Featured Small Business Lending Article

Small Business Lending

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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USCP at the 2010 Asset-Based Capital Conference Held By the Commercial Finance Association

I'm just off to Las Vegas for the Asset-Based Capital Conference held by the Commercial Finance Association (CFA). This is the premier networking and educational event of the year for lenders, service providers and anyone else involved in asset-based lending in the capital markets. 

As lead arrangers and co-lenders, we look forward to this conference because we get to meet up with other lenders and key executives in the asset-based lending industry and to talk about how we can work together to solve problems for our clients. 

The event attracts alternative finance professionals from across the nation including asset-based lenders, hedge fund professionals/private equity investors, distressed debt professionals, workout specialists, DIP lenders, and factoring professionals. 

This is an important educational trip for us because as we collaborate with co-lenders and figure out how we can help them with gap financing on orphan assets, we also need to understand how their underwriting criteria has changed so we can be better informed when we're doing deals and bringing in co-lenders to help better serve our clients' needs. The conference also offers great opportunities to stay on top of the latest developments in the asset-based and second lien markets, especially in today’s rapidly changing financial market. 

I'm also looking forward to this year's new event, the CFA charity poker tournament, which benefits the CFA Education Foundation.

If you would like to know more about how your business can secure the funding it needs, visit US Capital Partners at or call (415) 882-7160.


What To Do if You Need Recapitalization: How to Find the Right Advisor or Small Business Investment Banker

If you're concerned about protecting your small business financing and want to know if your company is at risk of losing its bank loans, I strongly recommend you take our brief Business Loan Risk Assessment to measure the risk of your bank calling your small-business loan.

If, after this brief assessment, it appears you are at moderate or great risk of having your bank loans pulled or not renewed, what should you do? The answer is “shop your loan,” or have a professional shop it for you. Most commercial banks are essentially the same when it comes to credit assessment and the types of loans they can make. In the current climate it is nearly impossible to find another bank to take over your loan if your current bank wants you to exit. So walking up and down the street to shop your loan will not be productive.

Where else can you turn? The answer is alternative lenders. These are primarily independent asset-based lenders and financial services arms of banks. Where do you find alternative lenders? Here lies the problem. In the small-business lending world, alternative lending is fragmented and difficult to navigate. There are many lenders and an abundance of financial products but few lenders that will make one loan on all the assets of your company, like you probably had with the bank. Usually, each alternative lender specializes in a certain asset class. They generally will not loan on other asset classes.

Additionally, the pricing for this alternative lending can range from extremely expensive to very reasonable and similar to your commercial bank pricing. These pricing variables are based on a risk assessment of the loan and the type of risk exposure these respective lenders specialize in. If you happen to pick the wrong group of lenders to shop your loan, you will be paying more than you deserve to pay at close.

You are also, of course, left with the problem of having three or four new lenders, each with different terms and pricing, lending on different collateral. This “circus” of lenders can definitely be coordinated to successfully replace the loans your bank has terminated, but it can be difficult, frustrating, and time-consuming for any small-business CEO or CFO. Finding the correct lenders, getting them to cooperate with complex legal documents such as subordination agreements, and then helping them to close simultaneously is challenging. Add to this the normal operational duties of your business, lack of experience in the sector, and an aggressive bank harassing you to get out, and the entire exercise can be exhausting.

Finding the right advisor to help you with recapitalization

A smart alternative is to spend time finding an advisor who knows what he or she is doing in the alternative lending space. You need someone who is familiar with the many lenders and who has experience negotiating and shopping loans to appropriately priced sources of capital. In the small-business world these are called advisors; in the mid- to large-business arena, they are called investment bankers.

There are a few true investment bankers in the small-business arena, such as our firm US Capital Partners, Inc. US Capital is both a lender and lead arranger or advisor on restructuring small-business debt. When it is cost effective, US Capital will bring in another lender for your loan, then provide additional capital from its own fund to “fill the gap” in required capital to take the bank out in the most cost-effective way.

When looking for a recapitalization advisor or small business investment banker, it is important to look for someone with recent experience in arranging or making loans similar in size to your requirement. Working with someone who has a track-record of larger deals may not be the best choice. The world of large-business or middle-market finance is very different to the world of small-business finance as far as lenders and structure are concerned. The chances are the advisor for larger businesses, although competent, will not be very familiar with the particular lenders in small business or even the common loan structures in this space. They will therefore take longer to get results, and those results may not be optimal.

The bottom line: If you choose to use an advisor to assist you with the financial restructuring of your company, consider someone who does, and has done, deals of your size.

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, Inc. at or call (415) 882-7160.



Finding Financing Outside the Normal Lending Parameters is More Important Than Ever as Small Businesses Still Struggling

According to the NSBA 2009 Year-End Economic Report, credit remains tight for small businesses in need of working capital. More than ever, companies that are unable to qualify for bank financing must look outside the normal lending parameters for borrowing alternatives that will help them regain the financial strength to meet the increasingly stringent lending criteria of commercial banks.

More businesses feeling the credit crunch are looking to alternative financing options like asset-based lending, which is an affordable and flexible way to acquire the working capital you need to grow a business or the cash to recapitalize your current finance structure. Businesses can borrow money using the current assets of the company (such as accounts receivable, purchase orders, or inventory) or its fixed assets (such as plant, property, or equipment) as collateral.

