tags : CIT Group , CIT , bankruptcy , factoring , accounts receivable loans

Los Angeles Commercial Real Estate Struggling

2009-07-10T06:00:00.000-07:00

As reported in the Los Angeles Times, research firm Real Capital Analytics found that 263 Los Angeles commercial real estate properties totaling $4.5 billion were in default, foreclosure or bankruptcy at the end of June.

Nationwide, troubled commercial real estate properties number over 5,300 properties valued at more than $108 billion.

What's to blame? Excessive leverage. When will it get better? No time soon - this could be the early stages of a decline.

These troubled properties will continue to impact both new financings and re-financings of commercial real estate for a while. Commercial real estate bridge loan lenders are having a field day and opportunistic investors with hordes of cash are overwhelming distressed owners having to sell.

As for the banks holding some of these properties in their workout departments or as REOs, it is impacting their ability to make business loans for working capital. Banks are still saying "no" to new business loan opportunities and in some cases, saying "go" to existing companies on maturing lines of credit.

Need help finding the right lender for your commercial real estate bridge loans or for business working capital loans? Read "Matchmaking for Business Loans" and give me a call!

Tags : commercial real estate loans , commercial real estate , California , Los Angeles , real estate bridge loans , private money loans

Factoring for California IOUs

2009-07-09T06:00:00.000-07:00

One of my factoring sources has told me they are providing emergency funding of California IOUs. This could be a huge assist to many small and medium sized businesses who conduct business with California but may not be able to collect on their invoices for months given the current budget stalemate in Sacramento.

The factor will buy the IOUs for 90% of the face value - you can sell as much or as few of your California IOUs as you need to support your working capital requirements. There are no minimum contract periods. The spot factoring is non recourse to the borrower - if California doesn't pay the IOUs, the factor will not require the borrower to make them whole.

If you already have a lender which has a senior lien on your accounts receivable, it doesn't matter. As the funding source is buying the IOU, it will not be subject to the senior lender's lien position.

Got that? Any questions on how to sell your California IOUs, give me a call at 310-371-4011 ASAP!

Tags : California IOUs , accounts receivable , factoring , asset based line of credit , cash flow

Clean Up the Balance Sheet

2009-07-08T08:53:00.000-07:00

Seven Steps to Improving Cash Flow and Profitability in a Turnaround is one of the articles in the most current edition of the CapitalEyes e-Newsletter from Bank of America Business Capital.

Clean up the balance sheet is the step which caught my eye.

Businesses are encouraged to generate as much liquidity as possible from receivables and inventories. Why? Money tied up in working capital is money not available to grow the company.

All lenders are focused on borrower liquidity in this market. Lenders want to know that borrowers are sending out invoices in a timely manner, if you are taking appropriate steps to implement leading edge credit and collection policies and if you are collecting your accounts receivable in a timely manner. Watch your receivables like a hawk!

Inventory is another hot button. Fewer lenders are willing to advance funds against inventory which may be slow moving or obsolete. I am finding that overly aggressive lending against inventory by incumbent lenders is one of the key reasons that borrowers are unable to find new lenders when the bank says "go"! More conservative lenders are limiting inventory advances to only 25-33% of the accounts receivable advance and only for profitable borrowers.

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 , Bank of America , CapitalEyes , working capital , business loans

Will California IOUs Impact Your Cash Flow?

2009-07-02T07:41:00.000-07:00

The deadline for California to approve an annual budget has passed once again without a final budget. How and when the California legislature and Governator Schwarzenegger will fashion a resolution for the now projected $24 billion deficit are unknown.

Once again, businesses conducting commerce with California that rely on borrowing against their accounts receivable for their cash flow are at risk.

The IOUs that the state may issue in lieu of payment to vendors may not be deemed acceptable for those borrowing against accounts receivable.

If your business is using factoring or a formula driven, asset based line of credit to accelerate cash flow, it is best to check quickly with your funding source and find out their stance on California IOUs. Decisions to accept the California IOUs as collateral will likely be done on a lender-by-lender basis.

By the way, six other states failed to meet July 1 budget deadlines including Arizona, Illinois, Ohio, Pennsylvania, Connecticut and North Carolina.

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 : California IOUs , accounts receivable , factoring , asset based line of credit , cash flow

Credit Still Tight

2009-06-24T16:00:00.000-07:00

The Turnaround Management Association’s Annual Trend Watch Credit Poll is out and the final word is in - business credit is still tight.

“The credit crunch is being exacerbated not only by the lack of availability of credit, but also by the lack of borrowing capacity of companies needing credit,” said TMA Chairman Arthur Perkins, co-head of the West Region Restructuring Practice of Deloitte Financial Advisory Services LLP in San Francisco.

In other words, borrowers suffer from lack of cash flow to service their debt and the banks suffer from lack of capital.

The end result to borrowers is an increase in interest rates and a tightening of loan conditions including a reduction in asset valuations used for collateral.

There is money sitting on the sidelines being loaned against accounts receivable, equipment and commercial real estate. But you have to know where to find it.

Need help finding the right asset based lender or telling your story the right way for your business? If you're in need of at least $1 million, read "Matchmaking for Business Loans" and give me a call!

Tags : credit crunch , Turnaround Management Association , TMA , Credit Poll , accounts receivable , commercial real estate , asset based loans

Top Five Bank Leasing Companies - 2009

2009-06-22T09:04:00.000-07:00

The 2009 list of the top 100 equipment leasing companies was just published and there are not a lot of surprises.

New business volume was down approximately $12.5 billion due to softening demand and tighter underwriting criterion. GE Capital took the biggest dollar hit with its new business volume down $24.5 billion. No other leasing company was even close to taking as large a dollar volume decrease.

Portfolio quality took another body blow following up on its poor prior year performance. Over 60% of the respondents reported that delinquency rates, credit loss provisions and net charge-offs were higher. Lower net charge-offs were reported by only 9% of the survey respondents.

So who were the top five U.S. bank affiliate leasing companies based upon new business volume?

CIT Group - was an independent until the financial bailout and generated almost $13 billion of new volume, down 23%
Bank of America - at $10.9 billion, an increase of 6%
Wells Fargo - at $9.8 billion, a 19% increase
Key Equipment Finance - at $4.5 billion, a 29% decrease
US Bank - at $4.0 billion, a 4% increase

From the tone of the publication, the current year is expected to be even tougher. Lessees beware!

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 : equipment leasing , leasing , equipment financing , Equipment Leasing and Finance Association

More Distributors and Manufacturers Seeking Loans

2009-06-16T21:28:00.000-07:00

In the last ten days, I have been referred to four distributors and manufacturers for asset based lines of credit for amounts ranging from $1 million to $8 million. Included in the group are a manufacturer of cosmetics, a distributor of building supplies, a produce distributor and an electronics manufacturer.

