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    September-2017
 
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To Avoid Having Loans Pulled, SMBs Must Know the Process

When a bank decides to call a loan, the client is often the last to find out. And when the client is a small- or medium-size business, it gives little time for company owners to secure other financial backing.

 “Typically, banks ‘pull loans’ because of poor financial performance by the company who owns the loan,” says Jeffrey Sweeney, chief executive officer and managing director of US Capital Partners, whose firm specializes in direct lending and loan advisory services. “It can also be due to the bank’s own credit problems.”

Being familiar with the loan-termination process and current banking realities can help any business avoid the possibility of having its loan called. When evaluating the potential of losing business financing, company owners should understand the type of loan they have and their company performance.

“Many small businesses have financing on some or all of the following: real estate (least risky), machinery and equipment, inventory and accounts receivable (most risky). A business that has all four of these types of loans from the same bank is at the greatest risk of losing them,” Sweeney explains. “This broad exposure to a single client has several banks nervous and wanting to shed these riskier-type loans from their books.”

Company performance, he says, is measured through a 12-month period and against previous years. If a company has experienced issues with declining accounts receivable, insufficient cash flow to make debt service, net operating losses or top-line sales decline, or fixed-asset devaluation, chances are higher that the loan is at risk of being terminated.

Most traditional banks would be hesitant to take over a business loan if the current bank wants to exit. But with the help of a qualified adviser, alternative funding is available to small- and medium-size companies. Sweeney says the best “tough times” adviser is one that knows the alternative lending market, specializes in restructuring and has the skills to strike a deal between multiple lenders.

“These pros have excellent contacts and relationships,” he says. “Be sure to ask advisory candidates if they are experienced in the same size and sector as your company and are able to provide financing as well as advisory services."

“The first priority for small-business owners, particularly during tough economic times, is to stay in business,” Sweeney says; however, “Bringing financial matters to experts who can help will ease the stress and get the business pointed in the right direction again.”

For more information, visit the company’s Web site at www.uscapitalpartners.net or call 415-889-1010.


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