Small-business loans slow to a trickle

Tom Abate, Chronicle Staff Writer

Wednesday, May 27, 2009

Lending to small businesses had slowed even before last fall's financial meltdown, and the credit picture has probably worsened since then, according to a report from the Small Business Administration's Office of Advocacy.

The report issued Tuesday said the growth of small-business loans - those less than $1 million - had fallen to 4 percent as of June 2008, or half the rate that prevailed during 2007.

The SBA defines a small business as any firm with 500 or fewer employees. Collectively, the small-business sector accounts for about half of total U.S. employment and has created roughly 70 percent of all new jobs in recent years.

Charles Ou, co-author of the SBA report, said it's too soon to get data on lending activity since last fall. But he said anecdotal evidence suggests credit to small businesses has slowed even further, giving this economic engine less fuel to grow.

"Since last winter, it has been horrible," Ou said. "You have real, real problems out there."

The SBA report identifies banks that focus on small loans. At Oakland's Innovative Bank, one of California's top-ranked lenders, Vice President Danny Alfonso said he has cut way back on small business loans.

Alfonso said Innovative has been one of the top issuers of SBA-backed small office/home office loans with a $50,000 limit. Through June 2008, Innovative had been funding about 350 such loans per month. Now it is issuing about 70 such loans monthly, mainly because of tougher eligibility requirements, he said.

"Loans that had been paying for two to three years have started to default," he said. "We have really tightened up our credit underwriting."

At Mission National Bank in San Francisco, another top small-business lender, President Dave Joves said he is getting more demand from prospective borrowers but has kept lending steady to err on the side of caution.

"Until the economy turns, you really want to be particular about who you lend to," he said.

The National Federation of Independent Business, a lobbying group, has polled small businesses on credit issues and found that some can't get access to loans or have had their credit limits reduced by banks or credit card issuers.

But economist Bruce Phillips, with the NFIB Research Foundation, said access to credit is not the primary challenge facing small firms.

He said many business owners are reluctant to borrow because they aren't sure they can increase sales to justify the extra expense.

"They have lost faith in the economy and haven't spent much money on capital equipment because they're worried about revenues," he said.

E-mail Tom Abate at tabate@sfchronicle.com

10 reasons to use hard money

by Morgan A. Scott

Whether a conventional bank loan isn’t available to you, or whether a bank is simply not willing to loan you moneybecause of your credit history, San Diego Hard Money can prove to be extremely useful in many instances. For example, some banks will refuse to help you simply because there may be an issue with the property or collateral.

Or maybe you are unable to provide adequate documentation according to the banks standards. Maybe you have the need for a bridge loan, have specific investment projects, or need money quickly. These all may be reasons you would obtain private financing.

10. Bank is unwilling to accept your property as collateral

There are essentially a number of reasons as to why a bank may not be willing to accept a property as a source of collateral. In particular, if a property has been designed for a specific purpose, banks are often reluctant to accept them. For example, these could include buildings such as care centers for the elderly, health and spa resorts or any other building where an appraiser has rated as being below average.

9. Poor credit history

Unlike banks, private money lenders tend to focus primarily on collateral, rather than credit history.

Because private investors and lenders look heavily at the property and the amount of equity available to lien, their primary concern is the collateral and typically their secondary concern is the credit history. This is not an absolute guideline but it often happens this way.

8. Banks have stringent documentation requirements

As so many have discovered in the past, being self employed can make it incredibly difficult to get finance from a bank as you simply may not be able to fulfill the banks requirements with regards to the documentation they require.

Hard money lenders on the other hand, will often be willing to accept income tax returns or even bank statements, in order to determine whether or not your income is sufficient for being able to make repayments.

7. Loans for the purpose of Rehabilitating Distressed Properties

For anyone needing a loan for the sole purpose of renovating an existing property, there’s a strong possibility that hard money financing will be made available to you.

However, San Diego hard money lenders and investors do insist that the borrower also make a contribution, if only to establish a certain amount of involvement on the borrower’s part.

6. People who own land but lack finance for the construction of a property

Construction loans are a common use for San Diego private financing. However, in order to qualify, the owner of the land will be required to show proof of ownership, building permits, draw schedule, construction cost break down and etcetera. Providing they can meet these requirements, then in all likelihood they will be granted financing.

