"Non-Bank Lenders" Pull Ahead in Small-Business Financing

US Capital Partners, LLC.Small business owners often think a traditional bank is the best source for a business loan. Non-bank lenders, however, are increasingly considered to have the competitive edge.

Small businesses seeking loans from traditional sources struggle to secure the amounts they need or deserve. Bank underwriting standards are still high, and the bank regulatory environment is expected to remain stringent. This makes it difficult for many small businesses to qualify for bank financing. With demand for loans high and increasing, this has created an opportunity that is being filled by non-bank lenders and alternative debt funds. "Small businesses have very individual needs," explains Jeffrey Sweeney, CEO and Managing Director of small-business lending and advisory firm US Capital Partners, LLC. "Traditional banks try to fit the small-business customer into one of their traditional business loan products, rather than tailor their products to meet the needs of their small-business customers. This has created new opportunities for non-bank lenders capable of designing flexible financing options for these clients."

Why Non-Bank Lender Are Increasing Their Market Share

Non-bank lenders have the following advantages:

• They typically offer financing products that may not be available at a bank.
• They tend to be more responsive to the real needs of small businesses.
• They are less restrictive as to what types of businesses qualify, and can work around high loan-to-value, poor credit rating, or recent losses.
• They are often able to amortize loans, at competitive rates, over a longer period than a bank

Today's New Challenges for Small-Business Owners

With so many more players joining the alternative funding space, the small-business lending marketplace has become even more fragmented. Non-bank lenders come in all shapes and sizes, and they tend to focus on a particular kind of lending or asset class only. Finding the right lenders, and then engineering the best possible financing between them, can be challenging.

Jeffrey Sweeney, CEO and Managing Partner of US Capital Partners "USCP"To secure optimal financing quickly and efficiently, it's best to get advice from a small-business lender and lead arranger who understands the fragmented marketplace. US Capital Partners, a leading small-business lender, specializes in structuring and securing optimal financing for a small business like yours either directly from their balance sheet or in coordination with other lenders. The firm's extensive relationships with both banks and non-bank lenders allows it to bring the most appropriate financing structure to your small business.

If you would like to know more about how your business can secure the funding it needs, email Jeffrey Sweeney, CEO and Managing Director, at jsweeney@uscapitalpartners.net or call (415) 889-1010.

Is Your Bank About to Call Your Loan?

Corrigendum: This US Capital Partners blogpost is based on, among other sources, The Wall Street Journal article “Debate: Do Big Banks Lend Enough to Small Businesses?” (Dec. 13, 2011), featuring guest speakers Ami Kassar and Marc Bernstein.How to measure the risk of your bank calling your small-business loan, and what to do if you need refinancing.

According to a recent article in the Los Angeles Times, Bank of America is now demanding that some of its small-business customers pay off their credit line balances in full instead of making monthly payments. If customers are unable to pay off these balances on demand, they are being offered new repayment plans over as long as 5 years, but with far higher interest rates than before.

How to Know if Your Loan is About to be Called?

Unfortunately, your bank will generally not tell you your loan will be “called,” or not renewed, until right before it takes action. How do you know if your business is at risk? For a few easy steps to assess whether you are a likely candidate for loan termination at your bank, read our guide on financing.

A Few Reasons Why Banks Drop Small-Business Loans

Banks will pull loans for a number of reasons, but the most common are:

 • poor financial performance by your business

• your bank’s own credit problems

• to impress the bank regulators

According to the Los Angeles Times article, "Bank of America severing some small-business credit lines," the Bank of America began dropping small-business loans because of pressure to raise capital and cut risks, in the wake of another round of Federal Reserve bank stress tests. The Wall Street Journal reported also that Bank of America’s CEO, Brian Moynihan, has told federal regulators that if the bank’s financial problems deepen, it could start retreating from certain parts of the country.

What to Do If Your Business is at Risk

Marin McElhanyIf your small-business loan is at risk of being called, you should contact our team at US Capital Partners, LLC immediately. There are usually plenty of financing options available to a small business in your position. US Capital Partners will help you secure the financing your business needs, so that you don’t suddenly find yourself at risk if the bank terminates your loan. 

If you would like to know more about how your business can secure the funding it needs, contact our Vice President of Sales and Marketing, Marin McElhany at marin@uscapitalpartners.net or call (415) 889-1010.

Are Banks Starting to Make More Loans?