In each case, these companies generated losses in 2008 and have been asked by their incumbent bank lenders to find a new source of funding. Across the board, the borrowers have already reversed their losses by taking actions to reduce their direct costs and overhead. However, the banks have either used the expiration of the credit facility or a breach in financial covenants as reason to terminate their lending relationship nonetheless.

When I spoke with the bank lenders, they cited a tightening of credit criteria or lender fatigue as the primary reason for asking these borrowers to find a new home.

I'm in the process of screening each of these asset based funding opportunities with banks, commercial finance companies and factors. Given that each has assets to offer as collateral (receivables, inventory and equipment), each of these borrowers will find a new lender. The issue will be at what cost. I expect that some of the borrowers will attract new loans in the 8% range while others will pay interest rates in the mid teens.

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 : manufacturer , distributors , lines of credit , asset based loan , factoring , accounts receivable , PACA

Bare Knuckle Asset Based Lending

2009-06-08T06:00:00.000-07:00

It's a bare knuckle asset based lending environment with a back to basics approach of pure formula driven structures with reliance on hard assets according to May/June edition of The ABF Journal.

With businesses generating less cash flow and banks still rationing credit, more and more business borrowers are finding that it takes strong accounts receivable and valuable inventory to get a line of credit.

For those business borrowers who don't quite qualify for conventional bank financing, there are two good asset based lending programs being offered by select banks.

The first program is available to qualified business borrowers in the state of California and provides a revolving line of credit up to $1.5 million.

The second program is available to qualified business borrowers nationwide through select SBA lenders and provides a revolving line of credit up to $2.0 million.

Both asset based lending programs focus on accounts receivable and inventory as the primary source of repayment. The all-in rates on these loans are tied to the prime rate and currently range from about 7.75% to 8.75%.

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 : Line of credit , asset based lending , accounts receivable , SBA

Interest Expense Reduced by Over 50%!

2009-05-18T08:00:00.000-07:00

Almost every business borrower will tell you that in today's current environment it is tougher to get a business loan and the lenders are charging higher rates of interest.

My client, a three year old healthcare staffing company, will tell you how I helped them increase their available credit and reduce their interest rate by over 50%!

Over the course of a two year funding commitment by the lender, my client could save as much as $250 thousand in interest expense.

This lower rate wasn't accomplished through a buy one, get one free promotion or a 3 day weekend sale.

It was accomplished by telling the borrower's story correctly to the right lenders and creating an auction environment so the lenders competed aggressively!

If your business needs to borrow up to $2 million and is currently borrowing at rates in excess of 15% (possibly through factoring), you might be able to achieve the same results!

To be eligible for these business loans, your business must be profitable and have a positive net worth. Accounts receivable and inventory will be the primary collateral for repayment of the revolving line of credit.

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 : accounts receivable , factoring , SBA 7a loan , asset based loans , line of credit , working capital

Taking the Bite out of Rising Healthcare Costs

2009-05-12T06:00:00.000-07:00

What do CFOs worry about when the credit crunch is not their main focus of attention?

In its most recent CFO survey by Bank of America, 67 percent of CFOs are concerned about rising healthcare costs. It is little wonder with healthcare costs expected to grow at an annual average rate of 6.7 percent between now and 2017.

In a survey conducted late last year by CFO Research Services, more than 40 percent of CFOs said they intend to reduce their company’s contribution to benefits in 2009.

Just how will they accomplish this? Will it be through a reduction of benefits, a transfer of costs to employees or a complete rethinking of the very nature of health plans?

To find out how companies might accomplish this, I spoke with Kelly Moore of Moore Benefits. Her company provides employee benefits consulting, brokerage, communication and administration for businesses with up to 200 employees, nationwide.

Here are three ideas Kelly mentioned that companies may use to save money on healthcare costs while remaining competitive in their benefit offerings.

First, companies might consider using a smaller network of HMO providers. In many cases, the more restrictive network allows for the same employee co-pay levels with a much lower premium cost. The savings can be substantial and in the range of 15% - 20%. The downside is that some employees may not have access to their provider as this smaller network will exclude the highest cost providers.

Second, many employers have realized a 20 to 30 percent reduction in premiums by replacing Co-pay plans with high deductible plans in combination with health savings accounts (HSAs). This is a good idea for employers who currently offer co-pay plans with relatively low out-of-pocket costs. The reason these plans have been slow to be adopted is the extra layer of paperwork in establishing, funding and filing claims from the HSA. Every carrier offers these types of plans and people from both extremes (high and low utilizers) can benefit from the savings.

Third, the most common way employers cut healthcare costs is a transfer of costs by increasing co-pays and deductibles. Moore agrees with CFO Magazine that employers may be able to make small changes to healthcare plans to minimize the increase in employee costs.

As lenders drill down on a borrower’s expenses and cash flow, healthcare costs will continue to draw their scrutiny. If you need assistance in getting a better handle on your company’s healthcare costs, give Kelly Moore a call at (949)872-2380.

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 : healthcare costs , chief financial officers , employee benefits , health savings accounts , HSA

Factoring for Agriculture, Meat and Seafood Industries

2009-05-05T14:00:00.000-07:00

Obtaining a line of credit from a commercial bank if you are a distributor in the agriculture, meat and seafood industries can be a bit more challenging.

Why?

Laws have been established which provide lien status to certain suppliers in these industries which trumps the priority liens over accounts receivable granted a borrower to its senior secured lender. As a result, banks and other commercial finance companies tend to shy away from lending money to anyone but the most creditworthy borrowers from these industries. Poor margins, insufficient net worth, too much leverage or too much concentration? No bank loans for you!

So if you are a distributor in the agriculture, meat and seafood industries, what alternatives for lines of credit exist if you are a less than perfect credit?

I work with a non-recourse factor who loves to finance distributors in the agriculture, meat and seafood industries. By purchasing the invoice rather than lending against it, the factor controls the security interest in the accounts receivable even when the distributor has failed to pay its supplier.

This particular funding source provides non-recourse factoring lines of credit in amounts starting at $1.0 million. The effective cost of this money ranges from 15-18% which is more than competitive with the most aggressive factoring rates from even recourse factoring!

A key to obtaining this financing is to have a well balanced list of customers whose creditworthiness can be readily confirmed.

If you are a distributor in the agriculture, meat or seafood industries and need help finding the right lender or telling your story the right way, read "Matchmaking for Business Loans" and give me a call!

Tags : agriculture , meat , seafood , distributors , accounts receivable , recourse factoring , PACA liens , PSA liens , lines of credit , credit insurance

Commercial Real Estate Loans under $4 Million

2009-04-29T08:00:00.000-07:00

The continued challenges facing the commercial real estate lending markets and the significant reductions in SBA 504 real estate loans have left many commercial real estate borrowers with fewer funding solutions.

