There has been so much in the news lately about business credit and finance that it’s hard to keep up with it all. But much of this information is important for business owners to read, so we have decided to do a regular “roundup” of business and financial news.

Risky Business Gets No Love
No, I’m not talking about Tom Cruise’s teenage shenanigans in the 1980’s hit movie Risky Business. In this sense, I’m referring to businesses with risky profiles, as viewed by lenders. According to a recent article in the Wall Street Journal, many of the major lenders in this country are investing in what they see as “less-profitable but steadier” types of businesses.
Read the full article at WSJ

Like Sands Through the Hourglass - Subprime Drama Continues
Many other lending giants are posting major losses that can be tied back to the subprime meltdown of last year (and this year, and next year?). Wells Fargo posted a 38% drop in the fourth quarter, largely due to credit losses associated with the mortgage fiasco.

Consumer Spending Down, Naturally
Recent rate cuts by the Fed are not having the desired effect (desired by the Fed, anyway). It’s also unlikely that any tax rebate program is going to spur consumers and stimulate the economy. The New York Times spells out the scenario, and what it means to business credit and finance in general. Here’s my question … how much stimulus will a $300 rebate check produce when it costs nearly that much to fill up your car with gas two or three times?

But It’s Not All Bad News
Companies like Far West Capital are in a position to help many businesses with accounts receivable systems in place, even while other lending channels are drying up. We are an asset-based financing company, which gives us a certain amount of flexibility that many lending channels no longer have. We use this flexibility to find the best financing option for our customers.

If you operate your business under some form of accounts receivable system — and you’d like to learn more about our A/R financing programs and how they might help you — please contact us.

The latest installment in the subprime mortgage meltdown: Bank of America purchases the ailing Countrywide.  

In previous blog posts, we have talked about the subprime mortgage meltdown and how it created a ripple effect that spread through our economy (even affecting business credit).

As of this morning, we have seen the latest development in the ongoing “shuffle” of mortgage companies. It has been public knowledge that Countrywide — like so many other mortgage lenders — was struggling financially. Financial analysts expected that the mortgage giant would have to declare bankruptcy at some point.

But instead of folding completely and losing billions, Countrywide was sold to Bank of America — to the tune of around 4 billion dollars.

This is just the latest in an ongoing string of mortgage company collapses. Ameriquest, formerly one of the biggest subprime mortgage lenders in the country, now has what equates to a “Sorry We Are Closed” message on their website.

Thus the economical cycle continues, with its many ups and downs. We have seen it before, and we will no doubt see it again.

But how does all of this affect you, as a business owner? This is the subject of a free booklet we are preparing, aptly titled “The Ripple Effect.” It should be online sometime in February, and we will announce it here on the blog and also through our newsletter.

So if you haven’t signed up for the free newsletter yet, now is the time.

A somewhat recent business finance article on the New York Times online discussed what we all know from watching the news — it’s getting harder for business owners to obtain credit / financing needed for growth.

The article’s first paragraph sums it all up:

“Credit flowing to American companies is drying up at a pace not seen in decades, threatening the creation of jobs and the expansion of businesses, while intensifying worries that the economy may be headed for recession.”

You might call this a ripple effect. Much of this began in the housing industry, and it goes back several years in true “time bomb” fashion. You know the story by now:

Lenders gave easy-credit subprime mortgage loans to poorly qualified home buyers … the rates were adjustable … the rates reset and caught the homeowners by surprise … record-breaking foreclosures … mortgage meltdown, etc.

Well, this initial pebble that fell into the financial waters of the mortgage industry has rippled elsewhere in our economy. Lenders of all types are under increased scrutiny from on high, which causes them to revisit (and often retighten) their lending standards.

What does it all mean? It means that it’s a lot tougher for growing businesses to obtain business financing / credit these days.

What will it mean in the future? Well, for the time being, business owners have to grin and bear it. Many business owners in certain industries are also turning to working capital finance solutions, like the services that we provide.

As for the federal government’s potential actions, it seems that the writing is on the wall. Said the New York Times piece:

“Just yesterday, the Fed’s vice chairman, Donald L. Kohn, said that the latest market turbulence appeared to be reducing credit to businesses and consumers, hinting that the central bank, in response, was prepared to cut interest rates further.”

Small and medium-sized businesses often face financing challenges that larger companies do not have to deal with. Tight budgets, small margins and high overheard are just a few of the financing challenges small businesses face.

But the startup phase is usually the greatest financial challenge to a small business. In the early stages of a small business, revenues might be small and/or unpredictable. And then there are all of those startup costs, such as equipment, personnel, training, marketing, etc.

Fortunately there are a number of ways to obtain financing for a financing a small business. Here are just a few of those financing options:

• Conventional Loan - A basic loan for a set amount that is made from a traditional lender. Such a loan could help cover the initial financing for a small business.
• Small Business Loan - This is a loan program designed especially for small business financing. Many traditional banks and lenders offer small business loans as part of their product line.
• Accounts Receivable Financing - This is a type of financing for small businesses where the business receives funding based on their accounts receivable. This is one of the financing services that Far West Capital provides.
• Our Services - If your business has some form of accounts receivable / invoicing program in place, you may be a candidate for the small business financing services we provide. If you have questions or would like to learn more, please contact a representative.

Related article: Small Business Factoring Explained