bank lending « MasterPlans blog

Posts Tagged ‘bank lending’

What You Can Learn From One Bank’s Failed Business Plan.

Monday, June 29th, 2009

Forgive us our moment of schadenfreude here, but we love us a little irony: National Bank, the biggest lender in Greece, said that it’s scrapping its three-year business plan because it’s no longer relevant. According to Reuters:

“Due to the adverse global financial conditions and the continuing instability prevailing in the markets…the assumptions on which its 2007-2009, three-year business plan was prepared have changed and are no longer relevant,” the lender said in a bourse filing.

In a strange twist, it seems that the banks- the very institutions that require three years worth of financials in every business plan—are the ones proving a point they’ve yet to concede: when it comes to a business’ financials, no one knows what’s going to happen in three years let alone, three months. It sounds simple and clear enough, but try telling that to a banker. The respone you’ll likely get is rote: “You need three years worth of financials to be considered for a loan…’

Unsatisfying? Yes. Frustrating? Absolutely. Still, National Bank’s debacle does illustrate an imporant point: bankers know just as well as you do that figures three years out aren’t likely to be terribly accurate. And here comes the takehome lesson for those of you working on a business plan. Rather than wasting your time toiling over what may happen three (or even two years) down the road, focus instead on the first six months of your financials, and ensure that those are as accurate as possible. The truth is that no bank expects you to have accurately predicated your business’ financials in three years when, with their teams of financial modelers and economic forecasters, even they can’t get it right.

bankers

Tags: bank lending, business plan
No Comments »

The SBA Makes More Loan Changes, But Will They Help?

Thursday, June 25th, 2009

Maybe good news for cash-strapped entrepreneurs with an existing business—the Small Business Administration has announced that it’s revised its 504 loan program to give businesses the chance to refinance if they plan to expand or buy equipment, reports the Wall Street Journal. While there’s a lot of technical nitty-gritty and fine print, here’s what you need to know: while it used to be that entrepreneurs could only tap into the 504 loan program if they were seeking new loans to purchase real estate or equipment, now the pot has been sweetened, and entrepreneurs can refinance existing SBA loans if that amount is 50% less than the new dollar amount they’re requesting. Here’s an example of how it might work:

“For instance, a business owner who already has a $1 million 504 loan could now refinance that to buy $500,000 worth of equipment, said Hayley Matz, a SBA spokeswoman.

There’s a catch, though. For every $65K the SBA guarantees, the entrepreneur must create or retain a job.

What do you think? Will this help struggling entrepreneurs?

closedforever

Tags: bank lending, sba
No Comments »

Where To Get A Small Business Loan.

Monday, June 1st, 2009

Seeking a small business loan with your business plan? Here are the banks whose names you’ll want to remember. This week the Small Business Administration recognized the “best lenders” to small business owners—those banks that haven’t shut off the capital to entrepreneurs who need it. Among the 10 financial firms that the SBA lauded were the BBVA Compass Bank of Birmingham Alabama, who won the 7(a) lender of the year award, as well as the Randolph-Brooks Federal Credit Union of Live Oak, Texas, who won the credit union 7(a) lender of the year, and Ameritrust Certified Development Company of Seattle, who scored the 504 lender of the year.

The good news for those of you who don’t live near these particular financial institutions is that they may increasingly be joined by more banks who are slowly beginning to offer more loans to entrepreneurs, according SBA head Karen Mills (via the Wall Street Journal). Loan volume in the SBA’s two most popular programs was up as much as 25% in mid-spring. The crisis may not be over yet, but at least it’s showing some signs of improvement.

compassbanks

Tags: bank lending, economy, sba
No Comments »

Bad Credit? Read This.

Thursday, May 21st, 2009

Typically for our weekly Q&A post we field questions from our own readers, but the Washington Post featured a question from a reader today in an online discussion about business financing we found especially useful – particularly for those of you with less-than-perfect credit. As we’ve reiterated (so many times it makes our own head hurt), along with a business plan and collateral, good credit is key to securing a business loan from your local bank. But what if you’re operating a successful business, have a great business plan, and need a loan—but don’t quite have the credit to match? Asks a WaPo reader in NYC:

“I have been thinking of applying for financial assistance at the SBA but I have less than a pristine credit report due to a bankruptcy five years ago. For three years now I have watched my online business grow and I have a good business plan. Now I just need more inventory. Do you think I’m a good candidate for an SBA loan?”

