Cashflow Blog

By Lou Wallace

Historically a first tier lender has been an institutional lender such as a Bank or similar company which falls under the regulatory agencies such as the FDIC or Federal Reserve.  The rates of interest they charge are almost always tied to Prime, or to the Libor rate of interest.  The interest charged is at quoted rate plus a factor which can be as high as 4%.  An example would be if the rate was agreed to be the prime rate, you would take that rate and add 4% to it which would get you your annualized interest rate. 

The second tier lender is usually a company which does not fall under these regulatory agencies.  In some states they are regulated by the state banking laws.  But all second tier lenders are restricted to lending to businesses and are restricted from making any type of consumer loans.  All of the loans are secured by collateral and almost always personal guarantees of any owners of more than 20% of the stock.  Interest rates are usually tied to the prime rate but the rate which is added on rate is higher than a Banks because of the additional cost of doing business. 

The final tier is usually an individual or individuals who lend money but are quite often interested in one particular industry or type of collateral.  The terms from these lenders tend to very high interest rates and low loan to value ratios.

In the current banking economy few first tier lenders are actually making loans.  Therefore the second tier lender is acquiring a larger market base as companies who traditionally would have secured first tier financing are only option is to obtain financing with the second tier lenders.
That being said, one has to ask themselves if a lender who is not making loans can be considered a 1st tier lender.  Likewise if a commercial finance company is lending money in this economy can they still be looked upon as a second tier lender when they are the only segment of the business community that is lending money.

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What is the difference is between a 1st, 2nd, and 3rd tier lender for business loans?

By Lou Wallace

One of the major failings of most businesses is the lack of accurate financial information.  What these business owners don’t understand is that current and accurate financial information is the first thing and lender will want to see and if it isn’t up to par, well you know the old saying about its hard to make a good impression the next time. 

Small business owners find it very difficult to justify the cost and time associated with keeping current and accurate financial information.  This aspect of the business notoriously seems to take a back seat to all other activities.  If I can give any business owner a golden key of advice is while consistent accurate information may not guarantee a loan, it will at least give you an excellent platform to present your financing needs. 

How do businesses get a lender to provide funding for their business?  Anytime a business owner applies for credit and cannot produce a current Balance Sheet or Income Statement they have just made their request go to the bottom of the stack behind those businesses which always have current and accurate information on the company.  If you can’t do it yourself then you need a good bookkeeping service or accountant to assist you.  The cost is worth it in the long run.

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.

See more here:
How does a business improve its chances to get credit?

An article from Scott Cooney (author of Build a Green Small Business: Profitable Ways to Become an Ecopreneur (McGraw-Hill)). He hopes that someday the green economy will simply be referred to as…the economy.

While counterintuitive, a recession is actually a terrific time to start a business. Sure, credit is tight, and venture capital is definitely hard to come by, so startup ideas requiring large amounts of up-front capital are perhaps best left to the drawing board for the moment. But for many entrepreneurs with a dream, startup capital requirements are small, and other elements of the economic outlook are very favorable.

As far as timing, for most businesses, it simply takes time for their product, service, or brand to become recognized, trusted, and sought after. Estimates vary widely, but it is simply a truth that average customers have to see your product or company several times before they make a purchase. This makes a recession a great time to get your name out there while most other companies are cutting back and the competition for people’s attention is less. Your company will be in good shape when the economy rebounds.

So while recessions can be a good time, and historically have been a good time for businesses to get their start, this particular recession is a great time to start a green business. Here’s why:

to continue reading this article CLICK HERE

More here:
Top 7 Reasons Why This Recession Is a Great Time to Start a Green Business

Are you positioning your business to be first in line to move when things turn around? The economy, while showing signs of improvement is still sluggish and everyone is still trying to figure out if it has reached bottom.  Small business owners are still scrambling to keep their business in the black.

So what happens if your company comes across a deal or contract that is very profitable?  The credit crunch is still with us. With Banks continuing to terminate existing lines of credit and business loans and are not making any new loans to business owners, what can you do to position your business to take advantage when these opportunities present themselves?

The answer may be in talking to an Asset Based lender or Factor to set up financing accommodations for your business now.  These lenders are still making loans and the unique thing about them is they add no debt burden to your company.  You don’t incur any loans to pay back until you have the contract or order to complete.  The financing is there when you need it and you won’t find yourself scrambling to find working capital you would need to seize these opportunities. 

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.
 

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