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David Sussman explores lending options and how to protect youR small business in a tough economy.
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Welcome back to at the -- -- this is our small business.
Center this every Wednesday we're gonna bring you more issues about small businesses and we were just talking with that the brains behind beyond -- and how they got started so.
We talk about some more of the challenges of small business owners have to overcome and we're gonna head out to Los Angeles -- -- talking to David Sussman.
This CEO of bellcore.
Thanks for coming on -- -- how are you.
Good Lauren thank you for having me back.
And act just really quickly can you tell me what bellcore is.
Well will have business restructuring firmware and advocacy firm that works for small businesses can't help them restructure their debts we bring -- capital acquisition and we have over a hundred licensees throughout North America.
And access to finance saying and I and David was really clan -- when I asked him earlier but -- It's hard it's hard to get the banks to dvd capital to expand our agreement -- -- to -- the capital -- to start.
So what are some ideas that you have -- -- for getting money or alternative ideas.
Forgetting the capital they need.
Well businesses need to be nimble in this environment right now we're facing a trifecta of that nimble very nimble.
We're facing a trifecta of business problems right now where we're dealing with banks approving.
At the end of October of 2011 there were approving 48 point 5% of business loans that were being applied for right at the end of April with down to 31 point 8% so the banks may not be the best resource right now for small businesses.
We're finding that we're dealing with obviously international conditions as you were just talking about with the Euro -- -- dealing with the China -- -- -- in factory orders -- slow.
Banks when they're taking a look at receivables and they're -- that cash flow.
Is really slow which is the lifeblood for small businesses they're not approving most of those loans and it's a small businesses have to find capital elsewhere.
And there's a lot of different alternative financing sources that exist out there today.
For small businesses that are looking for that capital to invest into the business let's -- eleven telling what those sources are.
Well alternative sources really at at at first need to start focusing on asset based lending -- as a business owner.
What assets do you currently have that could be borrowed against.
Are you looking at what what are your receivables like right now you have money that is owed to you you can actually finance on those receivables.
Do you have commercial real estate that you could borrow against.
Do you have equipment that could be forward against.
-- contracts and orders work in progress.
There's multiple different options that are available for a small business -- today that may otherwise not have an option with a smaller banks.
We're gonna talk the full screen which says -- based lending options commercial real estate but I need you -- exposed to like get but I need you to explain hard money loans as well as mezzanine financing what are those -- -- -- hard money loans is basically a higher interest loan that is provided for small businesses today that really don't have any other options it wouldn't be my first choice.
To recommend a small business -- go in that direction because of the cost of those loans but for some small businesses they really don't have another option what hello my nanny Laura -- some cases.
Well they could range anywhere from twelve to in some cases extremely high in the high 20% range we're seeing a lot of those loans right now fifteen.
Fifteen to 20% range so yes they are very advanced -- it is -- their net need that sort of -- typically go for that sort of high interest loan.
TC NN's you have to look at it and others.
Well yes a lot of industries right now are suffering short cash flow problems manufacturing.
A lot of companies and construction right now have had their lines of credit reduced by the bank's hands so they need a short term loan.
And the short term loan could be six months to one year.
Do not look at this is a long term prospect for yourself because it is very very -- right.
-- -- at 1520% interest rates for a set short period of time an out and hopefully your back on your feet that's correct got a and they may be.
-- and Lauren what they're looking at is that they're eventually gonna get some infusion of cash flow.
From there clients that may just haven't been received yet Wall Street Journal just reported.
That the time that -- small businesses are getting.
Payment from their creditors is being increased dramatically.
Below waiting for that -- to come through I you could borrow against that cap.
I hear that so often that you have smaller players -- they have a business they're just waiting months before they get paid.
I often times their clients which could be bigger players in the industry so it's like you're struggling to make -- -- -- -- -- -- embarrassed to ask.
Some -- owes you money.
Hi remember is hinted -- in -- can you follow through on it.
That that's -- good point and that's embarrassing for a lot of small businesses out there I hey David what's mezzanine financing.
While mezzanine financing is really think -- -- as the equivalent of a second mortgage -- many people watching you today.
Have got a second mortgage on their house because they were unable to get the full financing for their first mortgage.
The bank wasn't interested in financing that's a hundred cents on the dollar.
So they may get a loan to value of 70% that other 30% would be a higher interest loan and and it's -- mezzanine situation that and and and it's a higher interest cases well.
What state of the fact that someone might say -- strategy is like this kind of in a way got a sensitive the crisis that we -- in in 2000 made in 2009.
It's kinda like -- don't have the money shouldn't be expanding -- shouldn't be doing things.
When you don't have the financing don't play with money you know you're out.
-- -- Yeah you're you're absolutely correct when it comes to the consumer.
But when we're talking about small business owners small business is the lifeblood of this country and it is what is gonna get this country.
Out of this but I quite frankly I think we're in another recession right now.
And -- small businesses.
It absolutely does for many of our clients as well small businesses when they go to the banks and the banks take a look at there lack of cash flow they take a look at their lack of assets they're not -- if you have any blemish on your report or any at all in the past few years they're not gonna -- to you.
So these small businesses need that cash so that they can go out and hire and reinvest back into their business.
Hire more people expand do research and development and bring out more products that is what it's gonna get this country out of this recession if not depression.
Yet desperate times call for desperate measures and I'm just going to -- chat right now.
And and we asked them.
The question that we asked was would you you disease alternatives these four alternatives.
And David Larsen writing in says not -- some of these are more like loan sharks well short term fixes.
But I guess that's at some conservative thinkers but my father.
Would say we have about a minute left David can you share with us to success story.
Of the business that you had advised and they did something extravaganza and it really made out very extravagantly for them.
Well what we're talking about us are some of our clients we have clients throughout North America.
You know our focus is to trying to conventional loans for our clients and to do business restructuring by reducing the debts that are -- as well.
So we just didn't answer David's question really quickly and again we're talking about extreme circumstances and I I I certainly wouldn't recommend anybody to start looking hard money as a primary option right only knowing your -- -- against -- wall yes OK appreciate so so as far as a success story goes I mean we're working with a client right now we're we're restructuring a whole consortium of gas stations and convenience stores.
This is a situation where the bank.
Is looking to get their loans paid off we're talking about 5060 million dollars here.
And what we are doing is we're wrapping all of their loans up into one situation we're reducing the debts that are -- to the bank by doing -- take out situation.
By bringing in money from other lenders and these -- more conventional based loans.
To buy out the loans at a discounted rate from the primary back allowing this business with hundreds of employees to stay in business.
And obviously when you have hundreds of employees and that -- -- you're talking about.
Hundreds of families that are depending upon those paychecks every single week to put food on the table.
And so what we -- seeing is by attempting some of these strategies personal some of -- small business clients right now.
We're saving companies that are saving jobs and for us it's extremely rewarding to see that especially in today's -- Yes small businesses the backbone of America probably employ about half of American workers out there David Sussman thank you so much for coming on again CEO of bellcore.
The bellcore worldwide dot com is your web say -- And we can find you on Twitter at bellcore worldwide on FaceBook.
Dot com back thank you Laura about -- FB thinking you so much.
