Source: CNBC.com, May 16 2012, by Patricia Orsini

When business is good, it’s all good. It’s when the going gets tough that you find out who is really in your corner.

Take Bill Silverman, owner of a ski shop in Livingston, N.J. His business had been through unseasonably warm winters before.

January and February of 2005 had been some of the wettest months on record, but also the warmest, and his business, which usually grosses about $2.5 million annually, fell off sharply. That time, he said, his bank discussed pulling his line of credit, but it was eventually renewed.

But this spring, after another nearly snowless winter in the Northeast, Bank of America, which has been his lender for years, sent a letter requesting that Silverman pay off his current line of credit by June 15.

Silverman, who has run High Country Ski and Sports for 26 years, is trying to come to terms with BofA, but he’s not waiting to hear if they reinstate it. In recent weeks he’s met with other, smaller banks. “I’m surprised how receptive the locals are,” he says, “They’re looking to beat out the big banks.”

Bank of America [BAC 7.11 -0.19 (-2.6%) ] has recently trumpeted the fact that it added nearly 1,000 bankers to its small business ranks over the past year. In the first three months of 2012, according to a bank spokesperson, BofA has extended more than $3.6 billion in credit to small businesses, an increase of 14 percent over the same period last year.

But Silverman’s experience raises a question that many small business people are asking in times of tighter credit and uneven profits: Are bigger banks willing to deal with the risk of small business lending in tough times?

“It’s really a case of institutional fit,” said Charles Withee, executive vice president of The Provident Bank, a mid-sized regional bank based in Amesbury, Mass., with assets of $500 million. “Everybody has their spot.” He says if a business’s financials are basically strong, but it has hit a rough patch, “that’s the time when we do our best work,” he said.

“When times are good, anybody can do business with a big bank,” says Lisa Roberts, senior vice president of commercial finance at Champlain National Bank, an independent, community-owned bank in the Adirondack region of New York state. “We’re the smallest player in the market. If people come to us, and looking for us to get through [a rough time], we work them to get through it.”

The Adirondack region had its share of rough times this past year, suffering the same warm winter that New Jersey did, after Hurricane Irene had shortened the fall tourist season. Champlain National offered some residents loans with interest rates as low as 1.99 percent interest, “just to help neighbors,” said Tim Kononan, vice president of commercial finance in the bank’s Lake Placid office.

Bad times can actually be an opportunity to snatch business from the big boys. “It cuts both ways,” says Withee. “We can’t be the lender to the business that needs $100 million. But if one of my lenders has been chasing the ski-boot guy forever, and suddenly gets the phone call [that their line of credit has been denied], we swoop in.”

“In a bigger bank,” says Withee, “there are lines of authority that the borrower doesn’t understand. He needs help, but he’s not getting answers. It’s a process that, when things are going along well, no one notices.”

Ask Brian Delaney. He owns High Peaks Cyclery, in Lake Placid, N.Y. Thanks to the hurricane, he says, “no one came up for leaf season, and then January was dead, February was dead, and March was super-dead.”

To be proactive, he said, he was looking to refinance some property at a lower rate. “I called a few banks that didn’t even return my call. And the bank I normally work with” — a larger bank that he did not name — “offered me a rate of 6 percent. I shook his hand and said goodbye.”

Delaney said he is now working with NBT Bank, a small bank based in Norwich, N.Y., to refinance. “They said, ‘We have money to lend, we want to work with you.’ ”

In some cases, according to Robb Hilson, a Bank of America small business executive, the bigger bank can be the better fit. “We are part of the local communities we serve [but] we offer the capabilities of a global firm.” For instance, says Hilson, “a customer with $2 million in annual sales that buys overseas, had a question about using foreign currencies. We can advise on that.”

Like any bank though, in the end, said Hilson, “we’re cash flow lenders, so we want to make sure that our credit clients have the ability to repay their loans. It’s important to assess their operations. Giving money that they can’t repay isn’t good business.”

Bank of America would not comment directly on Silverman’s situation, but through a spokesperson did acknowledge it had been in touch with him. Their talks had focused on “how the bank may be able to offer a short-term extension on the line of credit and then revisit the credit at the end of that time period.”

In general, said the spokesperson, “Bank of America does evaluate each line of credit in our portfolio on an annual basis.” The bank looks to ensure that borrowers have the means to repay the loan, as well as a secondary source of repayment, such as collateral. “Though each company is different,” the bank spokesman said, “we evaluate every line individually.”

Small banks spend no less time mitigating risk, says Brian Hickey, executive vice president and middle market manager for M&T Bank,[MTB 82.53 -0.49 (-0.59%) ] based in Buffalo, N.Y., with $79 billion in assets. “We need our customers to succeed. We need to look at the business plan, their cash flow, how much inventory they have, and their payroll. It’s a deliberative process.”

But with seasonal businesses, Hickey says, it’s important to look at what has happened each winter or summer over the past several years. “If you have five good years, should you overlook the sixth, when it almost went out of business? We need to find out if it was because of the weather, or was it because of a new competitor that entered the market, or a new competitive dynamic they haven’t responded to. That’s the judgment of the lending officer.”

