By: Lou Wallace
There has been much to do recently in the media about the “credit crunch”. Article after article has appeared telling the general public Banks have quit lending and it will be hard for people to get credit. While we don’t need to go into the minute details of how’s and why the banks are not lending, the reality is they have shut off the credit spigot.
The money is still there it just isn’t in a form that can be lent out. A very simplistic explanation is that Banks are allowed to lend out a calculated amount of the capital and deposits they have in their institution. The main reason for this “credit crunch” is that banks do not have the cash in hand that allows them to continue lending. Because the banks have made a lot of “Bad Loans” they have to subtract those bad loans from their capital reducing the availability to make loans. Until the Banks can get additional capital or collect these loans which are past due they will not be able to make loans.
But small businesses still have a source for funding, and that alternative source for funding would be Asset Based lenders. Asset based lenders are lenders who do not fall under the same regulatory agencies as Banks. They are usually privately held and restrict their lending to businesses only. They are more flexible in their underwriting and offer a larger array of programs to help small business owners.
The money hasn’t gone away. It is just currently unavailable from most banks. If a small business does need money, it is still available but small businesses need to know where to look and what products work best for them. Asset based lenders are an excellent source of funding for start up companies as they do not generally put time limits on how long a company must be in business before they will consider lending them money. While asset based lenders are excellent sources of money, small businesses need to realize they will pay higher rates for these services.
Performance Funding Group, LLC is a locally owned and privately funded asset based lender who has been providing several different loan products since 1997. Lou Wallace has been working in commercial loans since 1971. Lou Wallace can be reached at 602-912-0200. www.performancefunding.com