According to a recent article in The New York Times, several of the nation’s biggest banks have reported significant increases in lending. Amidst the economic turmoil, the article states, “the banks have quietly turned on the lending spigot.”

However, a closer look at the state of bank lending reveals that it is nowhere near where it was in 2008, when the financial crisis unfolded. If you adjust the figures for one-time accounting changes, you find only modest increases in bank loans.

Source: Federal Reserve and The New York Times

More importantly, commercial loans remain heavily weighted toward larger companies and the strongest corporate borrowers. Small businesses continue to find it difficult to get the financing they need.

According to the “2011 Mid-Year Economic Report” published by the National Small Business Association, 36% of small businesses reported they were unable to get adequate financing. In other words, more than one-third—which could translate into more than 10 million—of the nation’s small businesses remain “underbanked.”

Small Company Financing Solution for Large Corporation

Recently, I met a CFO who, like me, had just missed a flight to Europe because of a delayed connection. That turned out to be fortunate for both of us, because as we were waiting for our next flight, we talked about his large company and his financing problem and found a creative solution to the financing issue he was trying to resolve.

It turns out this CFO is running a leading worldwide manufacturer that supplies companies like Calvin Klein and Diesel. This was a €300 million publicly traded company. However, the company’s European bank was no longer able to provide it with the credit it needed for all of its divisional operations abroad. The smaller divisions were no longer allowed to be part of the parent company’s borrowing base. This large public company had a foreign subsidiary selling directly to the United States. Financing was proving costly for the company, because it was more difficult to perfect title on these accounts receivable assets originating abroad. The company had a modest sales office in the US.

Solution: Big Company in Need of a Small-Company Financing Approach

US Capital Partners advised the CFO to make an inter-company transfer of its merchandise to its US-based company, which then would generate the invoices to its US customers. This resolved the collateral securitization issue. Through this elegant solution, US Capital Partners was able to secure a very reasonably priced credit facility of $6–8 million for the company’s foreign subsidiary, using these newly created US-based assets as collateral.

Many larger companies have divisions that need financing. In today’s lending climate, these companies are finding themselves “underbanked.” Traditional uni-tranche lending from the commercial banks continues to be increasingly difficult to find. CFOs of big companies are increasingly finding themselves in need of small-company financing solutions. If you have financing needs and need expert advisory and solution ideas, contact us at www.uscapitalpartners.net

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tagged US Capital Partners, small business financing, small business lending in Alternative Financing, Small Business Lending, business services - investing

Peer-to-Peer Lending: What Small Businesses Need to Know About this Alternative Financing Option

As a business and finance expert, I have helped many small- to middle-market companies secure financing through alternative lending solutions that are both intelligently structured and affordable. As someone who has been on both sides of business funding, I know that qualifying for traditional bank or cash-flow loans remains a challenge for many businesses in the current economy.

There's been a lot of buzz lately about peer-to-peer lenders, especially as companies don't know where to turn to for funding as the banks say “No”. While I’m not an expert in the peer-to-peer lending space, what little I do know I don’t like. These loans are just too risky. Conventional loans are turned down for good reason. With peer-to-peer lending, businesses that have been denied for a bank loan, line of credit or other more traditional source of funding, are now going to an unsophisticated group for a second try. So someone is going to get burned.

It’s one of those things that looks good at first glance – like looking online for a step-by-step appendectomy. ”Just cut here, take out the appendix and sew up.” Simple, right? And you can buy the tool kit and instruction manual for less than the hospital at DIYsurgery dot com.

But some things, such as evaluating investments, making loans or performing surgery are best handled by a professional in consultation with the investor or patient. Banks and finance companies along with doctors have existed for centuries, and not just because there were no websites like prosper.com and lendingclub.com.

My best advice: If your business doesn’t fit the bank’s narrow (and narrowing) loan criteria, it’s time to think outside the box. Many small companies simply do not know what they don't know, which is why it’s so important to get expert advisory to for rehabilitating and re-structuring their finances- instead of going it alone.

At US Capital Partners, we are dedicated to educating businesses to help them understand the market and determine appropriate solutions and service providers in that sector. As a direct lender, co-lender and lead financial arranger, we also offer speciailized advisory services so we can educate and collaborate with companies to help them understand alternative options for funding. If you are looking for financial support, visit our website www.uscapitalpartner.net or call (415) 882-7160.