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Credit Crunch: Small Business Lending


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1. Learn about the small business credit landscape
2. Hear a lending expert's tips on ways to access capital
3. Get your questions answered

Published in: Economy & Finance, Business
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Credit Crunch: Small Business Lending

  1. 1. Credit Crunch: Small Business Lending June 28, 2012
  2. 2. Today’s Speakers•  Ami Kassar –  CEO and Founder, Multifunding LLC•  Ben Geyerhahn –  Special Projects Director, Small Business Majority
  3. 3. 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
  4. 4. MULTIFUNDINGUnderstanding Debt Alternatives inToday’s Economy   June 29, 2012
  5. 5. 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”
  6. 6. EXAMPLE CLIENTS (funding completed)
  9. 9. 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        
  10. 10. TYPES OF LOAN PROGRAMS Source : MultiFunding Quarterly Lending Survey
  11. 11. ANNUAL INTEREST RATES BEING CHARGED Source : MultiFunding Quarterly Lending Survey
  12. 12. 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  
  13. 13. 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?  
  14. 14. 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  to  find  a  bank  in  your   neighborhood  that  is  ac^vely  lending  to  small   business.  
  15. 15. 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  communi^es  and  the   SBA  program  is  na^onwide.  •  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.  
  16. 16. 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.  
  17. 17. SBA EXAMPLE TWO•  Fire  Restora^on  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.  
  18. 18. 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.  
  19. 19. 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.  
  20. 20. 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.  
  21. 21. 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  op^ons  are  available  where  the   lender  will  advance  money  to  the  supplier.  •  These  loans  are  not  cheap  but  can  make  sense  in  high   margin  situa^ons.  
  22. 22. 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.  
  23. 23. 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.  
  24. 24. 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.  
  25. 25. 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.  
  26. 26. 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.  
  27. 27. 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  liquida^on  value,  and  sell  it  back   to  him  for  $1  at  end  of  term.  •  Interest  rate  was  14  %  per  annum.  
  28. 28. 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.  
  29. 29. 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    
  30. 30. MANY OPPORTUNITES TO WORK TOGETHER Ami  Kassar   Chief  Execu^ve  Officer   www.mul^   akassar@mul^   1-­‐800-­‐276-­‐0690  x  11  
  31. 31. Join Our Network Contact •  Erica Dowell, Network Coordinator •  Email: •  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