Bridging the Gap in Small Business Lending
US Capital Partners is one of the few investment banks able to step in and fill the “gap” between what lenders offer and what borrowers really need. US Capital Partners will be attending the “Funding the Gap” panel on Thursday, November 17 (2:15pm to 3:30pm), at the Commercial Finance Association’s 67th Annual Convention in New York, at the Marriot Marquis. Come meet the team at Booth #105 at the Convention from November 16th through the 18th.
The small business loan market remains stalled, as commercial banks keep lending standards tight and maintain an even tighter grip on capital. Alternative lenders are making a strong effort to bridge the ongoing lending gap. As the competition escalates, yields are being pushed downward, and alternative lenders are becoming more aggressive in their marketing, drawing attention to creative deal features and flexible loan structures.
While this is good news for borrowers, alternative lenders continue to focus predominantly on middle market companies. In our experience, there is still a giant lending gap in cash-flow, second-lien, and mezzanine loans for small businesses, especially companies with under $5 million in trailing EBITDA. Very few alternative lenders offer, for instance, $1–3 million cash-flow strips, which are truly a “gap” piece.
There is also a visible gap in equipment and real estate term loans, and also in growth-capital term loans, for small businesses. One of the reasons for the lending gap is that servicing these types of smaller loans can be expensive and time consuming. There is also a barrier to entry, with most alternative lenders lacking the necessary due diligence and underwriting skills to make these loans in the first place.
At US Capital Partners, we’re one of the few investment banks for small businesses that truly bridges the lending gap. We provide cash-flow terms loans of $1–5 million and upwards to bridge an asset-based lending or factoring shortfall. We also provide equipment and real estate term loans, as well as growth capital financing, to small businesses.