5. You need to make use of existing equity in order to obtain an additional property

San Diego hard money can be used to secure cash out on residential and commercial property. The typical closing time is anywhere from 7-14 days from the time a full package is received.

4. You have financed multiple properties but you wish to acquire additional properties with financing.

Unfortunately banks all too often decline loan applications to investors if they already have too many open loans. Of course, in this type of situation, hard money may be the only option available.

As long as the investor can show the ability to repay future obligations with current debts they will have opportunity through private channels.

3. You need to make an offer to acquire real estate but the terms of escrow are limited and short

Unlike banks, where loan applications can take ages to process, private lenders are for the most part able to make decisions in a fraction of the time banks take.

2. You need a bridge loan.

There could be various reasons that you need a bridge loan. Those might include a loan that is getting ready to adjust or balloon, temporary cash flow challenges in a business, or maybe you need to leverage so that you can fulfill some aspect of a real estate project.

1. Time is of the essence

When time is in short supply and financing is required in a hurry, San Diego hard money can usually ensure funds are available to you within seven to fourteen days. Of course, as many will agree, this is often the chief advantage.

No Income Check Loans. Prequal in minutes

Hard Money is not so hard, Prequal in minutes

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Stated income commercial loans.  We have money to lend

Asset Backed Loans

Asset Based Loans

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Asset Based Loans are loan secured by a company's accounts receivable, inventory, equipment, and real estate, whereby the asset-based lender takes a first priority security interest in those assets financed. It is an alternative to traditional bank lending because asset-based lenders target borrowers with risk characteristics typically outside a bank's comfort level.

Expert in all facets of collateralized lending, asset-based lenders possess the experience and know-how to structure the proper financing program for their borrowers. They specialize in financing businesses and business transactions involving a broad range of products and services.

Acceptable Collateral Types  Asset based loans are made based the market value of a company's collateral. They focus first on the collateral's cash conversion cycle for repayment and on cash flow second. Asset-based lenders loan money to companies using two main types of credit facilities: . • Working capital facilities based on accounts receivable and/or inventory: Loans which finance accounts receivable and inventory are typically structured under a revolving line of credit or "revolver," without a scheduled repayment. The lender advances funds against the revolver to carry accounts receivable and inventory and, when such assets convert to cash, the advances are repaid accordingly. . • Fixed asset facilities to finance equipment and owner-occupied real estate: Loans financing equipment and real estate typically take the form of term facilities with a scheduled repayment usually equal to the fixed assets' useful life. 

When do asset based loans make sense?.

Good candidates for an asset based loans have tangible or financeable assets that can be used as collateral, such as accounts receivable, inventory, equipment and real estate. These companies may have high leverage ratios, as measured by debt to equity, typically over 5 to 1, or may be marginally profitable companies, companies with a recent history of losses, or with inconsistent cash flow. .

But since the asset-based lender focuses on collateral, the borrower's eligibility for loan qualification is determined from an evaluation of the quality, liquidity, and sufficiency of the borrower's eligible assets. The lender analyzes each asset class to determine its net realizable value in a liquidation situation. It then uses this information to exclude certain assets from financing and set maximum advance rates. .

If the advance rate established by your lender creates adequate liquidity, asset based lending may be an appropriate solution to your company’s current financial requirements. .

Acceptable Uses of Funds.

Asset based loans provide capital for a wide variety of financial requirements including: . • Leveraged mergers and acquisitions  • Turnaround/restructuring situations  • Liquidity events for family-held businesses  • Growth opportunities  • Capital expenditures  • Tight working capital  • Seasonal or cyclical companies  • Specialized industries  • Stock repurchase  • Public ownership to private ownership  • Debtor-in-possession (DIP)/confirmation financing 

Asset-Based Lending vs. Traditional Bank Financing

The primary difference between commercial banks and asset-based lenders is where they each look first for repayment: The bank looks to cash flow for repayment first, then collateral; while the asset-based lender looks to collateral first. Since banks underwrite cash flow as their primary repayment source, they typically require less collateral controls and monitoring but more financial covenants.  For companies that are "asset heavy," an asset-based credit facility may be able to make more funds available because the loan is not based strictly on the anticipated levels of cash flow. Additionally, the structure often requires fewer covenants, thereby providing more flexibility for many borrowers. 

How does the asset-based lender monitor its borrowers? 

