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.”

“It is a privilege and honor to have such a respected and valuable member on our team. Bob has been in the business restructuring and commercial finance industry for three decades, representing the interests of both borrowers and lenders. This unique perspective will really bring additional value to both our clients and partners.” said Doyle. “There is a real void for small to middle market companies looking for corporate financing. With Bob on board, we can increase our reach on the east coast, to clients who are in need of working capital and business debt restructuring but have been turned down by traditional lenders.”

Mr. Burrick brings extensive expertise in finance, law and workouts. Before joining Business Capital, he was a principal and served as a senior officer of two specialty finance companies and also served as the Chief Restructuring Officer of a major hospitality group charged with the turn around and sale of nonperforming assets. Prior to his involvement in the business and lending work, he was a bankruptcy partner at a major national law firm, representing the interests of clients in most of the major bankruptcy cases spanning a 20 year period. Bob is a PHI BETA KAPPA graduate of the State University of New York at Buffalo and holds a JD from the Fordham University School of Law.

Business Capital, founded in 2002, is a national commercial finance and business debt restructuring firm specializing in arranging growth capital and corporate turnaround solutions for small and middle market companies. Combining a unique blend of traditional and progressive financing methods, the firm provides a vast spectrum of recapitalization and restructuring services for private and public companies in hyper-growth or challenging situations.

###

    Source: San Francisco Business Times, May 15 2012

• Robert Burrick
• Date added:May 15, 2012
• Submission Type:New Hire
• Current employer:Business Capital
• Current title/position:Senior Vice President
• Industry:Banking & Financial Services
• Position level:Senior Vice President
• Position department:Sales
• Duties/responsibilities:Business Capital, a national commercial finance and business debt restructuring firm, has added Robert Burrick as Sr. VP. Bob will expand the national client base and business development efforts on the east coast. He has 30 years of expertise in finance, bankruptcy law, workouts and turnarounds representing both borrowers and lenders.

Source: Mercury News.com, May 14 2012, by Rose Meily

Much like most residential real estate markets, the commercial real estate market is showing signs of recovery, but tight lending standards, particularly for small businesses, appear to be impeding growth, according to the National Association of Realtors’ annual Commercial Real Estate 2012 Lending Survey.

“This is very much a tale of two markets. There have been notable improvements in business capital for large commercial transactions valued at $2.5 million or higher, but there remain significant challenges for small business,” said Lawrence Yun, the national group’s chief economist.

“Our Realtor members typically are involved in helping commercial clients with purchases under $2 million, where a lack of business capital has caused two out of three respondents to report deals have fallen through. Given that most jobs are created through small business, the lack of capital is hurting small businesses and the overall economic recovery,” explained Yun.

According to Real Capital Analytics, more than 13,000 major properties valued at $2.5 million or higher traded hands in 2011. Sales volume increased 51 percent over 2010 to $205.8 billion, with the lion’s share of lending funds coming from big banks. Other business funding sources include insurance companies and institutional investors.

By contrast, the survey shows that small business transactions rely heavily on smaller regional and local banks, and small private investors, for lending capital. Respondents indicate nearly 30 percent of smaller commercial properties are purchased with cash, reflecting the tight credit environment, and some are seller financed.

“When credit is tight, cash is king,” Yun added.

The most common types of property transactions referenced in the survey were multifamily, land, warehouse, suburban office and retail strip centers. Other property types include industrial flex space, central business district office, freestanding retail and restaurants.

Longtime investors who never had a problem getting a loan in the past are now being declined. More than half of respondents say small business lending is just as stringent as a year ago, while 23 percent say it is more stringent; 20 percent say it is less stringent but not near historical averages. Members also complained about banks being over-regulated, and refinancing being denied due to stringent internal lender underwriting requirements or low appraisal valuations.

“If real estate is to fully recover, the lending industry needs to do its part by employing a more flexible approach to commercial financing and making loans more accessible to creditworthy borrowers and small businesses,” said Suzanne Yost, president of the Silicon Valley Association of Realtors.

The Commercial Real Estate 2012 Lending Survey is published by the National Association of Realtors Research Division for the commercial community. In April 2012, a random sample of 32,459 agents with an interest in commercial real estate was invited to complete an online survey. A total of 474 responses were received, for an overall response rate of 1.46 percent.

Source: Boston Globe, May  10 2012, by Bernard Condon

NEW YORK—Federal Reserve Chairman Ben Bernanke said Thursday that many businesses and consumers are finding it easier to borrow as banks shore up their balance sheets.

“Notwithstanding the various headwinds, credit conditions in the United States have improved significantly in a number of areas,” Bernanke said.

He said that large companies are selling bonds at historically low interest rates and that people with strong credit have “ready access” to credit card and auto loans.