I have reached an agreement with one commercial bank to help fill some of that void for commercial real estate loans between $1 million and $4 million.
While the underwriting guidelines are tight, they reflect the current market for credit conditions.

This nationwide lender will consider a wide variety of multi-purpose commercial real estate property types - industrial, warehouse, office (including medical office) and manufacturing - for both owner occupied and investor owned properties. Sorry, no gas stations, car washes or convenience stores.

In general, expect advance rates up to a maximum of 65% loan to value, fixed rate terms up to ten years and amortizations as high as 25 years. Debt service coverage ratios start at 1.20 times for owner occupied and 1.40 times for investor owned property.

All loans are full recourse to the borrowers. The interest rates are very competitive with commercial real estate loans offered by other banks.

These loans can be use for both commercial real estate acquisition and re-finance opportunities. Even "cash out" is permitted if certain criterion are met.

Need help finding the right commercial real estate 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 , commercial real estate , real estate bridge loans , private money loans

Rocky Road for Commercial Real Estate Loans

2009-04-22T21:17:00.000-07:00

The Federal Reserve's most recent "beige book" survey released last week found that commercial real estate conditions continue to deteriorate over the last six weeks per The Wall Street Journal (subscription required).

Citing a glut in new development in the Atlanta suburb of Buckhead, developer Tom Bell claims "it's going to be a rocky road for a while".

I'm pretty sure he's not talking about his preference for the ice cream flavor.

Why am I sure?

Commercial real estate loan defaults are approaching $700 billion and another $248 billion of commercial real estate loans come due in 2009. It's going to be real interesting to see how the commercial real estate loan market will deal with these challenges.

Today, I received a list of troubled commercial real estate loans from a commercial bank. I have approached a couple of distressed commercial real estate funds to determine if they have any interest in buying these loans ranging in size up to almost $10 million.

Rocky road, anyone?

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

Tags : commercial real estate loans , commercial real estate , real estate bridge loans , private money loans

Crisis Approaches for Commercial Real Estate

2009-04-07T08:34:00.000-07:00

More trouble is on the way for commercial real estate loans according to The Wall Street Journal (subscription required).

The delinquency rate of $700 billion of securitized loans backed by commercial real estate has more than doubled in just a few months. More bank failures are projected as experts forecast that the banks will get saddled with as much as $250 billion of losses on commercial real estate.

It gets worse.

In the next three years, almost $675 billion of commercial real estate loans mature. With declining property values and lower cash flows, it's very unclear how these loans will be re-financed in this tight credit environment.

I had coffee yesterday with a private money bridge lender for commercial real estate loans. They continue to raise more money to lend against California commercial real estate properties. Though they typically lend no more than 50 percent of fair market value, they can close on a commercial real estate loan in as little as a week. Rates start at 8.5 percent with a couple of points paid at closing.

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

Tags : commercial real estate loans , commercial real estate , bank failures , real estate bridge loans , private money loans , California

Community Banks Angry

2009-03-23T06:00:00.000-07:00

It's no surprise that Ben Bernanke and Sheila Bair were targets of ire for the nation's community banks at last week's annual convention for the Independent Community Banker of America according to The Wall Street Journal (subscription required).

Tired of being tarred and feathered by congressman exploiting (perhaps creating) populist rage against bankers, the community banks point out that few of them have pocketed taxpayer money from the TARP program. In most cases, the community bankers stayed away from subprime loans and the other financial exotic products that drove many of their larger brethren to seek TARP funds.

Even Fed chairman Bernanke acknowledged that 95 percent of the nation's community banks were well capitalized at the end of last year. In fact, many of the banks that contact me looking for deals are community banks who have healthy balance sheets. If your business can demonstrate the ability to repay a loan, community banks are actively seeking you out these days.

That being said, you still have to be careful which community bank with whom you choose to conduct business. Of the 42 banks that have failed in the last 15 months, at least half were community banks. Their sin - loans to finance real estate development and construction projects that have gone belly up since the housing market collapsed. I warned you back in September 2006 these chickens could come home to roost.

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 : community bank , real estate loans , TARP , Ben Bernanke , Independent Community Bankers of America

Solving the Banking Crisis

2009-03-11T08:14:00.000-07:00

Saturday Night Live's parody of Treasury Secretary, Timothy Geithner, makes it perfectly clear how to solve the credit crunch! Business loans will start flowing soon...depending upon your definition of "soon".

Enjoy this six minute video from Saturday Night Live!

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 : Credit crunch , business loans , Timothy Geithner , Saturday Night Live

Return to Sender

2009-03-05T06:00:00.000-08:00

Some regional banks that accepted TARP money are considering an early return to sender according to CFO.com.

Claiming they never wanted the money and may be tainted by having accepted it, regional banks like TCF Financial Corp and Iberiabank have initiated filings to repay the U.S. Treasury the money received under TARP.

Even Ken Lewis of Bank of America has hinted lately he would like to find a way to repay the TARP funds.

I guess the public floggings of bankers, the caps on compensation, the micromanaging of expenses by Barney Frank and the pressure to make loans to non-creditworthy borrowers has proven to be more of a dis-incentive to certain members of the banking community whose balance sheets had plenty of capital to lend.

Or maybe it's just the start of a big game of chicken between the banks and Congress.

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 : TARP , Capital Purchase Program , business loans , credit crunch

Plenty of Money to Lend

2009-03-04T06:00:00.000-08:00

There is plenty of money for banks to lend to businesses provided you can demonstrate the ability to repay.

That's the message from one Southern California middle market banker who focuses on companies with revenues in excess of $50 million. His bank is actively making business loans to companies with a track record of cash flow, strong management and a solid business model

Over coffee on Tuesday morning, we discussed that while there are currently 252 banks on the FDIC's Problem List, there are thousands of banks nationwide that are healthy and willing to lend. Many banks never veered from basic underwriting standards - a key reason why they are standing strong in today's market.

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 : FDIC , Problem Bank List , Credit Crunch

Problem Banks List Grows

2009-03-02T17:21:00.000-08:00

The news isn't getting any better as the FDIC announced that its "Problem List" grew during the quarter from 171 to 252 banks, the largest number since the middle of 1995.

This top-secret tally of institutions in hot water was announced in concert with the news that the U.S. banking industry spewed red ink to the tune of $26.2 billion in the last three months of 2008, the first such quarterly loss since 1990 during the savings and loan crisis.

With 25 bank failures in 2008 and 12 bank failures thus far in 2009, it's unclear how the banking industry is going to recover anytime soon and begin providing the access to business loans that the economy needs to effect a turnaround.

But don't let these challenges keep you from seeking a business loan. There are still thousands of well capitalized banks that will make loans to businesses that can demonstrate the ability to repay their obligations from cash flow.

