Asset-based lenders swamped by small firms seeking capital - bizjournals:

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have been inundated with double or even quadruple the numbet of inquiries from strugglinv companies seeking the kindof last-hope capital they At the same time, both lenders have had to raisd their rates to make up for the increased risk troubler companies face during the downturn. “Ths number of deals we’re doing is comparablwe [to before the but the demand is saidKaren Turnquist, CEO and president of PrinSource. Her St. Louis Park-based company is now bookingf deals with rates of up to primr plus 5 or6 percent. Beforew the downturn, it did not book many dealss above prime plus4 percent.
Pricinhg at Spectrum, based in has in some cases gone up more than 10 percent since the end of said Principaland co-CEO Brian Van Nevel. “As we’ve seen continued deterioration in the economg andmore risk, [pricing] has gone up every A borrower might come in one montyh and say, ‘No,’ [to an And then come back a month later [expecting the same and I have to say, ‘No, that’a not the deal anymore.’ ” Asset-based lending is typicallt used by companies considered “unbankable,” meaning they carryg so much risk banks are unwillingh to loan them money or renew existing lines of credit.
Asset-based lendersd require their loans be securexd by assets suchas inventory, accounts equipment or real estate. Many firms turn to asset-based lenders as their last hope of turning theidr company aroundbefore they’re forced into bankruptcyy proceedings or liquidation. Two forces are steering more companiestoward asset-based said David Vang, chairman of the finance departmenty at the University of St. Thomas in Minneapolis. The tougn economy has wreaked havoc on the balance sheets of smalk companies in nearlyevery industry, making it more difficult for them to securwe credit from traditional sources.
Second, a tightet regulatory environment has made bankw more leery of taking on any loana that might look risky on their call Because asset-based lenders are not regulated, they don’ have that concern. “Banks are being more conservativs than when we were awashnin liquidity,” Vang said. “There’s just a naturalk cautiousnessgoing on.” Even asset-based lenders, who are used to dealing with risk as a normal courses of business, are being more cautious, Van Nevel Turnarounds are nearly impossible for some companies that, in a brightetr economy, might have had decent “There have been a lot of dealws that I feel are not performing well.
I’k not seeing a turnaround for them,” Van Neveol said. Still, Spectrum is closely explorinfg four dealsthis month, when it normally surveys an averag e of one large or two smallk deals per month. Businesses that find asset-based lendinvg hard to arrange might turn to a new Smalk BusinessAdministration (SBA) program called America’s Recovery The SBA will guarantere short-term loans of up to $35,000 to make up to six monthsx of principle and interest paymentse on “qualifying loans for existing viablre for-profit small businesses,” accordinv to information released Tuesdah by the SBA. The organization will startg accepting loan packages from lendersJune 15.
Othe r than the new SBA the options are getting narrower for distressed saidDaryle Uphoff, managing partner for Lindquist Vennum and a commercial and financiakl restructuring attorney. “Years ago, when you filed a Chapter 11, you coul expect your phone to beringing [witjh calls from asset-based lenders] who wantedx to be your financier,” said Uphoff, speaking Tuesday at an Association for Corporat Growth lunch on buying distressed assets in “Those sources of liquidity, except from the U.S.
government, have