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Small Business Lending
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Jeffrey Sweeney is an investment banker with years of experience in direct lending and corporate finance for small- to middle-market companies. He is the chairman and CEO of US Capital Partners, an innovator in small- to middle-market business lending. US Capital Partners has been providing prompt, innovative, and reliable financing solutions across the United States and abroad for more than a decade.

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Friday
May282010

Small Business Financing News: WSJ Reports that Access to Capital Prevents Many Women-Run Businesses from Fulfilling Their Potential

I recently read an interesting article in the Wall Street Journal: Why Are Women-Owned Firms Smaller Than Men-Owned Ones?

In the article, Sharon G. Hadary explores the phenomenal growth of women-owned businesses, reporting that women are consistently launching enterprises at twice the rate of men over the past three decades, and their growth rates of employment and revenue have outpaced the economy.

However, despite all this progress, on average, women-owned businesses are still small compared with businesses owned by men - with the average revenues of majority women-owned businesses were still only 27% of the average of majority men-owned businesses. More than a quarter of a million women in the U.S. own and lead businesses with annual revenue topping $1 million—and many of these businesses are multimillion-dollar enterprises.

So what's holding back so many women business owners?

The article goes on to address various factors that are preventing so many women entrepreneurs from fulfilling their potential. One of the problems is access to working and growth capital.

I believe this is largely due to a knowledge/experience vacuum (which is a universal problem not limited to women) that can be further inhibited when you factor in the predominately white demographic of lenders. Seeking business credit can be intimidating for anyone, but especially for women since banking is still largely the domain of mature white guys with old school networks and marketing, not to mention conservative lending views (more so now after the credit crisis). The demographic of bankers - both investment, commercial, and alternative financing - is still dominated by white males with some inroads being made by men of color. Very few women and virtually no statistically relevant numbers of women of color are to be seen in this space.

That being the case we do not mean to imply an “unfriendly” or “unsympathetic” lending environment exists for women. My view is the banking community is pretty much gender and race neutral as to services and borrowing. The service providers themselves may not be diversified but the deals are viewed on their own economic merit. However, that still doesn't mean the demographic make-up of the bankers isn't an intimidation factor for borrowers who see little diversity in the arena.

Another issue may be insecurity regarding financial and market knowledge. Our experience is that most small business and even lower middle market business managers, CFOs, and financial advisors have little knowledge of financial products and markets available for borrowing. Small business commercial banking as well as alternative lending are vastly fragmented industries, and it really takes a specialist to understand the market and appropriate service providers in that sector. So it is not surprising that smaller businesses have difficulty finding the optimal solution to their financing needs.

Additionally, working against this group of small businesses is having little knowledge of the criteria for borrowing and what types of credit are available to them, not to mention what institutions make the kind of loans they need and are qualified for. Severe fragmentation in the small business lending market exponentially exacerbates this problem. The larger companies, on the other hand, have more experience and capable CFOs, a smaller pool of lenders with standardized solutions, and a better understanding of the debt market in their segment. From our perspective, this is a more universal problem and not limited to women rather than men. However, it may be more difficult for women to network and "ask the questions" of a white male demographic of the lenders, than it would be if service providers were more diversified.

Help for Entrepreneurs Looking to Reach Their Potential: Get in the Game!

The solution - for both men and women looking to accelerate their business growth - is to start asking questions and forming relationships before financing is desperately needed.

There is a conventional process for raising money for a small business. Those steps are pretty well known to entrepreneurs who have been through the process. Generally, the business owner uses their own capital from savings, credit cards, or personal borrowing. Next, perhaps they can get friends and family to invest or lend money. And here is where I think the process breaks down for many. After they have started and raised capital through the aforementioned means, the entrepreneurs then thinks they can go to the “bank” which is defined as the regional or national commercial bank. Usually this credit request is a little early due to the conservative nature of commercial banks and the request is denied.

The best next step before speaking to a commercial bank may be to discuss your needs with an alternative lender or advisor familiar with this market. The alternative lending sector is created to provide credit to businesses earlier and in higher quantities than commercial banks.

Alternative lenders are accustomed and equipped to more closely monitor a new business than a commercial bank so that are more comfortable making loans. Alternative small business lenders also realize they are often an interim step for a business before they enter the commercial bank and are not constrained by regulation and liability issues so they can frankly discuss the loan process with a business woman and what they have to do to qualify for a bank loan.

For an interesting case study on a woman-run businesses, see how Colleen Gray, CEO of Consensus, increased her company's available capital to support continued domestic and international growth. 

You can also read more about Alternative Financing Options for Securing Small Business Loans for Working and Growth Capital.

Since 1998, US Capital Partners has been providing prompt, innovative, and reliable financing solutions including lending, corporate financing, and debt re-structuring to businesses across the United States and abroadIf you are looking for financial support, visit US Capital Partners, Inc. at http://www.uscapitalpartners.net/ or call (415) 882-7160.

