WHY WON’T OUR BANKS FUND SMALL BUSINESSES?
In August 2010, President Obama traveled to Seattle and met with three local small business owners – who operate a bakery, a hotel and a pizzeria – in a roundtable discussion about strengthening the economy and creating jobs.
Acknowledging that small businesses create two out of every three new jobs in America, Obama was quoted that day as calling small businesses “the backbone of our economy and the cornerstones of our communities.”
In November 2013, in a post on the official blog of the Department of Housing and Urban Development called the HUDdle, Secretary Shaun Donovan echoed the President, writing that “Small businesses are the backbone of the American economy and the cornerstones of our Nation’s promise. In fact, today over half of America’s workers either own or work for a small business, and small businesses have generated 64 percent of net new jobs over the past 15 years. Small businesses create two out of every three new jobs in America.”
If this is the case, and our top officials in our government are so enthused by the power of small businesses to drive our economy – why, as The Restaurant Finance Company recently reported, do major institutional banks turn down well over half of the small business loans applied for?
The RFC says that since the beginning of 2011, banks have turned down 60 percent of applicants in the U.S.
With the down economy, many small business owners face poor sales and are in dire need of capital to ensure growth.
According to an article they cite in The Wall Street Journal, many businesses that would have traditionally turned to banks – or have already been turned down by them – have instead sought funding from cash advance providers.
In exchange for a certain amount of future sales (and hefty borrowing fees), cash advance providers are giving money to those who are willing to risk entrance into this highly unregulated market for quick access to capital regardless of personal credit.
In 2012, Forbes cited a study of 1,000 rejected small business loan applications (conducted by credit marketplace Biz2Credit) and found that the biggest culprits as far as rejection percentage were Bank of America (13.5%), JP Morgan Chase (11.6%) and Wells Fargo (11.2%).
The article concludes that the lending environment “still looks dicey with the most recent National Federation of Independent Business optimism survey showing more entrepreneurs with a negative outlook in obtaining credit.”
THE RISE OF ALTERNATIVE LENDING
Bad Credit Small Business Loans
So in light of all this, we have to ask ourselves: What is the value that small businesses bring to the economy and how important is it for growing companies to have access to financing to grow in that space?
What happens in the lending realm impacts small businesses around the country, and what the owners do with that money in growing their business has a rippling effect on their communities.
Agreeing that small businesses are the lifeblood of the small middle market and sharing the frustration that accessing cash is proving to be more difficult than ever, we created Bentley Capital Ventures, an alternative lending space that allows us to provide capital solutions through strategic relationships.
Our portfolio of capital partners includes corporations, institutional investors, mid-level firms and private investment.
Many of our clients who were at the end of their rope going through traditional lending channels are surprised to know that companies like ours exist – but it’s a necessity if small businesses are going to have a chance to thrive in the 21st Century.
We’re pleased to offer some of the industry’s best rates, service and loan options available.
Consider the benefits and efficiency of alternative lending.
With traditional lending, you’re in a position where everything has to be perfect in your business life, starting with your credit rating. Understanding how credit affects business loans is crucial to success.
And we all know that such perfection is rare if not impossible. So what companies like ours do is help business owners leverage strength in their business cash flow, which is one of the things we can lend off of.
DIFFERENT TYPES OF LENDING AND FINANCING FOR DIFFERENT LEVELS OF SMALL BUSINESS
Companies like ours are positioned to help small business owners acquire finances when they have no other options – without everything having to be perfect.
That can range from the salon and restaurant owner to a guy who owns 300 properties and needs $7.5 million to fund more.
Account Receivable Financing
A business owner came to us with terrible credit but with a very important task.
He was in charge of changing the Sprint Towers in his area from 3G to 4G but couldn’t get financing despite contracts he had secured from Sprint.
He had already attempted to go the traditional lending method through Wells Fargo but was turned away due to credit.
At the time he was unable to pay the upfront cost and service fees to continue working on the cell towers.
He was stuck with a project that would pay dividends in the long run, but he just needed a way to make it through the first few phases of the project.
