I get a lot of questions from businesses, potential borrowers/lessees, and referral contacts about what’s going on in credit markets these days with all the news about the mortgage meltdown and credit markets. What’s really going on? Can you still get financing?
I can’t say that the commercial credit market has been completely unaffected by what’s happening in the mortgage markets. It definitely has. Lenders and leasing companies are tightening up credit standards after the blowup in mortgage markets.
Let’s put it this way. What the mortgage lenders did to screw up the market will affect you to some extent for the time being. You can get funding but the standards are higher.
Our funding relies on insurance companies, pension funds, hedge funds, and investor pools of money. Money is moving away from CMO obligations but it still needs to be invested. This means that more money is available but the lending sources are looking for stronger assurances of repayment.
More specifically, here’s what I can tell you.
SBA Startup Loans – currently SBA Startup loans require a 25% non-borrowed cash injection from the borrower. There are hints this requirement will be raised to 30%. If you were thinking about getting an SBA loan and your funds are limited, apply now before they raise the bar.
Lines of credit – these are becoming more difficult to obtain. You need a strong balance sheet, some good operating results, and customers who can pay on time. High FICO scores definitely help. Businesses connected with real estate and construction will have a very difficult time obtaining financing and may have to consider alternative methods of financing such as factoring invoices.
Lease financing – lease financing is still the best option for companies that need more equipment and software. Startup companies can get financed to some extent. Rates however may go higher and credit standards will be higher.
If you have questions or would like more information about financing options, please contact me directly. There is more money available but the going is going to be tougher until this market sorts itself out. My best guess is one to two years before it’s over.
Regional Vice President
Equity Corporate Finance, Inc.
888-498-8999 ext. 109