The Struggles of Small Business Owners

Small businesses are still frustrated by banks’ tight lending policies more than three years after the Great Recession ended. They are now turning to a new crop of alternative lenders that are upending banks’ conservative standards and automating loan approvals. Instead of stringently relying on collateral and credit scores, these cash-flow lenders are using software that reviews online sales, banking transactions and comments on social-media sites, among hundreds of other criteria, to make loan decisions within minutes instead of weeks or months.

Big banks approved 14.8% of small-business loan requests in October, down from about 46% before the economic downturn

We at Connected Capital Finance Can Help!

Businesses typically must have sufficient collateral, sterling credit scores and strong cash flow to get loans from large banks, tough criteria to meet in the post-recession economy. Many banks find it’s not cost-efficient to even review modest-size loans. Approval from small banks is somewhat easier, but only for businesses that qualify for Small Business Administration guarantees. And loan limits on credit cards have been slashed.

There are alternatives. Businesses that don’t have enough collateral to get bank loans but sell to other businesses have long turned to factoring companies.

Cash-flow lenders, which have sprung up the past few years, are funding an even wider pool of very small businesses, including dentists or plumbers that may not accept credit cards. About 65% of loans this year to businesses with one to 10 employees are unconventional – including factoring, merchant cash advances and cash-flow lending – up from about 25% two years ago

There are other alternative lenders which include Connected Capital Finance and it’s host of preferred lenders.  We have the ability to review loan requests within minutes. After formal approval of the  Loans, the loan can be  funded within a two to three business days and paid back in six to 12 months, with payments deducted daily from a small business’ bank accounts.


Success Stories
1.  A medical services company wanted to begin purchasing a series of retiring physicians medical practices to increase his business model and improve the business strategy of that office.
He was turned down by most conventional lenders because he is not a physician. However, we have found the lender that will do this deal, have now received a commitment and will close in 3 weeks.  He is on schedule to acquire one practice every 6 months.
2.  Owner of two restaurants in a large metropolitan area in Washington, says several banks wouldn’t consider his request for a $50,000 loan to buy a new pizza oven and salad and dessert station to speed order delivery. He says bank officials told him the loan “was way too small…to even think about it.”

He has obtained  funds recently to hire more workers, have more stations and ovens.

3.  Co-owner of a bridal shop in Virginia was turned down by about a dozen banks for a roughly $175,000 loan he needed for advertising and new product lines. Banks, he says, focused on his lack of collateral, ignoring his unique business strategy of selling larger-size bridal gowns. The store, which has been open for close to 2 years and is on track to double revenue this year received a loan that they are using to buy new inventory.

Recent Survey of Investor Finance Shows Investor Optimism

The Top Ten “Takeaways” from a survey  of 526 subscribers to real estate investor platform subscribers in finance include:

  1. Investors bought using finance, loans and mortgages to over $58 billion of commercial and multi-family properties during the 1st Quarter of 2012, a 46% increase from the same period in 2011.
  2. 58% of the respondents believe that there is more capital in the market than six months ago, fueled by historically low interest rates for finance, mortgage and loans.
  3. 49% of the respondents said that they have an “abundance” of capital ready to invest.
  4. 60% of the respondents believe that now is the time to buy more apartments.
  5. 68% of the respondents expect apartment values to increase in the coming year, driven by low vacancy rates and projected 4.8% average nationwide rental growth.
  6. 55% of hotel owners believe now is the time to buy more hotel properties where there are a number of opportunities to snap up distressed situations and/or restructure debt. Hotel occupancy, ADR, and RevPar are all increasing, leading 60% of respondents to conclude hotel values are on the upswing.
  7. 53% of industrial property owners think that now is the time to buy since positive GDP growth has driven demand for space, vacancy rates nationally have dropped, and there has been minimal new construction.
  8. 42% more retail properties have already sold in 2012 versus the same period in 2011. Continued concern over the downsizing of retailers along with consumers’ increasing preference to shop online resulted in 55% of the respondents naming core, stable community and neighborhood shopping centers as the best potential investment opportunity over a five year hold.
  9. 74% of the respondents believe that commercial real estate continues to offer favorable returns relative to other investment classes…keep in mind; however, that 100% of the respondents are active commercial real estate players using loans, finance and mortages.
  10. 85% of respondents listed the fragile state of the U.S. economy as the top concern for commercial real estate investors, followed by 53% of respondents being concerned about the potential for increased taxes.

