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”
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 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.
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 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.
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 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.
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 liquida^on 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
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