And if your business can't qualify for a bank loan, there are plenty of alternative sources of business loans that will make loans to businesses that have good collateral such as accounts receivable, equipment and commercial real estate.

Expect these asset based loans to cost a bit more than bank loans and in some cases much more than bank loans. But, these asset based loans could be the lifeline to help your business survive until the economy recovers and bank lending activities return to normal.

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 : asset based loans , credit crunch , bank loans , FDIC , problem bank list

SBA Franchise Loan Default Rates for 2008

2009-02-24T15:11:00.000-08:00

Defaults on SBA 7a loans for franchises have soared by 52% in the latest fiscal year according to The Wall Street Journal (subscription required). In dollar terms, the loan losses totaled $93.3 million, a 167% increase over the prior year.

Here's the list where at least 11 franchisees defaulted on SBA 7a loans during fiscal year 2008 in order of the number of defaulted loans: Quiznos, Cold Stone Creamery, Subway, Curves for Women, Planet Beach, Aamco Transmissions, CiCi's Pizza, Carvel Ice Cream, Domino's Pizza, Dream Dinners, Taco Del Mar. Quiznos franchisees had the greatest number of loan defaults at 108 bad loans.

As a percentage of the total number of SBA 7a loans, these franchisees were not the worst offenders. The worst offenders based upon percentage of SBA guaranteed loans to franchisees to default over the last eight fiscal years included: Mr. Goodcents Subs & Pastas (55%), Philly Connection Sandwiches (51%), Cottman Transmission (49%), All Tune & Lube (47%), Cornwell Quality Tools (42%), Carvel (41%) and Blimpie (41%).

I'm sure someone at these franchisors has a really good reason why their franchisees may not be good at repaying their debts. The bottom line is that SBA lenders will be thinking twice before taking one of these deals to their investment committees.

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 , SBA loans , 7a loans , franchise loans

The Crack Cocaine of Community Banks

2009-02-16T10:44:00.000-08:00

With default rates rising on commercial real estate loans, RBC Capital Markets recently forecast that more than 1,000 U.S. banks may fail in the next three to five years. Most of these bank failures will occur at banks less than $2 billion of assets.

In The Minneapolis-St. Paul Business Journal, it was just noted that "commercial mortgages are being closely watched as another source of pain for the nation’s bankers. At the height of the credit bubble, one industry observer said commercial real estate loans had become the crack cocaine of community banking, reflecting the pace of growth some were achieving with such loans."

Crack cocaine?

Over two years ago, I wrote that bank regulators had issued new guidelines impacting many small and mid size banks to offset concern that too many bank loans were secured by business real estate creating an undue level of risk in bank loan portfolios. Their other concern was whether or not the banks had enough capital to withstand the losses that might result from defaults on real estate loans.

The FDIC shut down 25 banks in 2008 and 9 banks thus far in 2009. It will interesting to see how many more banks bite the dust this year and how many of those were hooked on "crack cocaine".

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 , community banks , bank failures , real estate bridge loans

Survey Says

2009-02-04T16:16:00.000-08:00

The January 2009 Senior Loan Officer Opinion Survey on Bank Lending Practices was released on Monday. No big changes or surprises in my mind.

Over 65 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. Down a bit from October, but not in a material way.

About 80 percent of domestic banks reported having tightened their lending standards on commercial real estate loans over the past three months. The fallout from the implosion of the CMBS market is becoming more evident every day. It's unlikely there will be sufficient lending capacity to re-finance the over $150 billion of commercial real estate mortgages maturing in 2009.

And as I noted last quarter, the survey also reports that interest rate floors are becoming more prevalent and loan to value ratios are decreasing.

The conclusion - credit is still tight if you're not a creditworthy borrower with lots of deposits.

The bankers with whom I speak on a regular basis confirm the status of the current lending environment. There's not yet been a push to increase business loans or commercial real estate loans to new clients notwithstanding the TARP plan. In fact, many of these loan officers are focused on gathering in new deposits or taking care of the non-borrowing needs of existing clients.

What's the next event to watch? It's not the new stimulus bill working its way through Congress though this will be critical to the economy.

Rather, watch when business borrowers start filing financial statements with their lenders for the fourth quarter. Expect many borrowers to post fourth quarter and full year 2008 losses and trip financial covenants causing a new onslaught of headaches for lenders.

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 : Federal Reserve , business loans , credit crunch , asset based loans , accounts receivable , hard money loans , real estate loans

Kiss and Say Goodbye

2009-02-03T15:19:00.000-08:00

I'm gonna miss you, it's no lie.
Let's just kiss and say goodbye.
"The Manhattans"

The SBA said losses from loans made through its lending programs more than doubled in 2008 reaching nearly $1.3 billion according to The Wall Street Journal (subscription required).

Potentially adding fuel to the fire, the economic stimulus bill making its way through Congress includes $735 million for the SBA to stimulate lending to small businesses.

The provisions for the SBA stimulus include larger loan limits, an increase in the government guarantee percentage, a reduction in borrower paid guarantee fees and possible direct lending by the SBA if all other lenders decline the loan.

No word on whether the SBA will instruct lenders to relax their underwriting criteria and give loans to any borrower with a pulse. Isn't that how we got into this predicament in the first place?

I suppose some will say this bailout of Main Street is no worse than a bailout of Wall Street. I just hope that some judgment is used before piling more debt on borrowers who can't repay.

If not, who wants to pucker up first and kiss that stimulus money "goodbye"?

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 : SBA , 7a loan , 504 loan , small business , SBA loan

California Declared Ineligible

2009-01-22T18:00:00.000-08:00

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

Rocket Fuel for Growth

2009-01-19T06:00:00.000-08:00

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

Twenty Percent Declined for Business Loans

2009-01-15T06:00:00.000-08:00

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 CFO.com. 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

Overly Optimistic Cash Flow Assumptions

2009-01-12T06:00:00.000-08:00

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!

Tags : real estate , private money loans , commercial real estate mortgages , bridge loans

A Little Less Conversation

2009-01-05T06:00:00.000-08:00

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

Lunch with the Chairman

2008-12-15T06:00:00.000-08:00

Surviving the financial crisis was the focus of a lunch presentation by Ivo Tjan, Chairman and CEO of CommerceWest Bank. Along with about 75 business owners and professionals, I attentively listened to Tjan explain the origins of the financial crisis, what was getting done in Washington to rescue the economy and what borrowers should know when asking for a business loan.

Here's a few of the points I found most interesting:

Shortly after inauguration, the new administration and congress will likely pursue a second stimulus package ranging from $700 billion to $900 billion. It will be heavy on infrastructure spending, not tax rebates.
Economic recovery is not likely to occur before fourth quarter 2009.
Ben Bernanke is not afraid of taking the fed funds rate to zero.
Only three of every ten banks currently have the capacity to make new loans.
Banks are focusing more and more on a business' ability to generate cash flow to repay a loan than on collateral.
Banks will understand if a borrower's current performance is suffering provided that it is performing better than its peer group and management has identified its challenges and is implementing a plan to address those challenges.
To ensure access to business loans, borrowers need to have strong relationships with the decision makers at their respective banks.