But he also noted that many creditworthy Americans are finding it difficult to get mortgage loans. He said small business owners who have used their homes as collateral for loans also face “challenging” conditions.

Bernanke’s comments were prepared for delivery at a banking conference in Chicago.

The Fed chairman said that banks have made “considerable progress” in shedding risk from balance sheets and building cushions against future loan losses. Cash and securities holdings at large banks have doubled since 2009, he said.

He also said that the way banks fund themselves has gotten safer. He said large banks are now “flush” with deposits and depend less on “short-term loans” from financial institutions for their own borrowing needs.

In the financial crisis in the fall of 2008, much of the lending among financial institutions in this so-called wholesale funding market froze, spreading panic and helping push the economy into its deepest recession since the Great Depression.

Bernanke noted that most of the 19 largest banks passed “stress tests” earlier this year, meaning they would likely survive and be able to lend in a financial crisis worse than 2008.

In those tests, regulators supposed the unemployment rate would spike to 13 percent, stocks would drop by half and home values would drop by more than a fifth.

Bernanke said loans to U.S. homeowners have fallen 13 percent from their peak, after adjusting for inflation. He said a slow economic recovery, a troubled housing market and caution by lenders mean that situation is unlikely to improve quickly.

Turning to small businesses, Bernanke said small loans from banks, though increasing, were still 15 percent below their 2008 peak at the end of last year.

In response to criticism that heightened scrutiny by regulators has made it difficult for banks to lend, Bernanke said the Fed has stressed to supervisors on its staff to take a “balanced approach” in overseeing banks.

In a news conference following a two-day policy meeting last month, Bernanke listed “credit tightness” among several factors holding back economic growth. He expressed hope that those conditions would soon improve.

To spur borrowing and stimulate the economy, the Fed has been selling short-term Treasurys and buying long-term ones in a maneuver known as Operation Twist.

Buying long-term bonds helps push their prices up and their yields down. Since many loans are tied to Treasurys, lower yields can mean lower interest rates for consumers and businesses. The bond-buying program ends in June.

Source: American Banker, May 8 2012, by Alan Kline

The pace of small-business lending slowed in April as demand from borrowers weakened and lenders of all sizes approved fewer loans.

Total loan requests fell 5.4% in April when compared with March, according to an analysis of lending trends released Thursday by Biz2credit, a New York firm that matches borrowers with lenders. It was the first month-to-month drop in a year, Biz2credit said in a news release Tuesday.

Meanwhile, an analysis of loan applications found that loan approvals at large banks — those with $10 billion of assets or more — fell for the second straight month and that approval rates at smaller banks declined for the first time since August of last year.

Large banks approved 10.6% of loan requests, down from 10.9% in March and 11.7% in January and February. Small banks approved 45.9% of requests, compared to 47.6% in each of the prior two months.

Approval rates also declined slightly at credit unions, to 57.4%, and held steady at alternative lenders at 63%.

Rohit Arora, Biz2Credit’s chief executive, said that the slow pace of the economic recovery is causing both borrowers and lenders to “proceed with caution.”

“The disappointing April jobs report, in which only 115,000 new jobs were created and when the expectation was much higher, is an indication that the economy is slowing down,” Arora said. He added that high oil prices and an intensifying fiscal crisis in Europe have only added to the uncertainty.

Also contributing to the overall slowdown in small-business loans was the March expiration of a temporary 90% guarantee on Small Business Administration loans and the reinstatement SBA loan fees that Congress had temporarily waived in an effort to stimulate lending, Arora said. The guarantee level fell back to 75% in April and the SBA again began assessing fees equaling 1% to 3% of the total loan.

“This played a big part in the drop in loan demand and the reduced willingness of banks to grant funding requests,” Arora said.

Source: WSJ.com, May 9 2012, by Angus Loten

One of the potential downsides of being a supplier or a vendor to a big company is that you may have to wait a while to get paid.

‪On average, big businesses – those with 1,000 or more employees – paid their bills more than a week past the due date on invoices, according to a report that’s expected to be released by Experian next week.

‪These big businesses appear to be taking even longer than they did last year to cut checks, and thus, settle their accounts with suppliers: The wait beyond contracted terms – that is, the date agreed to at the time of a sale – grew by 27% over the past year, from six days to nearly eight days, according to Experian.

‪‪This trend is particularly disturbing for many small business owners and start-up founders, because they tend to be highly dependent on regular cash flows for working capital to pay their own suppliers and vendors, along with their employees.

‪”You’ve done the work, but there’s no cash coming in,” says Brandon Cotter, who runs an online small-business invoicing service.

