Why Commercial Banks May Not Be the Best Source of Capital for Your Business
I recently sat down with Charles Yacoobian on Blog Talk Radio to talk about lending for small and middle market businesses. We discussed Creative Funding for Companies in the Lower Middle Market and Small Cap Area.
During the interview, I also share with Charles a few of the reasons why most banks just don't cut it when it comes to small and middle market lending. Due to the continued constriction of traditional bank or cash-flow loans, companies often turn to private banks like US Capital Partners to obtain optimal financing solutions for securing adequate working and growth capital.
Here's an excerpt from the interview B2B CFO Podcast: Asset Based Lending.. is it Right for Your Business:
Charles: You see your main competition are the commercial banks? Is that who business owners tend to turn to first, because that’s what they’re familiar with?
Jeff: Well that’s true. I mean, you know, it’s a marketing thing. Commercial banks may not be the best source of capital, but their names are on the side of a lot of big buildings.
Jeff: And so you naturally, when you’re driving around, and you see a name on the side of a building, and they’re a bank, you think, “Well that might be a good fit for me.” Well in our industry, especially in small cap, it’s a fragmented industry, so we consist of a lot of modest sized lenders, we don’t have a lot of bricks and mortar or names on buildings, so it’s quite fragmented and you have to have a relatively sophisticated and aggressive marketing program to be able to reach out to these companies.
But they’re actually served better by these commercial lenders like ourselves, or private banks, in many cases, than they are by the large institutional banks. Now on the other hand, the middle market companies north of 100 million or maybe 75 million, now they can be served fairly well by the large banks. But the large banks aren’t very good at serving small companies because they just can’t put enough dollars out the door to make it worth wile to really serve them. And they really don’t generate enough revenue to justify the analysis it takes to make a credit decision on a small business, especially if you’re stretching your credit a little bit.
It takes a lot of experience in order to know whether that’s a risk worth taking or not. And the banks tend to not want to take those kinds of risks, so they’ll err on the side of conservancy, because they don’t want to think about it that much really.
Listen to the full interview here: B2B CFO Podcast: Asset Based Lending.. Is it right for your business?
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.