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 Business Bank Borrowing Tips for Companies in Need of Capital Amid Slow Economic Rebound

I recently blogged about how banks are still reluctant to finance small and middle market businesses . Even as we head into a slow economic rebound, the constriction of credit in the marketplace remains a challenge for many companies that need growth capital for hiring new staff, developing new products, and expanding into new markets. 

Here are a few tips on bank borrowing for small businesses who have had difficulty obtaining new credit or have been denied adequate financing by traditional lending institutions.  

1) The application process can be very challenging and after you submit copious documents you may still get turned down. At this point, you need to realize that you're not bankable and seek alternative financing options, which is a solution the bank isn’t going to tell you about.

Learn more about Alternative Financing Solutions: Securing Small Business Loans for Working and Growth Capital.

2) When soliciting loans, commercial bank standards are similar so if you get rejected once, you need to try something else. While many businesses are either struggling to stay afloat or finding it difficult to capitalize on upcoming commercial growth opportunities, others are taking advantage of innovative alternative financing options to secure new financing even in tough times for small business lending.

What many businesses don’t realize is the extent to which they can leverage their business assets to secure funding. Alternative financing options can help businesses unlock the value of their assets to get the backing they need when the commercial banks say ‘No.’

For instance, read more about How Manufacturers Are Leveraging Their Business Assets to Secure Financing 

3) Regional banks are generally good for small businesses. However, if you don’t fit their lending criteria, there are alternative lenders that are more specialized and can help your business secure the funding it needs.

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

4) Finally, be wary of banking for small business statistics: These statistics may be deceptive, so they shouldn’t scare off businesses from seeking financing. For example, when stats report that small business borrowing is down, you have to take into consideration that growth and demand for loans is also down. Banks are still making loans, so it’s important to not rely too heavily on statistics when looking for financing solutions for your business’s unique needs.

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, visithttp://www.uscapitalpartners.net/ or call (415) 882-7160.

Small Business Financing News: Banking Regulations Attempt to Reign In Risky Deals

A recent article in The Wall Street Journal addresses how financial institutions are increasing protections against unexpected losses. In the article, "Banks Get New Restraints: Historic Refashioning of Rules Aims to Trim Risk-Taking, Limit Future Crises," Damian Paletta and David Enrich explore the impact of the new rules are designed to ensure the interconnected global banking system doesn't face another crisis such as that which led to taxpayer-funded bailouts in 2008 and 2009. 

The effects of these new restraints are likely to impact everything from mortgages to commercial loans in coming years. Officials want to rein in the kinds of risky activities that contributed to the financial crisis, including requiring banks to have large stockpiles of capital so that they will be able to continue lending even if the economy worsens. 

In my opinion, all the capital reserves in the world is not enough buffer for making bad loans and doing bad deals. Marginal increases in capital requirements are nice window dressing, but the real issues are underwriting standards and product offers the banks are allowed to make. These deals are and were way too broad and risky.

Banks need intelligent regulation that keep them from doing too risky of deals. 100% private equity/hedge funds can do virtually whatever deal they see fit to. As you move into commercial banking with leverage and government guaranties and grandmother's savings, much more care must be taken in making loans or providing other financial products. So the banks are really too big to succeed without bailouts. They need to be restricted to certain types of loans and financial products that are relatively low risk, inexpensive, and provide a low rate of return.

The balance of the capital market requirements should be provided by private equity or special investment banks with minimal leverage where their own capital is at risk. The price point for these deals with regard to interest rates will be much higher, but better matches the rate of return required for risky deals.

Essentially, what happened is risky deals were getting done cheap during the boom because institutions that should not have been involved were. Those deals should have been done with private equity, at a higher price point and the sharper supervision that goes with private equity. That would have slowed the growth of the bubble… if not prevented it in the first place. Deals would have to had made sense at a higher price point and under closer scrutiny because private closely managed money was at risk, rather the OPM (other peoples money) always a risky deal.

Businesses also need to make smart decisions about when seeking alternative financing from private lenders or exploring recapitalization and financial restructuring to continue securing working capital.

Find out more about how private lenders are able to support small businesses at a time when credit is scarce by providing loans that help borrowers fix their credit scores or buy equipment to expand.

 

One of our main strengths at US Capital Partners is our ability to finance businesses as well as provide financial advisory in complex and difficult situations. If you would like to know more about how your business can secure the funding it needs, visit US Capital Partners, Inc. at http://www.uscapitalpartners.net/ or call (415) 882-7160.  

Small Business Financing News: Working and Growth Capital is Readily Available Despite Credit Crunch

According to the Federal Reserve, $40 billion worth of loans to small businesses have disappeared in the last 2 years. A recent CNN article reports that loans to small businesses have reportedly dropped from more than $710 billion in the second quarter of 2008 to less than $670 billion in the first quarter of 2010.

After the recent debacle in the credit markets, loose credit is no longer readily available as banks implement more stringent criteria to secure loans. The challenge for many businesses is not so much a "credit crunch" but overcoming unrealistic borrowing expectations.

It’s very similar to the bubble burst in the housing market where we’ve had to firmly reset our expectations of the residential real estate market borrowing possibilities. While banks are returning to more prudent small business lending practices based on realistic asset value and ability to repay debt alternative small business lenders have always focused primarily on assets.

With the widespread tightening of lending standards, businesses who aren’t a good fit for marquee lenders need to look outside the bankable box to these private investment banks who are readily available to help businesses secure financing for appropriate working and growth capital.

If your business currently doesn't fit a bank's lending risk profile, you may be interested in learning more about how to secure Alternative Financing and Small Business Loans for Working and Growth Capital.

To learn more about how your business can secure the funding it needs, visit US Capital Partners, Inc. at http://www.uscapitalpartners.net/ or call (415) 882-7160.