Not a bad deal - a lunch which included food to eat and food for thought!

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 : CommerceWest Bank , Ivo Tjan , business loans , credit crunch

Happy Holidays?

2008-12-12T06:00:00.000-08:00

I attended the holiday parties for two major business associations this week - the Commercial Finance Conference of California (CFCC) and the Orange County Chapter of the Association of Corporate Growth (ACGOC).

I've been a regular attendee at the annual CFCC holiday party whose membership is primarily asset based lenders. Attendance was down significantly at this year's event to about 200 attendees. A typical year draws well over 300 guests. Why the decrease? Possibly industry layoffs. With restructurings at CIT, Textron, GMAC, Capital Tempfunds and others, perhaps there wasn't as much to celebrate or no one left to celebrate. I also saw very few back office and administrative types compared to previous years. One lender said that the tightened purse strings led them to send only the deal people this year. I also noticed very few bankers in attendance - must have been back at the office filling out more reports on troubled loans.

This was my first year attending the holiday party for the ACGOC. This group's membership has a significant number of service providers to the M&A industry. Attendance was similar to the prior year according to the event coordinator. I spoke with many of the attendees - most acknowledged that their business had declined these last six months. Quite a few mentioned their clients were experiencing cash flow problems and the impact of the credit crunch.

Hope your holiday parties are filled with cheer. Should you 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 : ACG , Commercial Finance Conference of California , Commercial Finance Association

Banker of the Year

2008-12-08T05:00:00.000-08:00

This year's recipient of Banker of the Year is Ken Lewis, Chairman and CEO of Bank of America.

Yes the same Ken Lewis whose comment about "stupid bankers" I wrote about in May 2007 and again this past spring. Here's the quote - "we are close to a time when we'll look back and say we did some stupid things".

The same Ken Lewis who is hoping he won't be considered one of those stupid bankers for Bank of America's acquisition of Countrywide and Merrill Lynch.

Two time winner Lewis joins past American Banker honorees including:

Kerry Killinger, ousted CEO of Washington Mutual
Ken Thompson, ousted CEO of Wachovia
Angelo Mozilo, ousted CEO of Countrywide

Congratulations to Ken Lewis and here's hoping he doesn't suffer the fate as the stupid bankers listed above. I meant former honorees.

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 : Bank of America , Ken Lewis , Banker of the Year

More Bank Failures on the Way

2008-11-25T12:59:00.000-08:00

The FDIC expects more banks to fail according to FDIC chairman Sheila Bair.

The agency now characterizes 171 institutions, with combined asset values of $116 billion, as "problem" institutions. If I'm correct, this list was at 90 back in the middle of summer 2008.

While Bair claims that "most banks remain well-capitalized, profitable, and sound," that's still a dramatic increase in the number of problem banks. It's unclear if the 171 count includes Citigroup.

As to be expected, loan defaults rates are starting to rise on business loans as the cracks in the economy start to spread. The rising default rates will add further pressure to the balance sheets of the problem banks as well at to those banks considered healthy.

Notwithstanding the credit crunch, there are banks making business loans as well as commercial finance companies, factors, leasing companies and private money lenders. Be prepared to turn over a few more stones in your search for a business loan and expect to pay higher interest than perhaps a year ago. Collateral in the form of accounts receivable, equipment and commercial real estate will give comfort to a lender trying to determine if your loan will be repaid.

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 : FDIC , problem banks , credit crunch , factoring , accounts receivable

Commercial Real Estate Loan Defaults on Rise

2008-11-19T08:48:00.000-08:00

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?

2008-11-11T05:00:00.000-08:00

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

2008-11-10T05:00:00.000-08:00

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

2008-11-03T17:46:00.000-08:00

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

2008-10-23T19:37:00.000-07:00

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

2008-10-10T08:00:00.000-07:00

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

2008-10-06T06:00:00.000-07:00

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

CFOs Worry About Access to Capital

2008-10-03T10:22:00.000-07:00

The credit crisis is deepening and the uncertainty of a congressional bailout package has both the financial markets and CFO's alike worried about the continued impact.

According to a new survey by CFO Research Services, 61 percent of CFOs surveyed are concerned about their company's access to day-to-day financing. Even more - 65 percent, are worried about access to long term credit.

Many of the lenders with whom I speak say they are willing and able to lend, but the proof is in the pudding. Here's what I have personally experienced myself in the last few days.

Closed a $250 thousand SBA loan for a manufacturer of food products.
Closed a $500 thousand factoring deal for an importer of meat products.
Received approval for a $500 thousand equipment financing for new trucks.
Obtained a bank proposal on behalf of a consumer electronic products company for a $1.5 million working capital secured by accounts receivable and inventory. Formal due diligence starts next week.
Submitted a $6 million proposal for Fannie Mae financing of a recently completed and fully leased, multi-family real estate property.

Debt financing is still flowing into the markets on a selective basis provided you can offer the right collateral to lenders. Rates are a bit higher reflecting lender perception of risk and the lack of liquidity amongst lenders.

Nervous Borrowers Draw Down Lines of Credit

2008-09-25T08:30:00.001-07:00

The Wall Street Journal (subscription required) reported a growing number of companies are hoarding cash and tapping lines of credit they don't actually need.

Why?

Fear that their bank lender may withhold it or unable to deliver the funds down the road.

With liquidity crunches in the interbank lending markets and the commercial paper markets, many borrowers are not waiting to make sure their own liquidity needs go unmet. GM, Sally Beauty, Jarden Corp. and Fairpoint Communications are just a few borrowers that have recently tapped or announced intentions to tap their lines of credit. GM recently announced it intends to draw down the remaining $3.5 billion of its $4.5 billion secured revolving line of credit.

Typically, these lines of credit would be quickly paid down. I suspect some of these companies will be letting the money sit in their own accounts till the storm passes over.

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 , business loans , accounts receivable , cash flow , lines of credit

Very Crunchy, Indeed

2008-09-16T19:39:00.000-07:00

The credit crunch will be felt even more in the months ahead as a result of the financial earthquake suffered on Wall Street this past Monday according to The Wall Street Journal (subscription required).

Those with less than stellar credit histories will have the most trouble borrowing money to run and expand their operations.

Need anecdotal evidence of a credit crunch?

One of my colleagues introduced me yesterday to six new deals - all for small and medium sized businesses seeking lines of credit ranging in amounts from $1 million to $10 million. In each case, the borrowers had been told by their lenders to find replacement sources of financing. All of the companies were offering accounts receivable and inventory for collateral.

