Leveraging the Three C’s: Credit Score, Collateral, and Cash Flow

With access to bank financing still limited for many smaller businesses, US Capital Partners offers alternative financing strategies for today’s underserved enterprises.

US Capital Partners Raising New External Debt Financing Graph

About two-thirds of smaller companies characterize the current business environment as difficult for raising new debt financing, according to a recent survey of about 3,700 business owners. About 59% of respondents indicated a need for external financing due to planned growth or expansion, 58% due to working capital fluctuations, and 53% due to increased demand already realized.

Unfortunately, the research also shows that many small business owners are tapping into their personal assets to fill financing gaps, with 36% saying they transferred personal assets to their business over the last three months. Often, this occurs after business owners are turned down by traditional lenders and don’t know where to turn.

Leveraging Your Credit Score

Traditional banks rely primarily on credit worthiness to determine whether, how much, and at what cost to lend to your business. Unfortunately, the application-to-loan ratio for small businesses can be fairly low. With mounting pressure from regulators, banks have been tightening commercial lending standards once again.

Leveraging Your Collateral Assets

Many smaller businesses fall outside the parameters of traditional bank financing. Thankfully, alternative lenders like US Capital Partners can provideaccounts receivable financing, machinery and equipment loans, purchase order financing, inventory loans, and much more. This type of financing, known as asset-based lending, or ABL, is on the sharp increase.

Many small businesses don’t appreciate the sheer extent to which they can leverage their business assets to secure funding. ABL is affordable and offers flexible loan structures. Loans come with fewer financial covenants than bank loans, and close more quickly than most other financing methods. ABL lenders focus on collateral rather than credit-worthiness, and therefore offer an alternative to traditional bank financing.

Leveraging Your Cash Flow

Smaller businesses may not always have large inventories, receivables, or fixed assets, though. This can make it difficult for them to secure traditional ABL. Nonetheless, these companies oftevn have strong cash-flow margins and enterprise value. Typical examples include service companies and high-tech companies.

“Many businesses are in their early stages, and may not have many years of historical performance,” explains Jeffrey Sweeney, Chairman and CEO at US Capital Partners. “Traditional banks may therefore be hesitant to lend to them. However, US Capital Partners now offers cash-flow term loans to such businesses, even if they have less than $5 million in trailing EBITDA—which used to be the threshold for such loans. At US Capital Partners, we can help smaller businesses leverage their cash flow to get the financing they need to grow.”

To learn more about how your business can secure the funding it needs, email Jeffrey Sweeney, Chairman and CEO, at jsweeney@uscapitalpartners.net or call (415) 889-1010.

Jeffrey Sweeney