Through our Account Receivable Financing service, we were able to front him $300,000 in accounts receivable to cover expenses and help him complete his project. Clients can access up to 80% of invoices within 48 hours and instantly correct the “Cash Flow Drain” problem with being paid on net terms.
Without that loan, our client would not have been able to offer a bid on the project and would have missed out on potentially millions of dollars.
The irony in the communications industry, huge as it is, is that many of the guys bidding for large projects have poor credit and only have enough capital on hand to make small deposits on their bids. Major banks obviously want them to have more deposits on hand.
Account Receivable Financing is the cheapest type of financing available, with a rate of 2.25%.
This is why our client was able to get the loan because they don’t take into account the credit score of the contractor, but are relying on the obviously stronger score of the corporation (in this case, Sprint).
This type of financing provides your business with flexible and immediate cash that will give your business the opportunity to grow, restructure, take advantage of supplier discounts, hire additional employees or even fund payroll.
It’s all about having the ability to access cash without having to give up equity in your company, and of course it is less restrictive and expensive than equity financing.
This process helps you free up valuable time and allows you to service your customers and generate new business.
It’s proven to shorten payment turnaround time, which in turn, ensures better cash flow for your company and reduces interest expense.
And because this form of financing allows you to access more cash as your business grows, or less if you need less, you can always ramp up or scale back as you see fit.
Business Revenue Lending
We work a lot with restaurant owners because this is one of the best industries out there.
So let’s say we’re dealing with Mr. Smith, an owner who has bad credit and needs cash yesterday, but doesn’t have time for funds to come in. Then his stove blows, and it’s an unexpected $20,000 expense, but he doesn’t have the money. But he believes if he gets a new one, he can generate an additional $12,000 a month once the equipment is up and running.
He can call us and get approval on a $20,000 loan, with very reasonable terms: a nine-month loan with a daily payment of $135.75.
All we need is a one-page application and six months of bank statements and we can issue the loan the same day. Within a few days of the approval, Mr. Smith is able to purchase the stove.
The math of the deal is pretty straightforward. Mr. Smith believes with his $20,000 stove he’ll be able to increase revenues from $32,000- 40,000 to $44,000-52,000 every month.
His loan has been approved with a $135.75 daily payback.
There are 22 business days in a month.
This equals $2986.50 as a monthly payback to us and/or our affiliates.
During the first month, Mr. Smith virtually covers 50% of the loan in new revenue because he can use the new stove to generate revenue at a rapid pace. You can check out the small business loan calculator to estimate your deal.
Companies like ours care more about deposits than credit scores.
The client’s score only affects how much he or she will be approved for and the fee. People with a 500 credit score will never get a traditional bank loan, but we’ve worked with clients who have scores in the 400’s.
Our industry is growing at a rapid rate because since the crash and recession of 2008-2009, banks have pretty much dried up their funding for small businesses.
Other owners just don’t want to go through the months of red tape that the SBA requires to consider a loan. But for alternative lending companies like us, we see that you have cash flowing and see you as an attractive lending risk.
And if someone has a rough credit history, we help them through the process to help them leverage what they have now to get them a loan. The value of this type of lending is the fact a business owner can access cash immediately when in need.
Investment Real Estate Mortgage Fund
This is a service we offer to another kind of small business owner, the real estate investor who holds properties in multiple states and is looking for a single blanket mortgage solution.
This program is designed to help residential investors looking to access cash quickly that has no limit on cash out, non-recourse, and no limit to the number of borrower notes. It offers investors five and ten year mortgages on portfolios of residential rental properties with a minimum of five units.
The Investment Fund can either refinance your existing portfolio or finance the purchase or portfolios of rental investments currently under lease.
Instead of dealing with the troubles inherent in seeking SBA loans and small business loans from financial institutions, this program addresses the problems investors have dealing with traditional loans via the Federal National Mortgage Association (aka “Fannie Mae”) and the Federal Home Loan Mortgage Corporation (aka “Freddie Mac”), the government institutions specializing in secondary mortgages.
This product has proven a game changer for real estate investors in the residential space.
