Many Small and Mid-sized Businesses Risk Losing Their Bank Loans

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Direct Lending and Advisory for Small & Middle Market Companies

Typically, banks 'pull loans' because of poor financial performance by the company who owns the loan, it can also be due to the bank's own credit problems.

San Francisco, CA (PRWEB) August 18, 2011

US Capital Partners, LLC, a direct lending and advisory firm, sees firsthand the result of the sluggish and uncertain economic recovery as more businesses come to them because their banks are calling their bank loans. Banks do not always advise their clients in advance that their loans are being called until right before it takes action, leaving business owners scrambling to secure financing to keep the lights on. The first steps to being proactive about financing are understanding the current banking realities and knowing how to assess if your organization’s bank loan is at risk to avoid reactive financing problems.

Jeffrey Sweeney, CEO and Managing Director of US Capital Partners, is all too aware of current banking practices and advises clients on what to do if they find themselves in this scenario. "Typically, banks 'pull loans' because of poor financial performance by the company who owns the loan, it can also be due to the bank's own credit problems." he says. "Lately we see lots of companies come to us because the banks are about to call their loans –we start first by measuring the risk of the bank calling a small-business loan, then explore options for refinancing." Sweeney recommends owners understand the following two categories when measuring their risk of losing business financing:

Loan Type - Many small businesses have financing on some or all of the following: Real Estate (least risky), Machinery and Equipment, Inventory and Accounts Receivable: (most risky). A business that has all four of these types of loans from the same bank is at the greatest risk of losing them. This broad exposure to a single client has several banks nervous and wanting to shed these riskier type loans from their books.

Company Performance - Business performance is also tied to bank loans and measured over a twelve-month period and against previous years. Assessment factors include the following:
1. Declines in accounts receivable and/or inventory assets or the "borrowing base."
2. Insufficient trailing and projected cash flow to make debt service.
3. Net operating losses for the current reporting period
4. A top-line sales decline from last year to this year
5. Fixed-asset devaluation below the agreed loan-to-value ratio (i.e. the building used to get the bank loan is worth much less than when it was obtained).

Given current financial uncertainty, it is nearly impossible to find another bank to take over a business loan if the current bank wants to exit. Few lenders will make one loan on all the assets of a company, but not all financial institutions are created equal. There is a solution to these financing problems. Sweeney encourages smart business owners to research and hire an experienced third-party adviser who can provide alternative financing solutions. Sweeney says, "The ideal advisor in tough times is a small-cap investment banker specializing in restructuring that knows the small business alternative lending market and can structure a deal between multiple lenders. These pros have excellent contacts and relationships with appropriate alternative lenders. Be sure to ask advisory candidates if they are experienced in the same size and sector as your company and are able to provide financing as well as advisory services."

The first priority for small business owners, particularly during tough economic times is to stay in business. Bringing financial matters to experts who can help will ease the stress and get the business pointed in the right direction again. US Capital Partners is both a direct lender and specialist in advisory services. They can advise on how to deal with a hostile bank, how to resolve lender issues, or how to refinance in distress situations. If you think your bank loan might be pulled or not renewed, contact US Capital Partners at (415) 889-1010 or visit http://www.uscapitalpartners.net.

About US Capital Partners, LLC

Since 1998, US Capital Partners has been providing prompt, innovative, and reliable financing solutions including lending, corporate financing, and debt re-structuring to businesses across the United States and abroad. US Capital Partners is a private investment bank, direct lender, co-lender, and lead financial arranger that specializes in asset-based debt for small- to middle-market private and public companies. The company’s innovative approach allows them to provide the best financing available, not only for companies in excellent financial condition, but also for companies who may have been refused credit by traditional lenders.

If you would like to know more about how your business can secure the funding it needs, visit http://www.uscapitalpartners.net or call (415) 889-1010.

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