Here are a couple of reasons these companies are having trouble finding lines of credit.

operating losses accompanied by negative cash flow
too much inventory relative to sales volumes
significant exposure to foreign accounts receivable

Asset based lending will likely be the solution for most of these deals. The interest rates will likely be much higher than what they're currently paying.

I had two interesting conversations today with bankers. The first with an SBA lender who commented on a shrinking pipeline of deal flow. The second with a banker who spoke of cherry picking deals and increasing the interest rates charged to borrowers.

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 , business loans , accounts receivable , cash flow , lines of credit

Banks Cutting Lines of Credit

2008-09-12T10:02:00.000-07:00

According to CFO.com, banks are downsizing companies' revolving lines of credit and pulling out of loan syndications.

Why?

First, to preserve liquidity and shore up balance sheets after large losses in their real estate portfolios. Second, to to put money to work in more profitable loans with borrowers who are using other lucrative bank services.

Easy companies to target for a reduction are those with little if any outstanding balances on revolving lines of credit. Use it or lose it if you want your bank to keep it in place seems to be the message.

According to Oliver Wyman consultant, John Walenta, middle market companies and small businesses may be at greatest risk to modifications to their revolving lines of credit. With these customers, the banks may have contractual rights to demand full repayment at any time.

I'm hearing of more banks cutting back on revolving lines of credit to customers that are in both payment default and those in violation of covenants. Most of the banks I know also won't consider a loan in this environment without a deposit relationship. The asset based lenders are much more active as bank lending continues to tighten.

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 : CFO Magazine , credit lines , credit crunch , lines of credit

Line Up International Receivables Financing First

2008-09-09T20:58:00.001-07:00

While the dollar is not as weak as it was earlier this summer, The Wall Street Journal (subscription required) reports that many businesses are still looking to exports to fuel growth to offset economic weaknesses in domestic markets.

A few companies have approached me as of late with cash flow challenges resulting from working capital tied up in international accounts receivable.

While there are sources of accounts receivable financing that will provide funding tied to international accounts receivables, those lenders typically want the exporters to have at least a few months of experience at selling overseas with open credit terms. As always, those customers should be creditworthy.

As I've written in the past, if you're extending credit terms to your customers, you're a lender. Take extra precautions when you're providing credit terms to foreign customers as your own funding sources may not be prepared to provide you with a loan secured by foreign accounts receivable. Or they might be willing to advance your loan, but only to the extent your customers are deemed bankworthy.

Ask your lender in advance of providing terms to your foreign clients so you don't get caught short on the working capital needed to keep the doors open.

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

Tags : accounts receivable financing , exports , working capital , credit terms , international factoring

Beige Book Notes Credit Crunch

2008-09-04T20:10:00.000-07:00

The latest Beige Book released this week notes that all twelve reporting districts reported tightening business loan standards. Federal Reserve officials are openly discussing a credit crunch.

Boston Federal Reserve Bank President Eric Rosengren said "the financial problems that initially created a liquidity crunch have now evolved into a more traditional credit crunch," in prepared remarks made available to reporters.

According to Rosengren, "the tightening already appears to be more widespread than it was during the early 1990s, and portends more difficulty in financing business fixed investment and commercial real estate projects in the second half of this year."

The Beige Book is simply a collection of anecdotal information on current economic conditions gathered through through reports from Bank and Branch directors and interviews with key business contacts, economists, market experts, and other sources.

Too bad they didn't call me - I'm overflowing with anecdotal evidence of a credit crunch for both business loans and commercial real estate loans. More and more deals are finding their ways to asset based lenders as many commercial bankers are declining new loan opportunities and spending their time looking for cheap deposits.

Do 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 : credit crunch , business loans , commercial real estate , bridge loans , Beige Book

Credit Crunch Impact on Middle Market M&A

2008-09-02T10:44:00.000-07:00

The credit crunch is being felt by middle market merger and acquisition deals according to emails I received today from both Bank of America and W.Y. Campbell & Company.

Here are five key points I gleaned from these two newsletters:

Purchase price multiples have declined to 6.8 times EBITDA (earnings before interest, taxes, depreciation and amortization - a proxy for cash flow) from a peak of 8.8 times EBITDA in the third quarter of 2007.
Acquisition leverage has declined with senior cash flow loans down to 2.5 to 3 times EBITDA from as much as 3.5 to 4 times EBITDA from 12 months ago.
Asset based loans are playing more of a role in financing acquisitions as lenders are becoming more conservative in underwriting criterion.
While benchmark rates such as Prime and LIBOR have declined in the last year, credit spreads have increased as much as 200 basis points for mid range middle market acquisition loans.
Equity injections by buyers are now approaching 40% of the purchase price compared to approximately 30% in 2006 and 2007.

Need help finding the right lender for your acquisition financing? Read "Matchmaking for Business Loans" and give me a call!

Tags : Bank of America , Capital Eyes , W.Y. Campbell , EBITDA , acquisition loans , credit crunch , asset based loans

Hedge Funds Providing Real Estate Bridge Loans

2008-08-27T13:08:00.001-07:00

With fewer banks making commercial real estate loans due to the credit crunch, hedge funds are becoming increasingly willing to fill the gap by providing commercial real estate bridge loans.

In today's The Wall Street Journal (subscription required), it is reported that as many as 140 hedge funds are actively pursuing providing "hard money" loans at rates ranging from 10% to 20%.

Not only borrowers with bad credit or tough deals are using these bridge loans which typically mature in under two years. Borrowers with good credit are using bridge loans to close deals much faster than commercial banks can fund.

I am also seeing more requests these days for commercial real estate bridge loans. Lately, I've seen requests for private money loans to fund the acquisition of gas stations, to refinance an automobile dealership, to refinance a single purpose property and to re-finance a construction loan for an office building.

As I have previously mentioned, 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? Read "Matchmaking for Business Loans" and give me a call!

Tags : commercial real estate , hard money loans , bridge loans , private money loans , hedge funds , California

Next Shoe to Drop - Commercial Real Estate Loans

2008-08-22T07:36:00.000-07:00

Ten months ago, I noted that some feared commercial real estate loans could be the next shoe to drop.

Today's New York Times cited evidence suggesting that time may be here.

Delinquencies and default rates are increasing, the availability for new commercial real estate loans is drying up and prices for commercial properties are softening. Moody’s/REAL Commercial Property Price Index has dropped nearly 12 percent since its peak last October.

I spent a lot of time this past week talking with bankers and commercial real estate lenders. I heard about cease and desist orders on construction lending, inability to lend against commercial real estate, tenants no longer qualifying as "credit-tenants", reduced loan to value advance rates, tighter underwriting criterion and a need for more bridge loans.

The other shoe is dropping.