About 14% of nearly 5,000 entrepreneurs cited late payments — or customers that didn’t pay at all — as their biggest challenge in 2010, up from just 2% in 2008, according to a study released Wednesday by the Ewing Marion Kauffman Foundation of Kansas City, Mo.

In 2011, small businesses waited up to 46 days on average to get paid, six days longer than in 2010 and 10 days longer than 2006, according to the National Federation of Independent Business, a small-business lobby group.

‪Small business loan broker Ami Kassar in this video makes the argument that big companies should try to help America’s small businesses by paying their bills in 10 days, rather than several months.

How long are you waiting to get paid by the big companies you are supplying? And how are big companies that are late payers affecting your business?

Bankruptcy has drawbacks…

With a bankruptcy, there are devastating, permanent consequences for both trade and customer relationships as well as personal credit.  The process is protracted, out of the businesses’ control, with a significant amount of money spent on legal and administrative costs associated with a Chapter 11, before any creditors are paid.

According to the American Bankruptcy Institute (ABI), filings of commercial bankruptcies fell in 2011 nationwide compared to the previous year.  This, after a series of significant rises in the years just after the recession. A poll by the ABI found that most respondents expected commercial bankruptcies to increase in 2012 due to continued fallout of the recession, with too much debt and restricted access to capital cited as the main reasons for more commercial filings this year.

Settling out of court has benefits…

There are bankruptcy alternatives. A voluntary business debt restructuring program addresses both:  reducing debt and thereby making a company more qualified for recapitalization.  An out of court, commercial debt restructuring can be much faster and more cost effective than filing for bankruptcy. New terms with vendors and suppliers can be worked out to avoid bankruptcy and maintain relationships that are vital to any business.  By reducing the amount of debt owed and/or extending debt payment terms, corporate debt can be restructured to position a rapid return to profitability.  Or, in the case of a business wind down, restructuring debt can provide a clean exit and avoid the long term personal fallout of bankruptcy filing.

Denial and Procrastination are not your friends.

Not admitting a problem and waiting to engage outside help will often leave a company without the option to settle out of court. In order to have a shot at commercial debt restructuring and remaining in business, it is important to act as quickly as possible.

In addition to timing, getting the right partner is key.  Companies interested in the possibility of a business debt restructuring verses filing Chapter 11, should shop around and find a firm best suited to their needs, then check references, history and other credible sources (like the BBB) in the vetting process.

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: The American, May 2 2012, Scott Shane

Banks profit by making loans, not refusing them. So why are banks making fewer loans to small business these days?

On March 29, at a lecture at George Washington University, Federal Reserve Chairman Ben Bernanke innocuously remarked that lately “small businesses have … found it difficult to get credit.” Too bad that none of the students at the lecture thought to ask him why. A case can be made that the Fed is partially responsible.

Bankers, small business owners, and policymakers all agree that small business lending has declined substantially since before the financial crisis and Great Recession. Business loans under $1 million fell 13 percent between June 2007 and June 2011, and the amount lent has declined 19 percent when measured in inflation-adjusted terms, Federal Deposit Insurance Corporation (FDIC) statistics reveal.

But banks profit by making loans, not refusing them. So why are banks making fewer loans to small business these days? The decline is, in part, a response to the Federal Reserve’s incentives for banks to increase their lending standards.

The banks increased their lending standards because the Fed told them to stop making the kinds of risky mortgage loans that led to the financial crisis. Unfortunately, small business funding was collateral damage in the effort to get rid of bad lending practices in the home mortgage business.

Efforts to fix bad mortgage practices hit small business lending because many small business owners use home equity to finance their operations. As I have explained in an earlier column, 28 percent of small businesses tapped equity in their homes to finance their businesses at the peak of the housing boom, according to Barlow Research, a Minneapolis-based market research firm. During the housing boom, households in which someone owned a small business were more likely than other households to take out home equity lines of credit and to borrow more money on those credit lines, Federal Reserve Bank research finds. With many small business owners making use of home loans to finance their companies, the Fed’s efforts to get banks to improve their home lending standards has meant less small business borrowing.

Moreover, when banks increase their lending standards, those increases often occur across the board. Therefore, in addition to raising standards for mortgage debt, the banks tightened them on small businesses borrowing in the aftermath of the financial crisis, the Federal Reserve’s Survey of Senior Loan Officers shows.

The Fed might decide that the banks need to maintain today’s higher lending standards, even if that means less small business lending than we used to have. But it should be more honest about what’s going on. Instead of implying that “small businesses have … found it difficult to get credit” because of some mysterious outside force, the Fed chairman should say that the Federal Reserve has encouraged banks to cut back on small business lending as part of an effort to get them to make better loans. Such straight talk would be consistent with the Fed’s new strategy of greater transparency about what it is doing.