 

Monday
May242010

Alternative Lending Case Study: How Speck Secured New Financing to Eliminate Working Capital Constraints and Fuel Growth 

I recently blogged about a $4.5 million senior secured credit facility that US Capital Partners secured for Speculative Product Design, Inc. (“Speck”). Their situation was interesting because even though they were performing well along their projections, they weren’t able to secure sufficient growth capital from their bank– even though they were growing.

They were stuck in a credit facility that was put in place when their performance was not as strong. It was appropriate at the time, but after a couple years, the pricing was not appropriate for current performance. Additionally, Speck’s lender was deleveraging the inventory financing available to the company and was unable to provide additional funds.

It’s a real sign of the times when banks stop or restrict advances against inventory due to internal changes or re-organization.

So what do you do if you’re doing great, but your bank isn’t?

When a bank makes their problems your problem, your business can fall victim to high pricing and/or reduced growth capital due to circumstances at the bank that have nothing to do with your own company’s performance.

As a leading designer and manufacturer of electronic accessories, Speck wanted to capitalize on upcoming commercial growth opportunities, but needed financing that was affordable and intelligently structured. We recognized that. And when they engaged USCP we were able to refinance its line of credit and increase its borrowing availability to support the company’s continued domestic and international growth.

Serving as lead arranger, US Capital Partners arranged a $4.5 million senior secured credit facility for Speck. The credit facility served to refinance Speck’s previous line of credit, and included an inventory revolver and an AR line of credit for both domestic and international assets. Working with its many affiliates, we successfully structured and arranged an optimal financing arrangement for Speck.

This solved the funding problems created by the bank, who had reduced its advances to zero. We were able to restored it to previous levels and above. Additionally, Speck ended up with more capital at a lower cost. Since we’re an alternative small business lender, we can refinance with the same or more capital than what businesses had before - even if your company is not meeting the bank’s lending criteria due to their own internal changes or your own modest performance fluctuations. The cost may be more (due to risk associated) but you can recover the funding base you had before at the bank till your company is recovered and bank on track – then you can sweep back into a bank relationship.

How to secure alternative financing to eliminate working capital constraints and fuel growth 

While alternative financing may provide the solutions you seek, your marquee bank is most likely not going to offer you alternative lines of credit. They won’t even direct you to an alternative division of the bank that may better serve your evolving needs. Banks often lack free flowing communications between divisions and tend to be more interested in managing portfolios and profitability. Banks are more likely to change credit lines to meet the bank’s needs, not the client’s needs.

If your performance and needs are small enough to fit into the bank’s narrow criteria, bank borrowing can be a great option for funding. But if you don’t fit into the bank’s narrow strike zone, that’s where alternative lending can add value. Alternative lenders like USCP can help you secure a larger credit facility over a wider array of assets and also provide additional strips of capital for owner liquidity based on the strength of the company and value of assets. We can provide you with better debt structure, lower cost of capital, and higher advance rate on A/R and inventory.

Alternative financing can also help you in transitional situations and can provide full facility until you can move back into a bank relationship. At USCP, we are advisors, co-lenders and lead arrangers who always look out for the best interest of clients. We have wide array of products to offer – so we are able to keep their best interests in mind. We pride ourselves at looking at needs of each client very closely so we can offer the most comprehensive refinancing package at the best price.

Visit our web site to read more about US Capital Partners' recent transactions. 

Since 1998, US Capital Partners has been providing prompt, innovative, and reliable financing solutions including lending, corporate financing, and debt re-structuring to businesses across the United States and abroad. We will give your business the attention it deserves and find the most suitable product for you. We offer true one-stop financing and will work in partnership with you throughout the lending process. If you would like to know more about how your business can secure the funding it needs, visit http://www.uscapitalpartners.net/ or call (415) 882-7160.

 

Wednesday
May122010

New Paradigm for Small Business Lending Focuses on Service and Customized Financing Solutions that Best Serve Borrowers' Needs

While the federal government seeks to bring down the unemployment rate by focusing on tight credit conditions for small business lending, what tends to be overlooked is the need for a new paradigm for banking in the coming years, especially after the recent debacle in the credit markets.  Because every business is different, the old paradigm based on calculated mathematical risk profiles is an obsolete, one-size-fits-all approach to lending that overlooks some great entrepreneurial opportunities. 

When bank borrowing is not an option or sufficient for securing adequate working and growth capital, businesses must look to lenders who serve clients by getting to know their business beyond a small box profile, and are therefore able to see opportunities and provide solutions as unique as each business model. 

My personal business philosophy is centered around service. And our business model at US Capital Partners is specifically designed and economically driven to put us in a customer-focused, fiduciary, position to provide much needed service and partnership with our clients. This is an unusual approach for an investment bank and what really differentiates us as an alternative small business lender. We also believe this is the new paradigm for banking in the coming years.

The United States remains one of the leaders in broad based business opportunities for innovation and opportunity. The combination of a favorable business climate, entrepreneurial mentality, and access to one of the largest markets in the world are what contribute to making the U.S. one of the leading places to start and grow a business. And this shift in the funding paradigm to find solutions that best serve borrowers' needs will enable more American businesses to leverage opportunities for innovation and growth.