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

Tags : commercial real estate loans , private money loans , bridge loans , hard money loans , credit tenant leases , California

Fixed Rate Equipment Financing

2008-08-19T19:51:00.000-07:00

Fixed rate or floating rate equipment financing? That's the question posed to me by the business strategy advisor to a transportation company.

The trucking equipment being acquired is brand new and according to the borrower, has a useful life of 6 to 7 years. The equipment financing options include a 6 year, fixed rate loan from a major commercial finance company or a 7 or 10 year, floating rate loan from a commercial bank through the SBA 7a loan program. The initial interest rate on the SBA loan options is marginally lower than that of the fixed rate equipment financing.

As the financing options are not mutually exclusive, I've recommended that the borrower accept both the fixed rate and floating rate financing offers.

In my opinion, interest rates are more likely to increase than to decrease over the next 5 years. The company can minimize a portion of its future interest rate risk by locking in the rate on a portion of its financing requirements today.

What course of action would you recommend?

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 , equipment finance , SBA loan , SBA 7a , fixed rate financing

Credit Tightening Results in New Asset Lenders

2008-08-12T21:37:00.000-07:00

According to the July 2008 Senior Loan Officer Opinion Survey on Bank Lending Practices, at least 60 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 80 percent of domestic banks reported having tightened their lending standards on commercial real estate loans over the past three months.

Both of these statistics point out why new lenders are jumping into the lending markets for both asset based business loans and real estate bridge loans.

On Monday I met with a new lender offering asset-based loans ranging in amounts from $500 thousand up to $10 million, an under-served niche within the asset-based lending market.

This lender is a new joint venture backed by a very large, east coast based fund. They will primarily lend against collateral consisting of any combination of machinery & equipment, rolling stock, inventory, accounts receivable, real estate, and intellectual property. Typical clients include small business owners, turnarounds, start-ups, businesses needing bridge loans, and companies needing bankruptcy exit financing.

The main target for these asset based loans will be small businesses with no financing alternatives due to the liquidity crunch and tightening credit requirements in regional banks.

Targeting businesses throughout the United States, this asset based lender looks strictly at asset value and does not require the borrower to have audited financial statements.

Expect pricing to reflect the risk profile of the borrower and the quality of the assets. In other words, don't expect bank rates!

If this lender sounds like a good fit for your financing needs, read "Matchmaking for Business Loans" and give me a call!

Tags : Federal Reserve , business loans , credit crunch , asset based loans , accounts receivable , equipment , inventory , collateral loans

Top 5 Bank Leasing Companies

2008-08-06T21:38:00.000-07:00

A major industry leasing publication just published its list of top 50 bank affiliated leasing companies in the U.S. ranked by net assets based upon 2007 activity.

Holding onto its number one ranking from 2006 was Bank of America Leasing. Interestingly, the order of the top 5 did not change from 2006.

Bank of America Leasing
Wachovia Equipment Finance
Citicapital
Key Equipment Finance
Wells Fargo Equipment Finance

Of the top 5, Wachovia and Citicapital both booked less business than the prior year. Wells Fargo had the biggest increase in net assets growing over 50% in one year.

I expect the rankings to look different next year as Citicapital has sold off significant leasing assets to both CIT and GE Capital.

One other interesting note, more than 40% of the top 50 banks reported increases in delinquencies, credit loss provisions and net charge-offs. Just like other types of lending, the leasing arms are probably "cherry picking" deals and increasing rates in 2008.

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

Tags : equipment leasing , leasing , Bank of America Leasing , Wachovia Equipment Finance , Citicapital , Key Equipment Finance , Wells Fargo Equipment Finance

Single Tenant, Net Leased Market Changes

2008-08-04T19:38:00.000-07:00

According to the July edition of Real Estate Forum, the balance sheet problems of commercial banks and the collapse of the CMBS markets are resulting in market terms for debt financing for single tenant, net leased properties reverting to conditions last seen before the in the 1999-2001 era.

Here's what that means according to the article by Michelle Napoli.

local and regional banks are now the "go-to" source of mortgage financing
full or partial recourse is back on the table
leverage is lower and interest rates are higher
loan term durations don't exceed the length of the lease

The lenders with whom I speak cite similar changes to the debt financing markets for all commercial real estate property types.

One bridge lender interviewed in the article claims to be seeing a lot more deal flow as borrowers "cannot get financing through avenues they typically use".

A private money, bridge lender that I show deals to has experienced the same increase in deal activity. This lender's 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 willing to consider properties in other western states.

Need help with an introduction to a bridge lender for commercial real estate properties? Read "Matchmaking for Business Loans" and give me a call!

Tags : commercial real estate , private money loans , bridge loans , hard money loans , Real Estate Forum , credit tenant leases

Factoring and Asset Based Lending Grows

2008-07-21T07:00:00.000-07:00

With cash flow on the decline and commercial banks taking a bath on their real estate portfolios, more borrowers are turning to factoring and asset based lending solutions to meet their working capital requirements according to CFO.com.

Factoring, a trillion dollar industry worldwide, grew in the US to $135 billion in 2007 representing a six percent increase over 2006. Asset based lending in the US increased to $545 billion in 2007, an 11 percent increase over 2007.

In times of economic challenges, borrowers will utilize their purchase orders, accounts receivable, inventories, equipment and real estate to give lenders comfort to extend business loans. As is often the case when using factoring and asset based lending, borrowers should expect that the interest rates and terms will be more expensive and tighter.

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

Tags : factoring , accounts receivable , asset based lending , working capital , cash flow

Top 5 Banks with Declining SBA Volume

2008-07-17T07:57:00.000-07:00

As reported in the Coleman Report, the decline in SBA loan volume at five banks - Capital One, Bank of America, RBS Citizens, Washington Mutual Bank and Wells Fargo Bank - amounted to 75 percent of the nation's decline in SBA lending.

"This isn't to suggest in any way that these banks have done something wrong," SBA spokesman Mike Stamler wrote. "It's simply an illustration of how changes in strategy by a handful of national lenders can affect SBA's loan program."

This was the extent of the information available in the Coleman report. It's not clear if the decline was based upon number of loans or dollar value of loans. I also don't know the time period for which the decline is reported or whether the decline is in the 7a or 504 programs. I couldn't find anything on the SBA's website which provided more detail.

Need an SBA loan for at least $1 million and need help finding the right SBA lender? Read "Matchmaking for Business Loans" and give me a call!

Tags : SBA , 7a loan , 504 loan , working capital , Coleman Report

Construction Loans Don't Mix with Hard Money

2008-07-16T08:23:00.000-07:00

Construction loans and private, hard money loans turned into a lethal combination for Scott Coles and Mortgages Ltd., one of Arizona's biggest private lenders during the real-estate boom.

The front page of today's Wall Street Journal (subscription required) highlighted the risks inherent in making hard money loans for commercial real estate construction projects. For Scott Coles, it resulted in the Chapter 11 filing for the business his father built and his own presumed suicide.