Discussion moderator Eric Zarnikow, Associate Administrator for the SBA’s Office of Capital Access, gave what we thought was an interesting answer:

“The SBA provides a partial government guarantee of a loan made by a bank, credit union or small business lending company. The partial government guarantee allows the lending partner to expand access to capital to small businesses that don’t fit their conventional loan standards. I would recommend that you contact local SBA lenders in your area.”

On the surface his response sounds a lot like bureaucratic double-speak, and maybe it is, but phony or not, part of it still stood out to us. While he doesn’t give the reader an emphatic yes, he doesn’t say no either. That’s significant. While most people these days would tell you that if you’ve got bad credit, you should just give up on securing funding, we think Zarnikow alludes to an important point. The only things bankers like seeing better than a high credit school is a functional business that’s generating actual profits—particularly in this climate. So even if you don’t think you have what it takes to qualify for a conventional loan—you lack the collateral or credit—having an operational business goes a long way.

More broadly, Zarnikow seems to be making another important point as well: don’t throw in the towel before trying. It’s easy to get cynical in this economy and to assume that you can’t secure a loan or that you won’t get the funding you need. But the truth is you don’t know until you ask. We’re not trying to go all happy Mr. Rogers on you, but it really is something worth considering if you’re trying to seek funding right now, whether it’s from a banker, a venture capitalist, or even your friends and family. Simply put: don’t throw up roadblocks for yourself. (That’s your banker’s job.)

badcred

Tags: bank lending
No Comments »

The Free, Easy Money That Never Was.

Monday, May 18th, 2009

Amidst all the talk about how difficult it is to secure capital these days, and bank loans in particular, here’s something everyone seems to have forgotten: raising money for your start-up with your business plan was never all that easy to begin with.

It’s true. Bank loans were never falling from trees, nor was venture capital funding ever flowing like wine, water, or anything else, actually. While there’s no question that it’s tougher now than it has been in the past to raise seed capital, there’s always been the same criteria for securing a bank loan. You need a good business plan, good credit, and collateral. The formula for venture capital is much the same (minus the collateral). That hasn’t changed. So it’s surprising that as things are starting to improve, and as banks and venture capitalists slowly start handing out more money to start-ups, that suddenly there’s the impression that as things revert back to what they were, these factors no longer matter. Reports Reuters:

“‘We are getting a whole bunch of folks coming out saying ‘Where’s my handout?’ There is no handout,’ insisted SCORE network advisor Steven Bloom, who coaches entrepreneurs on how to seek funding from government and private-sector sources.

Bloom said financing for small business has always been a hard sell, because owners typically don’t have the collateral to justify the risk to the lender: ‘There historically are no grants for small business or even for large business; unless you have the next cure for cancer or some other opportunity where scale is huge and the people launching it have a tremendous track record.’”

Make no mistake: having a strong business plan, a proven track record (if you have one), good credit and collateral are still important if you want to raise capital or secure a loan. There is no such thing as free money in the start-up industry, and there never has been. Don’t expect that to be the case as the economy starts to improve.

freemoney

Tags: bank lending, venture capital
No Comments »

SBA: Get Your Interest-Free Emergency Loans.

Monday, May 18th, 2009

Remember those emergency bridge loans we wrote about on Friday? The Small Business Administration made it official today: starting June 15, entrepreneurs in desperate need of cash can apply for a $35K “bridge loan” through the American Recovery Act (ARC). Unlike previous ARC loans, these will be 100% guaranteed by the SBA and, even better, they’re interest-free.

Recipients of the ARC loans won’t have to begin paying back the loan until 12 months after they receive their final disbursement check, reports the Business Journal of Milwaukee, after which point you have to pay back the principal over five years. Like other SBA loans, these are available through your local banker—not the agency itself—which means you need good credit and a good business plan to score the loan.

bridgetourble

Tags: bank lending, sba
No Comments »

SBA To Offer Emergency Bridge Loans.

Friday, May 15th, 2009

Are you one of the scores of entrepreneurs who needs a capital infusion right away to keep your business above water? The Small Business Administration announced this week that help may be on the way—potentially within two weeks.

Speaking to a group at a recent SCORE event in New York, SBA Director of Marketing John Miller said that the SBA will soon announce that availability of $35,000 “bridge loans” for small businesses in immediate need of cash, reports BusinessWeek. The loans will come with a 100% government guarantee, although no word yet on which banks will be providing the loans.