If your financials are solid, rejection at one bank can prompt small business owners to right-size their banking relationship. “I’m still working with Bank of America, and maybe we’ll be able to work it out. But I’m also trying my best to do something with a smaller bank,” says Silverman.

Even though the downturn has made finding credit a lender’s market, “I need to know that someone is going to be rooting for me.”

Source: CNN Money, May 7 2012, by Parija Kavilanz 

American manufacturers say business is booming again, but many are complaining that banks aren’t lending them money to ramp up production.

In a new quarterly survey of small to mid-sized manufacturers, 26% of 268 respondents cited “lack of capital to grow” as their biggest challenge at a time when they need loans to hire more workers, buy new equipment and aggressively market themselves.

The survey was conducted in April by MFG.com, an online directory that pairs businesses with manufacturers that can produce their goods domestically.

Banks, aware of a domestic manufacturing resurgence, say they’re willing to lend, according to a range of regional and national financial institutions CNNMoney talked to. But they are proceeding with caution, especially with loans to smaller contract manufacturers or “machine and job shops.”

Alabama’s manufacturing boom

Their concern is that these types of businesses are too dependent on short-term contract work. When the economy is good, the work picks up, but projects can also quickly dry up anytime there’s a blip, putting banks’ loans at risk.

Matt Henderson, president of Performance Machine & Manufacturing, operates two machine shops in Tennessee that make parts for the automotive industry.

Revenue at his company is up 80% over last year, reaching more than $3 million. As business revs up, Henderson desperately needs about $140,000 in financing to expand and hire workers.

But he’s struggling to get the loan, despite showing banks that business is booming.

His 30-person staff is working six to seven days a week to meet demand. While that’s a good sign for the company, it’s also forcing him to pay a substantial amount of overtime.

“If I get the loan, I can hire three full-time and two part-time workers and buy new equipment,” said Henderson. “I also want to do a heavy marketing campaign to bring in more business.”

His former bank, Bank of America, denied him the loan. His new bank, Regional Finance, offered one, but it’d come with a 6% to 7% interest rate and require a personal guarantee, meaning that Henderson would have to put his own money on the line. Those terms were “unreasonable” to him.

Don Vecchiarello, spokesman for Bank of America, didn’t address Henderson’s situation directly but did say the bank has increased overall lending to small businesses, including manufacturers.

“We’ve also hired more than 800 small business bankers to work with companies and assess their credit needs,” he said. “We want to make every good loan we can, because we also make a profit off these loans.”

Domestic factory work has heated up considerably in the last 12 months as more U.S. companies bring back production from overseas, and others commit to a Made in USA business policy.

Consequently, manufacturers overall are adding more workers every month.

But “manufacturing is a capital intensive business that requires equipment, tooling and raw material,” said MFG.com’s CEO Mitch Free.

If small factories don’t get loans soon, Free said it could stymie the nascent resurgence, and put the brakes on hiring and economic growth.

“Any prudent business owner knows that cash is king. When funding is tight, you go into preservation mode, you restrict appetite for expansion and this hurts the economy,” said Free. “We all feel it.”

California-based Superior Aluminum Products, a small manufacturer with 18 workers, makes parts for aerospace companies such as Boeing (BA, Fortune 500) and Lockheed Martin (LMT, Fortune 500).

It currently generates $10 million to $12 million a year in sales, and demand is rising. If business keeps at this pace, and the firm can secure a timely $1 million loan, CEO Ian Albert is confident he can boost revenues 40%.

“We can increase our sales, buy new equipment and hire 20 more workers,” said Albert, who has built and sold five other manufacturing companies in the past.

Getting the loan hasn’t been easy. Meantime, Albert is still grappling with the fallout from his old bank restructuring: He lost a $3 million line of credit that funded everyday business. He eventually left that bank.

He approached Bank of America (BAC, Fortune 500) and Wells Fargo (WFC, Fortune 500), and offered $4.5 million worth of equipment as collateral to borrow against, but they wouldn’t give him a credit line. “I finally went to a financing company and got it, but at higher interest rates.”

Hugh Long, Wells Fargo’s head of business banking, didn’t respond directly to Albert’s situation, but said his bank’s focus is to make every loan we can to “credit worthy” customers.

“We like making loans to manufacturers. As the economy begins to improve, these are the companies that can create wealth and jobs,” he said.

Wells Fargo’s bankers, Long said, are “aggressively” trying to identify the right manufacturers to make loans to.

He added that it doesn’t help companies or the bank “if we make loans to customers who can’t repay them.”

Michael McCracken, head of Banco Popular’s Chicago region, agreed.

“Lending to manufacturers is a hot area right now,” said McCracken. “But with smaller manufacturers, we have to consider if this [business] pickup is sustainable.”

Source: BankCreditNews.com, April 26 2012, by Alexandra Villarreal

The House of Representatives approved H.R. 3336 on Monday, which extends exemptions from the regulatory burden of the 2010 Dodd-Frank Act to credit unions, community banks and other smaller financial institutions.