The level of controls and monitoring by the asset-based lender is directly related to the credit-worthiness of the borrower. Typical controls include: • A borrowing base formula that monitors the relationship between the value of the collateral available to secure the outstanding loan and the actual balance of the loan on a regular basis.  • Funding controls (collateral monitoring) that may be administered daily, weekly, or monthly and range from submission of sales invoices/shipping documents to accounts receivable aging and listings/inventory listings. The degree of reporting depends on the borrower's risk rating.  • Collection controls: The asset-based lender requires dominion (control) over cash by establishing a collateral account into which accounts receivable collections are deposited. Access to this account is restricted to the asset-based lender.  Ongoing audits are also used to monitor the account. The asset-based lender will audit the borrower's books and records periodically to test the records' accuracy and validity and to substantiate collateral values as represented by the borrower. 

What private investors need to know before They will approve you

Most Private lenders want to know the following before 

considering lending you money.  Put together a brief

summary of the following questions will greatly increase 

the chance of you getting approved.

• A brief summary about the business and the principal owners
• amount needed
• use of proceeds and how it will benefit your business
• Term needed and how you plan to pay back the loan
• List of collaterial and a Personal financial statement.

For more information email   weapprove@gmail.com

Non-Institutional Forms of Lenders and How Private Financing can be Achieved

Private financing options are available for personal, investment, and commercial purposes. Private financing simply means you are not dealing with a traditional bank. Private financing can be obtained from private parties who are also known as Angel Investors, hard money lenders, private equity investors, investment groups, or venture capitalists.  Angel investors make up the largest – and the most flexible group – of private financing options. Angel investors may be relatives, friends, colleagues, or persons as yet unknown to you. If your scope of acquaintances does not yield suitable private financing, spread the word about your project among all of the above, as well as bankers, brokers, business development groups, etc. The right angel investor will for private financing will probably be someone who has some knowledge of your industry. Angel investors may provide a simply loan, repayable with interest and possibly points and a prepayment fee. Alternatively, they may want to take an equity position with your company, taking stock in combination with or instead of interest on the private financing they offer you.  Private equity lenders, aka venture capital firms, can be thought of as a group of Angel Investors providing private financing as a group. Venture capital firms sometimes offer incubators: office suites in which their darling companies (for whom they provide private financing) are housed, watched over, and assisted through the early stages of development. To give private financing groups the returns that their investors are looking for, private equity lenders always want a piece of the action. In exchange for the private financing they offer, private equity lenders take an equity position in your company through stock or some other means and become your financial partner.  Private financing obtained in exchange for stock can be an excellent way to get the initial operating capital needed to start a business, but it can be extremely expensive on the far end. While you will likely not be paying interest in the early stages of your business, you will pay dearly should you become a success.  If you have real estate to collateralize, you may be able to obtain private financing without having to give away an equity position (and a place on your Board, control of your business decisions and all that comes with having a financial partner) by working with a hard money lender. Naturally, hard money lenders can provide financing for real estate investment projects, land acquisitions, and construction projects. But, by collateralizing real estate you already own, you may be able to obtain private financing for purposes completely unrelated to real estate. When it comes to hard money private financing, the use of funds is not as important as a clear indication of how the loan will be paid back. Naturally, if you are unable to repay the loan, the real estate collateralized by this kind of private financing will be sold off by the private financing lender, just as traditional banks foreclose on homes when you cannot pay the mortgage.  Regardless of the path you choose in obtaining private financing, you will find private financing companies are more flexible in lending criteria than banks, SBA, or similar traditional lending institutions. Check out private financing companies and brokers online to see which will suit your business needs most effectively. 

weapprove@gmail.com

Stated income Nationwide

 NATIONWIDE STATED LENDING: MOST COMMERCIAL PROPERTY TYPES. $125,000 - $375,000. MIN MID CREDIT 640 RATE 8.5% - 11.4% . This Program is for borrowers that need money, it is not for Rate shoppers.

 

COMMERCIAL REFINANCE OR PURCHASE 65% MAXIMUM, 80% CLTV Ok. Profitable Tax Returns Required. Minimum 660 Experian Credit. Rates 6%-7.5% . Cash Out Only to Pay off Mortgage plus any Personal or Corporate Debt

 

 

No Construction.No Land.No Farms.

No Gas Stations.No Churches. No Residential.

 

Email for more info   weapprove@gmail.com

 

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