Expect the official announcement during National Small Business Week, which starts on Monday. If you’re in immediate need of cash, get your business plan ready.

bridgeloans

Tags: bank lending, sba, small business
No Comments »

Banks As Cash-Strapped As Most Entrepreneurs.

Thursday, May 7th, 2009

Suddenly, it’s clear why banks aren’t handing out capital the way the government has been asking them to: it’s because they need every last dime for themselves. The results of the Fed’s “stress test” on banks has come out, and for some of the nation’s largest banks, the news is dire. Wells Fargo, Bank of American, GMAC, and a variety of other banks all have been instructed by the Federal Reserve to raise more capital, reports the Christian Science Monitor. Here’s how it breaks down:

-Bank of America appears to be in the most trouble, needing $34 billion

-Wells Fargo needs $13 billion

-Citigroup needs another $5 billion

-GMAC needs $11.5 billion

On the flip side, some banks are well-capitalized—like JP Morgan Chase—which regulators say don’t need to raise anymore capital. The good news, then, is that it appears some banks are doing well, which naturally has an impact on loan volumes. The bad news of course is that more banks are doing poorly. Stay tuned!

bofa

Tags: bank lending, economy
1 Comment »

Small Signs The Dark Clouds May Be Lifting.

Tuesday, May 5th, 2009

After the flood of overwhelmingly bad economic news the past year, it’s refreshing to finally see some signs that things may (slowly) be turning around. First, Fed Chairman Ben Bernanke announced what’s some of the first positive news from that department in months, saying that the “recession appears to be losing steam, with growth likely to resume later this year,” according to the Wall Street Journal. While Bernanke was measured in his statement—noting that a real economic upturn likely won’t come until later this year—it was still cautiously optimistic in its tone. That’s a notable change from previous statements made by the Fed chairman.

While that’s good for all of us, entrepreneurs seeking small business loans received an additional dose of positive news today, with the word that small business lenders are finally beginning to see a thaw in secondary markets. These secondary markets are critical to lenders originating news loans, and the recent movement appears to be real: the volume of Small Business Administration (SBA) loans has jumped by 20% from March, according to the SBA.

“Specifically, the weekly average number of 7(a) loans approved has risen 28% to 796, or $145.8 million in loans, from a weekly average of 622 loans, or $117.9 million, from January to mid-March. In the 504 loan program, which lends money for the purchase of real estate and equipment, the average weekly number of loans has increased by a third,” reports the Wall Street Journal.

Not only that, some banks that halted lending last winter have resumed that business again:

“Excel National Bank of Beverly Hills, Calif., resumed taking loan applications in late February—it has approved 28 loans so far, valued at $32.7 million—after halting lending in December. It had made $35 million of SBA-backed loans in September, before the credit markets froze.

‘We’re back to lending full-speed again,’ says Brian Carlson, Excel’s president and chief executive.”

While we accept that there’s plenty of skeptics out there who are still bearish on the economy—and we agree that there’s no reason to believe that the recession’s close to over yet—we think these small signs of improvement are worth getting excited about.

lightthroughclouds

Tags: bank lending, economy, small business
No Comments »

Missouri Does What Feds Won’t: Gives Small Biz Loans.

Wednesday, April 22nd, 2009

Here’s the kind of initiative we like to see: if the Feds won’t put money directly in the hands of entrepreneurs, then some states say they will. Yesterday Missouri okayed a small business loan program, which has set aside $2 million dollars to get cash to entrepreneurs seeking funding with a business plan. The state will dole out this $2 million as 80 low-interest—or even no-interest—$25,000 loans to local entrepreneurs and small business owners. The Missouri Development Finance Board announced that effective immediately, they’ll begin accepting applications for the loans. Live in Missouri? You can check out all the details, and apply, here. North Carolina’s assembly is currently in the process of considering as similar measure, and it’s likely that other states may follow suit.

Naturally, such programs don’t come free, however. The state is funding the program with a 4% fee that’s currently levied on Missouri Development Finance Board tax credits. Would you support such an initiative in your state?

missouri

Tags: bank lending, government, small business
No Comments »

MasterPlans: The business plan experts. Custom business plans by professional business plan writers. Business plan consulting by professional business plan consultants.

Get a free consultation