CIT has been an important participant in the small business loan marketplace for the past 100 years and today, they are in bankruptcy.  A sign of the times but not a reason for panic.

In 2008 CIT was the largest Small Business Administration loan provider.  However, CIT provided just $65 million of business loans in the first half of this year.

I am willing to bet, however, you are not familiar with CIT because they are not a lender to very small business owners like you as they tend to lend to much larger “small businesses”.

So, what will be the impact to American small business owners in need of working capital and small business loans?  Let’s focus on the bullet points today as there will be time to speculate over the next few weeks.

1)      The US Governments $2.3 billion equity position created from its cash infusion a few months ago has been entirely wiped out…Sorry.

2)      90% of creditors have already agreed to CIT’s restructuring plan and they expect to be out of bankruptcy in about 60 days.  They will not disappear but there is no competitor looking to fill the void created by their lack of lending.

3)      Their troubles stems from their SBA lending, so it is fair to assume some changes will be made in their business loan underwriting guidelines.

4)      The “small business loans” CIT is well know for are typically to multi-million dollar businesses with dozens or hundreds of employees.  They are not a significant provider of working capital or small business loans for very small businesses.

The macro economic impact is more concerning.  In the short term as it is very likely businesses both small and large will hoard cash and reduce investment plans in the near term, which will not help our economy.

Have you every had a business loan with CIT?  I’d love to hear what communications they have had regarding their business loans and any changes you can expect.

(Jason Kuffer photo (CC))

CIT Group Files for Bankruptcy – How will this affect small business loans? is a post from: Business Cash Advance provider Instant Capital Solutions.

My last post discussed how American Express cut credit limits for business owners when it was needed most and now is advertising how they want to be a part of the economic recovery and a friend of small business.

For the record, they are not alone in their ability to abandon business owners in a time of need.  This Wall Street Journal article on August 12 discusses how wide spread the practice has been and the ability your credit card issuer has to conduct business any way they see fit.

How will you respond?

Amex and others hope business owners forget when times get better, will you?

Business Credit Card Limit Cutting Continues is a post from: Business Cash Advance provider Instant Capital Solutions.

Do you remember how frustrating he was?  He was the cause of problems, putting the Robinson family in danger because of his greed, stupidity or fear.  After the crisis passed, he would deflect blame and grab credit.

That is exactly the feeling I got last night when I saw an American Express ad forecasting a light at the end of the economic recession and the rebirth of a new and better small business economy.  Clearly, their Dr Smith moment.

Reality is that American Express cut credit limits to small business owners in their moment of need.  This not only limited available credit, it cause credit scores for many to drop and their cost of capital jump.  In other words, Amex was part of small business’ problem, not a solution.  When times were tough and the recession was scaring many business owners, Amex cut their risk and ran for cover.  Owners were looking for small business loans and working capital while Amex was taking them away.

Now that things are looking brighter, they want to be a resource and a friend.  Until when…?

I understand weakness and fear, we’ve all experienced that at one time or another.  I understand Amex wanting to protect their balance sheet.  What I do not tolerate well is Amex boldly proclaiming they are part of the solution now that the future looks brighter.  I did not like it when I was a kid watching Lost in Space and I do not like it now when my business is on the line.

I think Zachery Smith is Running Amex Small Business Loan Department is a post from: Business Cash Advance provider Instant Capital Solutions.

“We can’t solve problems with the same kind of thinking we used when we created them.”
– Albert Einstein

I wish I could report that the legislation our law makers finally passed on Friday will have immediate impact on the economy and capital will begin to flow into small business lending quickly

However, it will likely take several weeks before the Treasury Department can create room on lenders’ balance sheets and impact underwriting decisions that make capital available to small business owners.

Essentially, traditional business lending sources will continue to limit or freeze their lending activity for weeks.

There are no shortage of articles about small business credit crunches, including Concerns about how franchise restaurants will remodel or expand in Entrepreneurs Scramble for financing Even my local and Tight credit forces stores, restaurants to be flexible .

While these stories reflect the world of traditional lending, it does not tell the entire story of small business financing and the business cash advance industry which has stepped in to fill this capital void for greatfull business owners.

Business Cash Advance Capital, Lending Programs are Available

Truth is, in the past few months, many of the companies we work with to arrange client financing have raised hundreds of million of dollars in new capital, created new lending programs and seen a significant increase in their small business financing.

We are clearly in difficult times, but there are financing alternatives for small business owners in almost any industry with almost any credit profile.

Stay positive.

Small Business Finance – Much Better than Press Reports is a post from: Business Cash Advance provider Instant Capital Solutions.

Maureen Farrell is a staff writer at Forbes.com and I think I can tell from her recent article that she is an academic who never had to make payroll or struggle for capital. The tone of her article paints anyone who has taken a merchant cash advance as stupid or foolish. Are there really that many stupid small business owners out there?

Most business owners seem to be pleased to have the opportunity to make a choice between “expensive” capital and none at all. Without this type of financing, who would provide the money to grow thousands of small business…the bank? The mortgage industry? Forbes? (Which I love by the way).

