Could Commercial Loans Collapse Major Banks and Small Businesses Along With Them?

The recent rash of commercial loan losses is threatening not only traditional lenders, but the small businesses that rely on them for start-up and survival. Could this be the trend that brings everything to a head? And what role does cash flow management play in the equation?

Commercial Loan Losses Pile Up
A Stand & Poor’s article in Seeking Alpha warns of the looming disaster as unresolved commercial loans continue to grow. Lower profit margins are forcing many banks to reserve stockpiles of cash assets that they would normally extend to small businesses for start-up and expansion.

Businesses Still Can’t Borrow Money
The New York Time Small Business section summarizes the conundrum facing small businesses across industries. Despite billions of dollars of bailout and stimulus money, timid lenders are tightening credit standards to the point that small businesses without a sterling track record are left in the lurch.

How to Control Cash Flow
A PowerPoint presentation authored by the Small Business Administration (SBA) suggests that controlling your cash flow could be the key to surviving the credit crunch. The future of commercial loans could depend on these factors:

• Ratios to Watch. Days receivable, days payable and days inventory
• Program Mods. The SBA is temporarily suspending loan fees and increasing the insurance rate to 90 percent
• SBA Coverage. Credit-worthy businesses can borrow up to 6 months of payments, or $35,000

The commercial loan industry is making a fragile comeback. Small businesses that mind cash flow will improve their chances of remaining solvent.

Merchant Funding: What to Expect, What to Avoid and How to Choose

Merchant funding is fast becoming the alternative financing option of choice for small businesses seeking start-up or expansion capital. However, as with most financial vehicles, it’s not without its hitches. Here’s more on merchant funding activities from several consumer fronts.

How Merchant Funding Works
The GreenDOC blog offers a fairly robust explanation of the merchant funding agreement. Perhaps the most alluring benefit is that it requires no collateral or personal guarantee by the borrower. In fact, if you've owned a business for at least 6 months and process at least $3,500 in monthly credit card sales, chances are that you can secure a merchant funding agreement.

The Ugly Underbelly of Merchant Funding
Despite the seeming innocence of this funding source, there are always pitfalls of which you should be aware. DIRECT Mag reveals the seedy side of merchant funding deals that come with illegible fine print and outrageous annual percentage rates. For example, the FTC recently cracked won on several merchant lenders who charged as much as a 4.981% annual percentage rate--hidden in extremely fine print.

Evaluating a Potential Merchant Funding Partner
BusinessWeek offers several techniques for evaluating a choosing a merchant funding partner that will ensure that you don’t get the short end of the stick. These include checking with potential lenders for quality, asking for and following-up with referrals from former clients, and signing an ironclad contract that your personal business attorney reviews for accuracy.

Business Cash: How to Handle “The King” of Small Business Growth

We all know cash is king. You learn that on your very first day of Economics 101. Even in these uncertain economic times, cash is the great equalizer. Here’s more on how investors, small businesses and newbie CEOs secure cash for start-up and expansion.

As Cash Popularity Goes Up, Stock Performance Goes Down
PhilStar.com presents an interesting conundrum with respect to the availability of cash and the health of the market. It seems as though the more cash investors scoop up for themselves, the more the reverb can be felt throughout the stock market and the economy in general. As stock investors see their cash flow squeezed, it fosters a feeling of insecurity that can be felt across markets.

How Small Businesses Will Respond to the Cash Jam
In short, furloughs and layoffs. Small business owners holding IOUs in the form of bad debts are creating contingency plans to keep their businesses afloat. CNN Money reports that the California state legislature’s failure to close a $26 billion gap may leave many in the lurch. The resulting rhetoric forces CEOs to brace for the future.

Business Owners Learn to Manage Cash Flow
It could be the single most important skill to master. Knowing what your cash balances are today and during the next six months is important to remaining solvent in a sea of failures. Small business owners are encouraged to take formal business cash classes in managing money to avoid missteps in operations.

Business Loans: How is the ARC Being Received and How Can I Get One?

ARC. America's Recovery Capital program. It’s the Obama Administration’s outreach to struggling small businesses and it’s dominating the financial headlines. But is it really helping? Let’s examine the latest updates on ARC business loans and how you can get one for your struggling small business.

The ARC is On, But Banks Aren’t Participating
At least not without careful scrutiny of the applying business, that is. According to CNNMoney Small Business, the 10,000 loan mark by 2010 should be met--but progress is slow and deliberate. Here is ARC business loans by the numbers:

• Participating Lenders. About 400 out of 8,200 FDIC-backed US banks
• Actual Lenders. Wells Fargo, PNC Financial and Zions Bank--3 out of 10 of the SBA’s most active lenders
• Default Forecast. The SBA figures around 56 percent
• The Offering. $35,000 in interest-free money

What’s Causing the Delays?
The Sacramento Bee offers several reasons why the ARC business loans program is slow to reach its full potential, outside of timid lenders. The acceptance guidelines are a primary affecter, as business must show at least two years of steady profit growth. Another problem is the issue of how lender guidelines mesh with the Federal government.

How to Get Yours
The New York Daily News offers this advice for small business owners interested in applying for ARC business loans in the near future.

1. Gather financial records, both professional and personal
2. Present a strategic business plan that covers all bases
3. Find the right loan and lender for the business

Owners are encouraged to look for loans that cater to their specific market as opposed to applying for blanket business loans. Niche lenders understand the particular challenges of the industry and can work with applicants in that regard.

Small Business Loans: Government versus Big Banks, and Why They Can’t Synch-up

The Feds are offering small business loans that hardly any businesses are taking advantage of. The big banks are clamoring for more local control of their government-funded loan offerings. Both groups seem out of touch with what owners really need to respect to start-up or expansion capital. Why can’t everyone get on the same page?

$255 million at No Interest: Any Takers?
Gazette.net reports that we have the Obama administration offering short-term, interest-free loans to the tune of up to $35,000 to cash-strapped small businesses--and it doesn’t seem like anyone is interested. It’s called America's Recovery Capital Loan program, funded with $255 million by the American Recovery and Reinvestment Act. To date, only three loans have been processed in the Baltimore district, with only two in the Washington, D.C., district. The newness of the small business loans program may be partly to blame.

British Small Businesses Say “Let Us Decide”
Across the pond, big banks are begging for the chance to have more flexibility in their lending. A UK press release cites bank officials contending that, because their closer to the ground, they have a better feel for those small businesses that have a good chance of making it.

Obama Pushes for Big Banks to Open Up
Almost as a response to big bank excuses for the turmoil, President Obama chided 21 federally-funded banks for not doing enough to stimulate borrowing. Fox News reports that Obama believes federal bail-out money is going toward institution debt as opposed to small business owners--the original intention.