So what’s the answer for SME businesses? Up your game if you need to borrow. We are finding good reception with bankers for specific, data-driven descriptions of intangibles. 80% of the value of the average company today is intangible. Most bankers and businesspeople understand this intuitively but they often don’t have the information to tie value and intangibles together.
But it’s still tough to get a loan if you are in a SME (small or mid-size enterprise). A recent Wall Street Journal article notes a very small increase in credit approval for small business in 2010. This is off seriously-reduced levels from 2009. Some of this reflects lesser demand from businesses that laid off workers and cut way back on discretionary expenses. It also reflects a drying up of M&A activity in the SME space.
Finding Financing in Difficult Times
The Role of Financial Executives in Exit Planning for Business Owners
Commercial lenders must know the Owner/Manager’s exit plan.
Private Capital Markets: Valuation, Capitalization, and Transfer of Private Business Interests (Wiley Finance) by Rob Slee
“Private Capital Markets”, was published in 2004. It is the first book to really document this important sector of American business.
Exit Planning Exchange – Boston chapter; Bryan Piskorowski, Wells Fargo Advisors will address the personal investing outlook for 2010. Ken Serwinski, CEO/Senior Managing Director of Prairie Capital Advisors will discuss the M & A outlook for 2010.
Now is not the time to take your lender’s word on the safety of your financial relationship. It is time for your company’s finance people to meet with other bankers and get them familiar with your company—just in case your current banker pressures you to refinance elsewhere.
If businesses can find loans from banks these days, the loan rate and fees are higher. The covenants and advance rates are also tighter, a far cry from the “covenant-light” loans that were made in 2005 and 2006.
We recommend keeping a sharp eye on these developments and how the higher costs will affect your business.