What surprises me is that Forbes knows how the free markets work. Capital flows in because of demand and because these funding companies can make a profit to justify their risk without regulation created by beaurocrats to protect business owners from themselves. If there is a great demand for merchant cash advance, it is because there is a great need not being met.

She also makes it seem like this is a product newly popular because of the recent credit crunch. In fact the industry was been around for 10 years now and provided over $500 million of financing to small business owners of all credit profiles in 2007.

I am also a small business owner and collectively we are the largest employer in the Unites States. We have a long history of being the back bone of American business and the engine of creativity. I am surprised Ms. Farrell and Forbes would not give us credit for having the ability to make intelligent business decisions about capital and the growth of our businesses.

Don’t You Love the Ivory Tower… is a post from: Business Cash Advance provider Instant Capital Solutions.

5 Steps to Side-Step a Crunch in Your Business

You’ve been reading about the credit crunch as it affects on the biggest banks and the lower credit home owners in the country for the past several months. This week you’ve been reading about stock market turmoil and the fear of a “global recession”.

This economic storm has worsened recently and in the next 30-45 days you’ll begin to feel the effects in your business in one (or more) of the following ways.

• Slower paying customers
• Reduced consumer demand
• Disappearing personal and business credit
• More conservative business spending
• Better buying opportunities

Counter to press reports, recession is not necessarily bad. In fact, it is a normal and regular economic cycle. A slowing economy does, however, seem to finish off weaker businesses and it will weaken even good businesses.

If you resolve to survive the next one or two economic quarters of “slowing economic growth” then you should consider the following steps to protect your business now and position it for a stronger post-recession future.

1. Take steps now, regardless of current need, to arrange for additional capital. Increase credit lines, get approved for additional credit cards, establish credit with vendors, and pre-qualify for merchant cash advance. Whatever the source, take steps now, before your capital needs increase or your credit standing decreases.
2. Confirm existing credit terms and amounts. Citi Bank recently announced that it is “re-underwriting” existing credit it already has extended to both business and consumer borrowers. Many Citi Bank clients will discover they do not have the credit amount they thought they had.
3. Merchant Cash Advance has been a working capital source for thousands of business owners over the past several years and will now have a great opportunity to move out from the shadows as an excellent financial tool for small business owners. Understand this marketplace and be a wise consumer. (Free merchant advance report).
4. Whenever possible, have customers pay in advance or on credit card. If you do not accept cards, apply to accept Visa and MasterCard now. You’ll be surprised how many business customers will use credit cards and how much accepting them improves your cash flow.
5. Take advantage of renewed buying power. In slower economic times, buying opportunities are more available. If you’ve arranged credit, keep an eye out and ask about better terms and prices if you are able to buy more aggressively.

Recession is a normal economic cycle and this one may last for several months. A recession will likely eliminate some of your competition and leave you financially stronger with greater opportunities in the future.

Credit Crunch Survival Guide is a post from: Business Cash Advance provider Instant Capital Solutions.

If you’ll review past blog titles, you’ll see I’ve anticipated the current credit crunch since last summer, giving readers and clients ample time to prepare for a credit crunch that will almost certainly worsen before it becomes better.

The 1/22/06 Wall Street Journal had 46 related articles to the “credit crunch” including a great one that discussed why funding will get much harder for smaller companies (here).

Many of the biggest small business lenders are reeling with multi billion dollar sub prime mortgage losses and are reducing their lending activities. Citi recently announced they will increase rates on consumer credit and reduce lending limits on already committed and underwritten loans.

Fed Chairman Bernanke’s .75% emergency rate cut yesterday clearly helped calm the stock markets, and should help with liquidity. However, we are not out of the woods. In fact, I suspect we’re still in the middle of the forest.

As alternatives for business financing vanish, merchant cash advance has a wonderful opportunity to fill a void vacated by traditional lenders. From early evidence, that is exactly what is happening.

While some funding companies have had their credit reduced, the industry’s largest and most stable companies are adding additional lending capacity in anticipation of growing demand.

As suggested last summer, smart business owners will take the time NOW to become approved for reserve capital that can be accessed quickly in the event emergencies arise or current credit lines are reduced or eliminated.

Crunch Arrives – Problems will Worsen is a post from: Business Cash Advance provider Instant Capital Solutions.

The credit crunch is on its way. It has already begun in the mortgage world and will likely spread to other areas of the economy which many worry will effect the stock market and potentially drag the US economy into recession.

The Fed can have some impact on this ripple effect and is being watched closely for indication of how they will handle this potential threat to the economy. However, there will likely be an impact to your ability to get credit and access capital.

While away last week I came across a very good article in the Wall Street Journal (read here). It outlines the potential problems on the horizon for small companies looking for capital and gives some solid ideas on how best to prepare for a credit crunch.

As always, advance planning is the best approach and our CARE Program outlines several steps to position you for more and better capital.

Read this article and take the steps now to prepare for future credit needs now.

Credit Crunch Coming??? is a post from: Business Cash Advance provider Instant Capital Solutions.