Small Business Financing

9/18/2007

Yes, the subprime home mortgage mess, which is a rather small segment of the financial industry, is having a major impact in other financial lending areas. How? By tighting up available liquidity. Of equal concern for small business is that lenders will use the subprime mess as a reason to tighten up their own credit, or more profoundly, clean up their existing portfolio holdings by requesting less profitable or riskier companies go to another lender. This is done by not renewing demand lines of credit, not providing enough new capital when requested or simply putting a company into workout and foreclosure without notice.

Today the Fed's dropped the prime rate a full 1/2 percent. This should help to get lenders to relax their credit criteria a little. But,don't expect the banks to be as relaxed with their underwriting criteria. Rather expect to see banks continue to "clean up" their poor performing companies or take write offs between now and the end of the year to make their balance sheets look stronger for their shareholders and analysts.

Thanks and I agree. In teh past, lenders still hold onto the old lending philosphy of measuring "brick & mortar" - how can a Home Based or Virtual business improve their position(s) to potential lenders?

9/19/2007

A few ways include:

1.) Contact capital funding sources who clearly have underwrting expertise in your company's industry. These specialists will see the value of your company and will understand what you are doing. Seek lenders not only in the north east Ohio area, but other parts of the company.

2.) Depending on your $ amount/financial needs, if your company allows your customers to use a credit card to pay for your product and service, there are companies who will lend up to $500K and use your credit card A/R and potential A/R as the collateral. The rates are a little pricey though.

3.)Look into the state of Ohio's Third Frontier Programs and see if any of these programs might fit your company.

4.) The Small Business Administration(SBA) is a great source for profitable companies who don't have enough collateral needed for tradtional senior debt. Check out the SBA Fast Track and 7(a) programs.