At USCP, our philosophy is to provide businesses with a unique service that matches borrowers' needs to appropriately priced capital. Our ability to assess complex or special situations quickly and provide solutions outside the bankable box has made us one of the most innovative small- to middle-market investment banks in the country.

We will give your business the attention it deserves and find the most suitable product for you (most lenders only have one product, which can be limiting). 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 US Capital Partners,  at or call (415) 882-7160.


Business Loan Risk Assessment: How to Measure the Risk of Your Bank Calling Your Small-Business Loan

As a result of the recent “Great Recession,” many small businesses are finding it difficult to obtain credit. Additionally, business owners need to be aware that many companies are also be in danger of losing their current bank loans.

I recently blogged about the importance of protecting your small business financing by knowing if your business is in danger of losing it's financing. But how can you assess if your business is being considered for termination? There are a few fundamental and relatively simple questions you can ask yourself to determine your risk of losing your small business loans.

Essentially, there are two categories of assessment when measuring the risk of losing your small business financing: the type of loans your company has and your company’s financial performance.

Loan type criteria
The type of bank loans your company are categorized below from riskiest, and currently least popular with the banks, to safest and most popular for the banks to hold.

Considered riskiest, and therefore least popular, is a combination of the following types of lending to one business from the same bank:

1. Real Estate: A commercial real estate term loan for your place of business

2. Machinery and Equipment: A term loan on machinery and equipment used for your business

3. Inventory: A revolving line of credit tied to your inventory balances

4. Accounts Receivable: A revolving line of credit tied to your accounts receivable balances

If your business has all four of these types of loans in place, all from the same bank, you are at the greatest risk of losing all or part of your financing. Banks are reluctant now to make all of these types of loans to a single client. They would usually welcome the opportunity to get out of loans with this breadth of exposure.

As you eliminate loans on real estate through accounts receivable, your perceived risk to the bank declines. It is possible your bank will be happy to keep your credit in place with all these loans in place if your financial performance is as good as, or better than, it was last year. But a word off caution: if your bank has had unusually high loan losses, is financially weak, or has recently been taken over by another institution, it may call your loans even if your company is strong.

Company performance criteria

How was your company’s financial performance over the past twelve months? If there has been a decline in financial results or a drop in company asset values, you may be at risk of losing your small business loans.

The following financial problems are considered most damaging to your business’s prospects of keeping its bank loans:

1. Less accounts receivable and/or inventory assets than agreed as the “borrowing base” required for the revolving line of credit amount currently outstanding

2. Insufficient trailing and projected cash flow to make debt service

3. Net operating losses for the current reporting period

4. A top-line sales decline from last year to this year

5. Fixed-asset devaluation below the agreed loan-to-value ratio (i.e. your building is worth much less than when you got your bank loan on it).

If you think you may be at great risk of having your small business loan pulled or not renewed, it's time to shop your loan or have a professional shop it for you – if you want to continue to have working capital for your business.  

If you would like to know more about how your business can secure the funding it needs, visit US Capital Partners, Inc. at or call (415) 882-7160.

Small Business Finances: The Top 10 Things to Consider When Researching 2010 Economic Predictions

I recently blogged about how economic predictions for 2010 will affect your small business. I talked about how it's important to look at these financial forecasts on a micro level - as it affects your own financial situation.

With that said, the following list of things to consider when researching economic predictions may involve some of your own investigation. My prediction for 2010 is that the new trend is to take personal responsibility for all aspects of your economic interests and involve yourself in critical decisions. We have seen the dire consequences of blindly following complex and many times deceptive economic strategies and investments few people really understand.

Here are a few areas to research as you evaluate financial predictions for 2010 from a Micro economic perspective:

1. Your Industry: How deep is the economic contraction in my particular industry? Do the research to find out. 

2. Your particular business: How healthy is my particular company? Are the sales steady or in rapid decline? What about profits?

3. Your Job: What is the prediction you particular job will be eliminated? What are the unemployment statistics in my industry...a good predictor of my job loss prospects.

4. Your opportunities: Which industries, businesses, or sectors are doing relatively well and could offer cross over skills in case your industry is weak and declining.

5. Your Investments: Is your financial strategy diversified as to investments. Are you chasing trendy returns where you could experience massive, unexpected losses. Are your investments in vehicles out of your expertise?

6. Your liquidity position: Based on your economic prediction do you have sufficient cash reserves or working capital to weather a transition to a new job or break into new markets. If not, then is now the time to increase credit lines while things are still good before problems make credit unobtainable?

7. Your Assets and Balance sheet: What is the value trend in you particular assets. If the asset value is at risk is now a good time to liquidate to raise cash reserves or are asset values so low it is best to hold on to them and wait for a general increase.

8. Additional Income: What are the trends in additional income streams from related part-time work or business development.

9. Your Health Insurance: Is your insurance sustainable if you loose your job. Should you have an individual plan that is portable and sustainable without a job. what are the trends in this field.

10. Interest rates: Are these historical times of low interest where it is wise to refinance mortgage debt or purchase durable goods that are needed sometime in the near future now due to buying opportunities and savings.

2009 was a tough year for many. When looking at your personal and small business finances, keep in mind that there is sound alternative financing available to you—especially through asset-based loans - if you are proactive about your situation. Businesses that need financial restructuring work can seek out small business financing through alternative lenders to help them make it through the downturn.

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, Inc. at or call (415) 882-7160.