Outlook-for-borrowing-2013

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2013 Outlook for Small Business Loans

Sam Thacker512.990.8756

[email protected]

Copyright 2013 BFS-USA Group LLC

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HISTORICAL PERSPECTIVE

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Circa 2005-2008• Largest span of

available business credit since WWII

• Most banks loaning to businesses in all phases of their life cycle

• Commercial credit bubble about to pop

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Bank Failures 2008 - 2012

**Many federally insured credit unions failed also

2008 2009 2010 2011 2012

25

140157

92

51

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OPTIONS FOR 2013

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Conventional Bank Loans

• Unavailable for start-ups- Must have two or three years of profitability

• Banks are looking for hard collateral

• Stellar personal guarantors

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SBA Loans• Few banks are very excited

about making SBA loans

• Good when real estate is part of loan package

• Need to find an SBA loan expert to help you

***Franchise financing may be available for start-ups

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Credit Unions• Might work with start-ups

• Average size of loan is very small

• Randolph Brooks FCU making SBA loans

• May be a good place for equipment finance

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Equipment Leasing Companies• Private commercial lenders

• Still want 2 years in business

• Will finance small ticket equipment and software pretty easily

• Austin has several “B” through “D” credit leasing companies

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SBICs• Small Business Investment

Companies (SBIC)

• President Obama just signed bill providing for $8 billion in new guarantees to SBICs

• Good for start-ups, growth capital, M&A

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SBIC (continued)• Three different

investment/lending models

• Pure equity

• Subordinated debt

• Mixed model

• Government regulated

• Friendly “venture capital”

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SBIC (continued)• Very involved application

and approval process

• They bring expertise to your company

• Subordinated debt model has warrant provisions

• Vertical niche and geographic coverage

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Community Lenders

• Will take risks on start-ups

• Typical size $50,000 to $300,000

• Most participate in a U.S. Treasury program

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Small Asset-Based Lenders• Will finance service

companies

• Some will finance start-ups

• Inventory, accounts receivable and equipmentocean freight

• 80% A/R50% Inventory50% Equipment

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Factoring Accounts Receivable

• Start-ups okay

• Price has become very competitive

• Service companies ideal

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Factoring (continued)

• Good for seasonal and cyclical businesses

• Good for high growth, high profit

• Uneven profit history okay

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Improving Chances Lowering Costs

• Quality financial statements

• Keep excellent records

• Don’t use one size fits all loan if it doesn’t fit

• Understand your risks

• Trusted advisors

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Private Subordinated Debt

• Use for growth capital and expansions

• Start-ups may work if substantial domain expertise

• Look in U.S. and outside the country for sub-debt funds

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CONCULSION

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Funds are Available but…

• You may have to kiss a lot of frogs!

• Creativity is necessary to find the solution that fits your company best

• Formulate a strategy before you start knocking on doors

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2003 - 2008• Insanely easy credit

• Unsecured LOC up to $250,000

• Businesses boot strapped on credit card debt

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Other Important Events

• Textron Financial stopped making new asset based loans – December 2008

• CIT Commercial Credit bankruptcy – November 2009