Many of these hard money lenders are learning the same lessons as the many commercial banks who made loans to real estate developers in the last two or three years of the real estate boom. Bet on the right horse and know your exit strategy if events turn against you.

According to The Wall Street Journal, "hard-money lenders that didn't overextend themselves during the boom, and still have capital to lend, are poised to cash in as the credit crunch spurs traditional lenders like banks to stay on the sidelines."

I'm working with a couple of hard money lenders that fit this description. While they won't extend construction loans, these private money lenders will lend from $1 million to $50 million against commercial real estate. For California commercial real estate, the interest rates current start at 9-10% for 12-18 month loans. With points averaging 4.5 and loan to values as high as 70%, these loans can be extremely helpful in acquisitions or re-financings.

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

Tags : commercial real estate , hard money loans , construction loans , private money loans

The Return of Mezzanine Loans

2008-07-09T18:12:00.000-07:00

Bank of America Business Capital reports in its latest edition of Capital Eyes that mezzanine debt is experiencing a rise in popularity as a way to finance the acquisitions of private equity firms.

Second lien loans, a quite popular funding tool in this decade until the first half of 2007, have disappeared for all practical purposes.

Why?

According to Capital Eyes, second lien loans have become extremely expensive and there is concern how second lien lenders will behave in a workout situation.

Mezzanine lenders are filling their coffers in expectation of more active lending days ahead. The article notes that this past quarter saw $20.5 billion in fundraising dollars go to mezzanine funds, which is four times more than was raised in all of 2007.

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

Tags : Bank of America , Capital Eyes , second lien loans , subordinated loans , mezzanine financing

Construction Loans May Crush Some Banks

2008-07-02T19:12:00.000-07:00

Having a hard time getting a construction loan for your commercial real estate project? It's only going to get tougher.

Today's Wall Street Journal (subscription required) reported that a number of regional and community banks may soon report significant losses related to real estate construction loans gone bad.

With the residential construction industry in the toilet and interest reserves running out, more and more banks will be forced to report an increase in construction loans that developers cannot repay.

More writedowns means less capital on the balance sheet.

Less capital means you better know your bank's appetite for any type of loan before you go in with your loan request. Real estate loans or business loans - the bank may have less money or no money to lend.

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

Tags : commercial real estate , hard money loans , construction loans

Real Estate - Interest Reserves for Construction Loans

2008-06-25T17:03:00.000-07:00

According to The Wall Street Journal (subscription required), bank auditors are looking closely at whether or not banks are using interest reserves to hide troubled real estate construction loans.

Interest reserves represent money set aside by the bank from loan proceeds to cover the interest expense to be incurred over the life of the loan. In effect, the bank could be paying themselves interest even when a loan is not performing and should be considered delinquent.

"As an indication of regulators' concerns about construction lending, the FDIC in recent months has hit some banks with cease-and-desist orders requiring, among other things, that they overhaul how they use interest reserves. Analysts have warned that some 150 small banks could fail in the next few years because of their big bets on construction loans."

Use of interest reserves has been a long standing practice. However, with bank losses growing daily from bad real estate construction loans, The Wall Street Journal notes some banks may alter or discontinue this practice.

If interest reserves are a critical element of your real estate construction loan, you'll find some private money lenders are willing to provide interest reserves. Of course, the cost of this money will be significantly higher than bank 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 : commercial real estate , hard money loans , construction loans

Recourse Real Estate Loans Back in Fashion

2008-06-18T17:27:00.000-07:00

According to today's Wall Street Journal (subscription required), lenders are once again asking for personal guarantees on commercial real estate loans.

With a disappearance of the commercial mortgage-backed securities (CMBS) markets, bank lenders are returning to the recourse "loan and hold" model.

Underwriting is more thorough, advance rates are down, pricing is up and terms are tougher.

No personal guarantee and you're not likely to get the loan.

If the bank told you no and you need help finding the right hard money lender for a commercial real estate loan greater than $1 million, "Matchmaking for Business Loans" and give me a call!

Tags : commercial real estate , hard money loans

Atradius - Top Four Impacts of Credit Crunch

2008-06-11T11:04:00.000-07:00

More than 2,500 business executives in 14 countries have shared their perspectives on the global credit crisis with The Atradius Group which provides trade credit insurance, surety and collections services worldwide. Ninety percent of U.S. respondents forecast further tightening of credit.

Here are the top four negative impacts on performance anticipated in the coming year as a result of the credit crunch.

Increase in payment defaults (69%)
Increase in the cost of capital (67%)
Inability to raise outside capital (63%); and
Slow-to-no sales growth (62%)

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

Tags : Atradius , credit crunch , cost of capital

Pessimistic CPAs

2008-06-05T07:59:00.000-07:00

As reported in SMB Finance, senior level executive CPAs are pessimistic about the economy and experiencing problems related to the credit crunch.

The quarterly survey, by the American Institute of CPAs and the University of North Carolina's Kenan-Flagler Business School, found that 57 percent of the more than 1,400 senior-level executive CPAs polled said they were pessimistic or very pessimistic about the economic outlook for the U.S. over the next 12 months.

Asked about the impact of the credit crisis, 45 percent said their organization was not experiencing any changes, while 20 percent cited problems with customer collections. Eighteen percent indicated they were experiencing higher credit costs and 14 percent said that previous sources of financing were no longer available.

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 , SMB Finance

Leasing Rates Increase

2008-06-03T13:05:00.000-07:00

My small ticket leasing alliance partner just told me that interest rates on leasing transactions are being increased by a major bank leasing company. This funding source finds its business through a network of independent finance brokers and lessors.

Why is this lessor raising rates for "application only" and small commercial leasing deals?

First, the lessor's cost of borrowing has increased.

Second, delinquencies and defaults have also increased - higher risk goes hand-in-hand with higher rates.

Per my alliance partner, while this source was the first to increase rates, the news on the street is other lessors will soon follow.

Need help finding the right lease financing source 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

SBA - Experience Wanted

2008-05-28T07:20:00.000-07:00

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

Inc.com - Why are SBA Loans Drying Up?

2008-05-27T10:32:00.000-07:00

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 Inc.com 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

Another Way to Accelerate Cash Flow

2008-05-22T06:00:00.000-07:00

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

Note to Self: Line Up Financing First!

2008-05-20T07:00:00.000-07:00

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

Stupid Bankers - Redux

2008-05-14T06:00:00.000-07:00

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.

Oops!

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

Fast Funding and $250 Thousand Lower Interest Expense

2008-05-13T07:00:00.000-07:00

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

Top Ten Concerns of CFOs

2008-05-08T04:00:00.000-07:00

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

Fed - Tighter Standards for Small Business Loans

2008-05-06T07:00:00.000-07:00

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