Rep. Vicky Hartzler (R-Mo.), the sponsor of the bill, also known as the Small Business Credit Availability Act, explained the importance of amending Dodd-Frank to minimize the reform legislation’s unintended negative impact on small-town America, Agri-Pulse reports.

“The current law stifles the [h]eartland,” Hartzler said, according to Agri-Pulse. “Small businesses in rural America should be able to access credit in local communities without the need to turn to national banks that are not familiar with the needs and concerns of this part of the country.”

Supporters of the legislation contend that while the increased regulation of large financial institutions is necessary due to the risk posed to the U.S. financial system, the same rules are not needed for smaller institutions.

“Although Dodd-Frank was supposed to reduce the power of big banks, it has actually had the exact opposite effect,” Hartzler said, The Hill reports. “My bill helps to reverse this trend and keep lending decisions closer to home.”

Hartzler further explained that the bill would increase the ability of small businesses to attain credit within their communities.

“This revision of Dodd-Frank is essential to farmers, manufacturers and small and rural businesses wanting to expand and create new jobs,” Hartzler said, according to The Hill. “Many of these businesses are often overlooked by large national banks and might not have access to competitive loans.”

The Client

The Company is a California based printing and on-line publishing company and premier regional producer and printer of magazines, catalogs, event guides, sports programs, directories and other publications for the travel, food & beverage, entertainment, healthcare, technology, professional association, and sports industries.

The Situation

Due to the economic downturn and the changes in the printing industry, traditional revenue sources were impacted and the company was forced to make a costly shift to include digital media.  Because of a decrease in revenue and increase in costs, their current lender was not willing to provide the additional working capital needed.

The Solution

Business Capital successfully underwrote this credit by articulating the company’s history and future plans for adaptation and growth to credit committee partners to secure intelligently structured and affordable financing for the client. The new credit facility paid off the company’s previous lender and allowed the firm to complete their transformation into a competitive, integrated print media organization and support a planned increase in sales.

The Client

The company  has been in business for over 50 years and provides highly specialized components to the electronics industry. They have a large customer and manufacturing base in the United States and overseas and are known worldwide as an innovative and reliable supplier of highly engineered hardware for operational and advanced military systems.  They manufacture critical microwave electronic components, sub-assemblies and integrated sub-systems for the Military Electronics Defense, Aerospace and Telecom Industries.

The Situation

The client was making a comeback from obstacles presented by the recession and was unable to attract affordable financing, primarily due to a period of decreased revenue during the economic slowdown and some outstanding debt overhang. They were experiencing increased demand and had aggressive plans to further grow sales but lacked the liquidity to purchase the additional raw materials needed to manufacture and distribute increased product to meet demand.

The Solution

Business Capital was able to articulate their unique situation and prove up their projections of dramatically increased profitability within a year with a lower cost of capital.  Working with lending partners,  Business Capital quickly structured a financing package that was cost effective and specifically addressed the client’s current and future needs for growth.

There are times when a business cannot successfully overcome various market and resource challenges. When this occurs, it is important to pursue a course of action that protects the clients’ interests and maximizes recoveries for all parties. At Business Capital, it is always our goal to develop and implement creative solutions that will return a company to prosperity, yet we also have the experience and insight to quickly identify those situations that can no longer be turned around. In the case of a business wind down, our objective is to maximize the value of our client’s business assets and strategically resolve outstanding financial issues and obligations that drain value.

Avoid the grinding halt to your business. Experience the benefits of working with a full service financial firm.

 The Client

A California based commercial printing company which specialized in the manufacturing of adhesive wine labels.

The Situation

The company had recently expanded from printing wine labels to providing printing services for makers of soft drinks and food products. This expansion had led to a decrease in liquidity. Their previous bank ratcheted down their advance rates and insisted the company pay off their note and find a new lender.

The Solution

Business Capital worked with lending partners to successfully structure a financing solution, pay off the company’s previous line of credit and recapitalize the company to enable it to achieve future growth plans.

ACG CT Private Equity Expo
December 2, 2011
7:30-10am

Stamford Marriott, Stamford CT

Click here to learn more about ACG

Presented by TMA No CA

Panelists Include:

Craig Bassel, Wells Fargo Capital Finance, Receivables Funding Group
James Christiansen, Graystone Capital
Doug Watson, Rubicon Capital Partners, LLC
Chuck Doyle, Business Capital
Paul Schuldiner, Wells Fargo Capital Finance, Purchase Order Finance Group

Moderated by: Howard Bailey, Bailey & Elizondo, LLC

Discussion to include:

• Your business finds itself in a significant transition.  Where can you turn for financing when banks are not the solution?
•  Are there still sources available for tough commercial real estate loans?
•  Are there still lenders out there that truly focus on the assets instead of the balance sheet in making credit decisions?
•  What does the future look like in respect to asset based lending?
•  And More…..

Event Details:

When: Thursday, October 14, 2010 at 7:30 a.m. – 9:30 a.m.

Where: The City Club, 155 Sansome Street, #150

click here for Event Registration & Sponsors

Where: Gaylord Resort & Convention Center, National Harbor, MD

For more information, please visit: www.abiworld.org