Construction Starts Up – Need to Loosen Finance Options for Homeowners

New construction starts were up nationwide, 2.3%  in the July-August and were up 24.5 percent from August 2011, according to the latest numbers from the Census Bureau

Builder confidence is growing and for the fifth month in a row in September, reached its highest level since 2006, the National Association of Home Builders reported this week.

Fear remains that their will not be enough mortgage and finance options for buyers to move the inventory when it’s complete. Mortgage rules need to become more flexible. Currently FHA is the most viable lending option. We need the major lenders to adopt programs that acknowledge the devastating effect that the recession has taken to the US savings.

Recent reports say the average 47 year old has only $25000 in savings. Not enough to purchase a new home with a 20% down requirement. In the past, a move up buyer could sell every ten years and recover enough equity for a down payment on their new home. When home values fall 20-50% nationwide, equity is gone and home buyers have to save for their down payment.

Additionally, most sellers that are moving up are upside down forcing a short sale. This is reported to the credit bureaus and causes problems getting a new loan even if there are no lates.

Finance, mortgages and loans for home buyers need to reflect the devastating effect of the recession to counter the severe problems brought on by the banks themselves before those homes that are now being built can be absorbed.


Low Rates on Commercial Loans for Student Housing

Great time for refinance or purchase student housing

student housing is a great investment.commercial financing available from 3.9%

Excellent purchase or refinance loans for student housing starting at 3.6%*!

Interested in the student housing market? Rates are low for fraternity and sorority house loans, bachelor units, and student apartment units next to most major universities.

To visit this and other commercial finance programs check out our website!

*for California properties. Other states are just under 5%

Home Prices Up in Seattle! Good News for Commercial Loans?

Seattle’s NWMLS just released positive news about NW residential real estate Statistics and I’m looking for a similar rebound in commercial loans.

An 11% increase in closed sales, and prices increased by 9.2% from 12 months ago and in fact, closed sales for the first 3 quarters of 2012 are up 14.6% from a year ago.

Good News and Possibly the sign of a turnaround in residential real estate when normally signals a turnaround in commercial loans and financing.

Possibly sales are being driven because there are 27% fewer listings on the market from the same time last year. However, listings have been down in previous years, but the buyers just weren’t there to provide the demand and prices stayed lower. Buyers now seem to be coming off the fence, more than likely due to historically low interest rates.

Whatever the reason, we are seeing a turnaround in the health of real estate sales which will hopefully lead to the same optimism for business finance and commercial finance

America May Be Past the Jobs Slump – commercial finance lending sba loan

Business may still wait to see how the global economy fairs before hiring. They also may wait before financing equipment and capital expenditures.

However, dropping unemployment, rising house prices (Seattle home prices rose 9.2% Sept 2012 over Sept 2011) and signs that the economy is slowly improving may be signaling that we’re past the bottom of the recession and on the way back up. This may signal to business owners that it may be safe to begin hiring again.

No one expects the rise to be anything but lackluster for the next year or two, but whomever becomes the president for the next 4 years, there’s finally a basis for optimism.

Effect of Jobs Act on Crowd Funding: It May Get Messy!

There are still a lot of questions about the JOBS Act that President Obama signed into law earlier this year, as the Securities and Exchange Commission prepares to release its regulations on crowdfunding, crowdsourcing and initial public offerings.

Crowdfunding is a way that businesses raise equity from investors online. The Sacramento Business Journal published an excellent graphic of just how this works:

1. Company creates a profile and sets a funding goal on an equity crowdfunding site

2. Crowdfunding site looks over terms and documents and approves the company

3. People invest in the company through the crowdfunding site

4. If the funding goal is met, the crowdfunding site sends money to the company and investors get a stake in the company

The ability to raise equity online is one of the most important affects of the JOBS act and the SEC is currently trying to work out the wrinkles on how this will affect current SEC rules regarding raising money.

Washington state regulators even released a consumer alert earlier this year about the uncertainties raised by the Jumpstart Our Business Startups (JOBS) act.

Still, the ACT didn’t affect all regulations that would concern Crowd Funding. There are still regulations dictating who can give investment advice and how that advice is administered, and there are still rules that anyone bringing together buyers and sellers must be registered, either as a broker/dealer or as a stock exchange. This may create enough confusion in just who and how can money be raised.  As usual, attorney groups will be needed to sort through the new regulations.

Real estate investment – Steps to get commercial mortgage loans

Real estate investment – Steps to get commercial mortgage loans

A guest blog by Gabriel Knight, from

People, who are interested to invest in commercial real estate properties, are very likely to be interested in getting a commercial mortgage loan for the said purpose. For that reason, they need to get their acts together in order to qualify for the loans and get their mortgage application approved.