Fannie and Freddie require you to show all your personal debt in formulating a debt to income ratio, and also limit the number of investor homes that borrowers can have on their credit.
They have historically tight rules and regulations that require you to operate as an individual investor and not through a company. If something goes wrong, the borrower is 100 percent liable.
Fannie and Freddie also have ‘due on sale’ requirements, which means that borrowers are not able to sell the equity in a corporate entity that owns the property. So the investor is not able to access the cash with the equity they have incorporated into the property. All of these housing and real estate investors have equity but when they sell their properties, they have to repay them via a due on sale requirement.
The Fannie and Freddie problems go on and on.
If you have multiple mortgages with different interest rates, you have a lot of payments coming out on your properties, which is an obvious cash flow drain.
The Investment Real Estate Mortgage Fund lowers that threshold with three main points that counter Fannie and Freddie.
We don’t limit the cash out on the properties. We don’t limit the number of notes a borrower can hold, and the non-recourse element means that an investor is not personally liable if there is a failure on the mortgage.
In non- recourse lending, we offer lending products up to 75 loan to value (LTV) percentage. We offer loans from $500,000 to $50 million. The single blanket mortgage covers all the properties in your portfolio and the current rate of 5.25% is significantly less than those on most of the loans Fannie and Freddie are issuing for investment properties these days.
We started Bentley Capital Ventures because we were getting phone calls from business owners seeking help who couldn’t find financing. We found everything, from having the ability to finance their next construction project, financing their new oil rig, or purchasing the next truck in their fleet.
Companies like ours are quickly filling a hole in the marketplace in an economy where traditional banks (and yes, the SBA, Fannie and Freddie) are becoming more stringent in their loan policies.
We strongly advise business owners that if they need financing in a hurry, they should avoid SBA loans because the process is lengthy and their approval rates are low. We’re happy to provide a place where they feel comfortable applying for a loan even if they’ve had bankruptcies. As long as their cash is flowing and the bankruptcy has been seasoned (dismissed) for a year, we can do it.
But our job doesn’t stop once we help them accomplish their goals via bad credit small business loan options. If they need it, we’re also there to help them with other business opportunities.
We’ve helped over 2000 business owners write their business plan and even offer business plan templates.
When talking about alternative methods of financing there are several source and each source may require something that the other source may not. Having a well written business plan can be the difference sometimes depending on which lender you go with.
Speaking with so many business owners has given us the unique opportunity to learn from them in what they are doing right in their business.
Old school ways of thinking might help in small communities, but most successful businesses these days are using online marketing to take their game to the next level. Helping our clients leverage their online space, we have tools and knowledge that can help businesses generate hundreds of leads per day.
We tell them to invest a percentage of their revenue getting more exposure via Search Engine Optimization This allows users to consume content that is relevant and have the ability to find exactly what they are looking for.
Social media is also a crucial tool these days to get one’s brand awareness out there. We use it ourselves. We have over 13,000 likes on Facebook and every time we have a message we want our subscribers to see, we can get it instantly in front of tens of thousands of business owners.
Our Internet connections have allowed us to help getting a small business loan in any industry and across state lines. We fund businesses in California every day even though we are based in Tampa.
Another big thing that business owners should be taking advantage of online is “retargeting” clients. If a customer Googles “restaurants” and yours pops up the first time, there are ways to ensure that the next time they search, your name and site will pop up. For many businesses we help, the online world allows you to acquire hundreds of leads in 24 hours for less than $100.
This marketing service is all part of our overall goal: striving to provide business owners with the ability to grow their businesses without headaches. The addition of capital for growth plus proven marketing strategies allows business owners to truly succeed in their business.
It’s the opposite of what happens on ABC’s “Shark Tank.” The guys on that show offer you money but require a piece of your business in return.
Companies like ours are here saying that we don’t want in on your business, but we will lend you the cash if you need more. Our M.O. is wanting business owners to have access to cash so they can grow their businesses.
If they are indeed the backbone and cornerstone of our economy, they deserve no less.
Questions? Call Joe Schuck: VP of Sales