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Critical trends in small business financing

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Information about Critical trends in small business financing
Finance

Published on February 27, 2014

Author: chrislehnes

Source: slideshare.net

Description

As companies need new ways to access financing to boost business, asset based lending (ABL) has become an established capital market product. The ABL market has rebounded from the post-credit crunch slowdown as investment banks, national and regional banks, and unregulated financial services firms have entered the space and added capacity, offered more alternatives to borrowers, and increased competition among lenders.
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2/27/2014 Critical Trends in Small Business Financing Asset Based Lending As companies need new ways to access financing to boost business, asset based lending (ABL) has become an established capital market product. The ABL market has rebounded from the post-credit crunch slowdown as investment banks, national and regional banks, and unregulated financial services firms have entered the space and added capacity, offered more alternatives to borrowers, and increased competition among lenders. Both 2011 and 2012 saw big names like Morgan Stanley and Goldman Sachs enter the field and the resulting competition has led to less covenants, cure periods, increased over-advanced provisions and loan spreads returning to pre-crisis levels. Consequently, ABL has become an attractive option for many businesses looking to use their assets to secure financing for the future. Businesses are also becoming savvier with their use of ABL facilities. For example, 2011 had a huge spike in volume primarily due to “amend and extend” refinancing whereby existing lenders lengthen the maturity of loans in exchange for fees, increased interest spreads and other considerations.source Factoring Beginning in the third quarter of 2013, Gibraltar started seeing a significant increase in inquiries into our borrowing-based factoring facility without any impetus, such as upcoming tax deadlines. We also noticed greater interest from startup companies looking beyond either traditional bank financing or equity fundraising to finance growth initiatives. Another cause for increased volume is more indicative of the prevailing macroeconomic headwinds that have been building in the aftermath of the financial crisis. Quite simply, options are running out for companies to create efficiencies—costs have been stripped to the bare minimum and revenue growth is stagnating because there is nothing more to sell or cut. That means everyone is stretching terms as companies try to use vendors to finance their operations. Ultimately everyone is a vendor. Therefore everyone gets stretched down the line, resulting in a massive demand for working capital. Big picture In this environment, Gibraltar is looking to support and empower companies with their growth plans— even if they’re getting stretched. Our ABL lines of credit and borrowing-based factoring facilities help businesses improve cash flow. Instead of focusing exclusively on reducing expenses to create efficiencies, businesses can use Gibraltar’s financing to achieve growth and create value through scale. http://secure.campaigner.com/Campaigner/Public/t.show?6dm9o--3ckwb-o2g4ed5&_v=2 1/2

2/27/2014 Critical Trends in Small Business Financing Learn more about factoring and asset based lending. Or, contact me: Chris Lehnes SVP, Loan Originations clehnes@gibraltarbc.com 203-304-9527 http://secure.campaigner.com/Campaigner/Public/t.show?6dm9o--3ckwb-o2g4ed5&_v=2 2/2

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