Steps to qualify for a commercial mortgage

Real estate enthusiasts should follow the below mentioned tips in order to qualify themselves for a smart deal:

A.    Income – Real estate investors should try out every possible ways to increase their income so that it becomes easier for them to qualify a for a commercial mortgage loan. This is because low earning individual pose a risk to the investment made by the lenders, so they prefer people with impressive and a steady source of income. Therefore, investors should step up their efforts to hike their income through probity, dedication and hard work. Investors have to think out-of-the-box and invent a source of income for themselves.

B.    Down payment – Investors need to set aside a good amount of money to be used as a down payment while securing a commercial mortgage loan. Investors may start a savings fund for themselves. They must have at least 5-25% of a commercial property’s value in their savings account, which will be of great help when making the down payment.

C.    Credit score – Investors should get over from their past financial disasters and try to implement every trick in the book to improve their credit score. Investors with good credit score are less likely to default on their loan payments, so they it becomes an obvious choice for lender to prefer such people.

Moreover, they need to shun taking out new credit and using credit card irresponsibly. This will make them qualify for commercial mortgages easily. Once an investor has qualified for the loans, then he has to prepare himself to get his mortgage application approved by the lenders.

Steps to get commercial mortgage approval

Here are some of the basic tips to get mortgage application approved by the lenders:

A.    Business plan – Investors should be ready with a crisp and lucid business plan. The plan should explain to the lenders the need for the loan, current state of affairs of the business, future target of the company and so on. Moreover, their application should display a mark of professionalism that is complete with all the required loan documents arranged in a neat fashion along with the business plan.

B.    Business profitability – Investors, whose business is not performing well, should try to fix that problem first, before they can even think of applying for a commercial mortgage loan. They have to increase their company’s bottom line through various cost-cutting measures and clean up the financial mess. They can increase their company’s cash flow with better receivable management.

C.    Business analysis – Mortgage lenders analyze an investor’s business as well as his other assets (intangibles) before approving any loan. Investors should be aware of their company’s credit rating and try to keep a rating of about 75%. Moreover, they should analyze their company in line with the commercial lending criteria. They must also prepare themselves with all the correct answers for the queries a lender might have.

Therefore, it will be easier for the investors to qualify and get the necessary approval for a commercial mortgage only if they have championed the above discussed tips.

Bernake Tries to Find a Solution

Bernake creates aggressive new policy

Until the employment rates go down and more Americans get back to work, Ben Bernake is concerned enough to start a strong and aggressive new policy.

Feds will buy back 40 million in mortgage backed securities every month to lower interest rates

Business loans and investor loans will reflect these new loans and should stimulate business and investor buying.

Before stopping this action, the feds will look for more than a couple of months of growth. This should help raise confidence and boost spending as both Wall Street and Main Street feel wealthier

Economy is Still Fragile

Uncertainty is hurting the economy

  • August had weak job creation
  • There are downward revisions to the previous two months’ figures.
  • There is uncertainty surrounding the election
  • Many employers are in a holding pattern
  • Manufacturing had waning exports.
  • Many eurozone countries have re-entered recession.

The economy is now very fragile

In recent months, the Federal Reserve signaled that it may again ease the rates to stimulate the economy  The FOMC will likely take action at its next two-day meeting slated to start September 12.

  • Private-sector employers added 103,000 workers last month, offsetting a loss of
  • 7,000 government jobs were lost.
  • Manufacturers trimmed 15,000 jobs in August, all in the durable goods segment.
  • The loss interrupts a sustained period of growth, as manufacturers added 421,000 positions in the past 24 months.

Employers remain either unable to find qualified candidates to fill positions or reluctant to commit to adding permanent workers with the election and possible federal spending cuts unresolved.  Mass layoffs fell to the lowest level last month since December 2010 and the year-to-date total is lower than at any time in the past 10 years.

Impact on Commercial Real Estate

Full-time positions added over the 12 months ending in the second quarter generated only 55 square feet of net absorption per worker, down from 78 square feet per worker at a similar point in the last economic recovery. Subpar demand growth will underpin a scant 40-basis point drop in vacancy this year to 16.9 percent, while effective rents will grow 2.7 percent.

The unemployment rate has declined 90 basis points this year to 10.1 percent. The decrease contributed to a 50-basis point drop in national vacancy in the first half to 4.7 percent and supported a 2.1 percent bump in effective rents. Steady demand and minimal construction will slash vacancy 80 basis points to 4.4 percent this year, the lowest year-end level in the past 10 years, while effective rents will advance 4.9 percent.