You might be wondering what you can do if your business currently doesn't fit a bank's lending risk profile. Learn more about Alternative Financing Options: Securing Small Business Loans for Working and Growth Capital.

Since 1998, US Capital Partners has been providing prompt, innovative, and reliable financing solutions including lending, corporate financing, and debt re-structuring to businesses across the United States and abroad. We will give your business the attention it deserves and find the most suitable product for you. We offer true one-stop financing and will work in partnership with you throughout the lending process. If you would like to know more about how your business can secure the funding it needs, visit http://www.uscapitalpartners.net/ or call (415) 882-7160.

Tuesday
Apr272010

US Capital Partners, LLC Serves as Lead Arranger of $4.5 Million Credit Facility for Speculative Product Design, Inc.

Our team at US Capital Partners, LLC (“USCP”) has secured a $4.5 million senior secured credit facility for Speculative Product Design, Inc. (“Speck”), headquartered in Palo Alto, CA. We are a private investment bank, direct lender, co-lender, and leading financial arranger that specializes in business loans for small to middle-market companies.

The credit facility served to refinance Speck’s previous line of credit, and will be used to support the company’s continued domestic and international growth. Speck has become a dominant market leader in the iPod, cell phone, satellite radio, and electronic accessory category. The company is best-known for creating refreshing designs that offer quality, thoughtful features, and distinctive style. Its line of products can be found worldwide at Apple retail stores and at most major electronics dealers. The new credit facility arranged by USCP included an inventory revolver and an AR line of credit for both domestic and international assets. It was designed to eliminate working capital constraints and fuel domestic and international growth.

“USCP has structured and arranged an optimal financing arrangement for us,” said Irene Baran, CEO of Speck. “Working with its many affiliates, USCP was able to change our financing structure and increase our borrowing availability. We are really pleased with the result.”

We are delighted to have secured this financing facility for Speck. According to PricewaterhouseCoopers, smaller private companies will likely lead the economic recovery in 2010, especially those doing business in international markets, like Speck. These businesses are increasingly looking to capitalize on upcoming commercial growth opportunities, but they need financing that is affordable and intelligently structured. Our team at USCP specializes in arranging this for them.

About US Capital Partners, LLC
Since 1998, US Capital Partners has been providing prompt, innovative, and reliable financing solutions including lending, corporate financing, and debt re-structuring to businesses across the United States and abroad. US Capital is a private investment bank, direct lender, co-lender, and lead financial arranger that specializes in asset-based debt for small- to middle-market private and public companies. The company’s innovative approach allows them to provide the best financing available, not only for companies in excellent financial condition, but also for companies who may have been refused credit by traditional lenders. If you would like to know more about how your business can secure the funding it needs, visit http://www.uscapitalpartners.net/ or call (415) 882-7160.

Thursday
Apr152010

Small Business Owners Turn to Alternative Lenders After Real-Estate Bubble Bust According to Wall Street Journal

One of the best parts of my job is getting to educate small business owners on their finance options, so I was thrilled when I was recently asked to share my expertise with The Wall Street Journal on alternative lending solutions for businesses. In today's Money Hunt column, Emily Maltby explores collateral woes for business owners seeking loans.

Highlights from the article are below. And you can read the full article here: Real-Estate Bust Hurts Lending for Little Guys

Since the mortgage meltdown, business owners can no longer reliably count on homes or commercial properties to secure financing.

Business owners who don't have sufficient collateral in homes or commercial properties to satisfy banks are also turning to alternative lenders for asset-based loans.

A drawback: Such lenders generally exert a certain degree of control over the business's assets and can seize them if the borrower misses payments. For example, an owner may find that a client's payment must first be deposited into an account controlled by the lender, who will transfer the money only if it's deemed adequate in relation to the amount borrowed. But "alternative lenders are a little less stringent on the cash flow and may allow for tighter margins," says Jeffrey Sweeney, CEO of U.S. Capital Partners, an alternative lender in San Francisco. "It's a bridge back into traditional lending."

While people may leverage their personal assets for personal purposes – and then use those funds for their businesses, personal collateral is not typically a major criteria for business loans. The emphasis in small business lending is moving towards underwriting and credit analysis to make sure businesses can pay loans back.

In addition to looking at ability to make debt service, lenders will be looking at business viability. They will want to know if the business has cash flow or assets (accounts receivable, inventory, purchase orders, buildings, machinery and equipment) to prove ability pay back their debit. Pay back through operations – not personal collateral - is what's critical for business owners seeking commercial bank loans.

And for those looking for a bridge back to traditional bank loans, you can read more about Alternative Financing Options for Securing Small Business Loans for Working and Growth Capital.

Since 1998, US Capital Partners has been providing prompt, innovative, and reliable financing solutions including lending, corporate financing, and debt re-structuring to businesses across the United States and abroad. If you are looking for financial support, visit US Capital Partners, LLC. at http://www.uscapitalpartners.net/ or call (415) 882-7160.