Credit Crunch: Small Business Lending

Credit Crunch: Small Business Lending June 28, 2012

Today’s Speakers•  Ami Kassar –  CEO and Founder, Multifunding LLC•  Ben Geyerhahn –  Special Projects Director, Small Business Majority

About Small Business Majority•  Small business advocacy organization – founded and run by small business owners•  National – offices in California, Washington, DC, New York, Ohio, Colorado, and Missouri•  Research and advocacy on issues of top importance to small businesses (<100 employees) and the self-employed•  Very focused on healthcare over the past 6 years – becoming more involved in energy and access to credit

MULTIFUNDINGUnderstanding Debt Alternatives inToday’s Economy June 29, 2012

WHO IS MULTIFUNDING ? •  Helping Small Business Owners Figure Out The Best Possible Loans For Their Unique Situations•  Reuters calls us –  “Loan Doctors for Business”•  Twi%er calls us –  “The People’s Loan Broker”

EXAMPLE CLIENTS (funding completed)

MULTIFUNDING IN THE PRESS

GEOGRAPHICALLY DIVERSE

WHAT’S OUT THERE?•  Regular Bank Loans •  Asset Based Lenders •  SBA / USDA Loans •  Equipment Leasing •  A/R Financing •  Sale Lease Back Loans •  Purchase Order Financing •  Merchant Cash Advance •  Inventory Financing Loans

TYPES OF LOAN PROGRAMS Source : MultiFunding Quarterly Lending Survey

ANNUAL INTEREST RATES BEING CHARGED Source : MultiFunding Quarterly Lending Survey

LENDER’S VALUATIONS Discounted (%) LTV (%) Business Assets Real Estate 25 75 Equipment 50 50 Receivables 20 80 Inventory 50 50 Personal Assets Real Estate 20 80 Stock 30 70 Cash 5 95

THE FOUR QUESTIONS•  Collateral –  Do you have something a bank can liquidate? The easier to liquidate, the cheaper your rate. •  Cash Flow –  How was business last year; this year? •  Credit Score –  680 or above (for best terms) •  Cost of Funds –  What interest rate you can get? –  What can you aﬀord?

GOOD OLD FASHIONED BANK LOANS•  Bank loans today require profitability, cash flow, good credit, and good collateral. •  If you think you have all of these ingredients, try a local community bank first. •  Visit www.bankinggrades.com to find a bank in your neighborhood that is ac^vely lending to small business.

SBA and USDA LOANS•  Many banks will be a bit more lenient when lending through the SBA and USDA programs. The government offers them insurance to be more aggressive when lending to small business. •  The USDA program works well in rural communiês and the SBA program is naônwide. •  When considering these programs, always look for a lender who is aggressive and has a lot of experience. •  If one lender says no, always try another one.

SBA EXAMPLE ONE•  Glass contractor in Oregon approached us to consolidate debts, term out payables, and gain access to working capital. •  We managed to reﬁnance their debts into an 18 year term SBA loan, secured by real estate. •  Interest rates went down from 18 % to 6 % and client will save $100,000 of ﬁnance charges per year.

SBA EXAMPLE TWO•  Fire Restoraôn company in Tennessee approached us to gain access to working capital. •  Through an SBA loan (secured by her home) we achieved her goal and refinanced several equipment leases and credit cards. •  Clients monthly finance fees reduced by $3,000 a month.

IF THE BANKS AND SBA LENDERS SAY NO•  Don’t despair, there are plenty of alterna^ves to consider. •  The key issue is what collateral you have to oﬀer the lender.

ACCOUNTS RECEIVABLE FINANCING•  If you have completed work for other businesses, have invoiced them and are wai^ng to be paid for it, these invoices are collateral. •  Many lenders will advance you money against the invoices so that you can get paid faster and improve your cash ﬂow. •  Key issues that they will consider are the quality of your contract with your client, and the quality of the client. •  They are underwri^ng your client ﬁrst, and your business second.

A/R FINANCING EXAMPLS•  We were approached by a logis^cs company in Pennsylvania who was struggling with cash ﬂow issues. •  This company had an exis^ng line of credit with their local bank. •  We put them on the Receivables Exchange and they were able to keep their line of credit and trade their receivables.

PURCHASE ORDER FINANCING•  Some^mes a company doesn’t have receivables yet, but has a purchase order from a credible business. •  A loan is needed to advance money to their suppliers to they can fulfill the order. •  Purchase order financing opôns are available where the lender will advance money to the supplier. •  These loans are not cheap but can make sense in high margin situaôns.

INVENTORY FINANCING•  There are lenders who will ﬁnance your inventory. •  Some will ﬁnance your inventory purchases. •  Others will provide an ongoing line of credit against your inventory.

INVENTORY PURCHASE LOAN•  A ligh^ng distributor in Colorado approached us and needed to buy inventory quickly to meet an order. •  Their supplier was not willing to extend terms. •  Our lender cuts the check to the supplier, adds a ﬁfeen percent fees, and then debited the money from the client over 90 days in equal payments. •  It’s expensive money but can be done in a week and makes sense if no other alterna^ves and there is good proﬁt in a job.

ASSET BASED LENDERS•  Some^mes companies have accounts receivable, inventory, and equipment on their balance sheets. •  There are Asset Based Lenders who will lend against all of these categories. •  They can make sense vs. going to an individual A/R , Inventory, or Equipment Lender.

EQUIPMENT LEASING•  If you’re in the market for a new piece of equipment or sofware, leasing is an ac^ve and viable op^on. •  There are many tax advantages to leasing. •  Always consider a $1 buy back at the end of the term vs. a residual equipment value.

EQUIPMENT SALES LEASE BACK•  Some^mes the only collateral a company has is equipment that they own that is free and clear. •  In some cases it is possible to sell this equipment to the leasing company, who will then lease it back to you. •  The lender will want to see and understand what you intend to use the funds for.

EQUIPMENT SALES LEASE BACK EXAMPLE•  A car wash in Dallas reached out to us and needed cash quickly to pay off a creditor. •  His only collateral available was his equipment. •  We managed to find a lender to buy his equipment from him at 50% of liquidaôn value, and sell it back to him for $1 at end of term. •  Interest rate was 14 % per annum.

MERCHANT CASH ADVANCE LOANS•  Unfortunately, many companies today have no collateral that a lender is interested in. •  If the company takes credit cards, there are lenders who will advance them money today and take a future daily percentage of their credit card receipts un^l their principle and fees are paid back. •  Other lenders will do the same in the form of a term loan from a checking account. •  Pay a%en^on to the term of the loan when considering these op^ons.

WHAT IS AN ANNUAL DEBT REVIEW ?•  An opportunity to sit down with a client on an annual review and determine if their current loans s^ll make sense. •  Look for savings opportuni^es –  Loan Markets Change –  Business Condi^ons Change

MANY OPPORTUNITES TO WORK TOGETHER Ami Kassar Chief Execu^ve Oﬃcer www.mul^funding.com akassar@mul^funding.com 1-‐800-‐276-‐0690 x 11

Join Our Network Contact •  Erica Dowell, Network Coordinator •  Email: edowell@smallbusinessmajority.org •  Direct: (202) 535-3244 Ways to Get Involved: Connect with us! •  Receive a monthly newsletter •  Share your story for media requests @SmlBizMajority •  Letters to the editor/Op-eds Small Business Majority •  State events/Roundtables •  Fly-ins •  Webinars for business organizations

Credit Crunch: Small Business Lending

by Small Business Majority on Jul 09, 2012

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Credit Crunch: Small Business Lending Webinar Transcript