Friday, October 30, 2009
what do you do when your line of credit at the bank is due?
I've seen many businesses look for alternative answers to handle their working capital needs. Several business owners are turning to asset based lending or factoring as an alternative source for bank financing. Some banks are having liquidity or solvency issues and aren't renewing working capital lines. Some businesses have had losses due to the changes in their business and the economy. This kind of financing does provide an advance rate of between 75% to 85% of accounts receivable less than 90 days. However, the cost of capital can be as high as 25-30% on an annualized basis. For many businesses, this is higher than their gross margin which begs the question why sell the product if all of your margin goes to financing cost? Asset based lending or factoring may be the only way to go. But, are there any other viable alternatives to the business owner who needs working capital financing?
Monday, September 14, 2009
Excerpts from the Georgia Bankers Association Report
The Georgia Bankers Association recently put out it's Update for September 2009. Here are some excerpts from the 24 page report.
-Georgia's banking environment remained unusually challenging through the first half of 2009. The broad economic recession, continued weakness in the residential real estate sector and growing concerns about commercial real estate are causing continued stress on many Georgia Banks. Even so, a vast majority of Georgia's banks remain well capitalized.
-Much of the story is unchanged since earlier this year, and bank performance continues to struggle in the aftermath of the severe housing, real estate and credit market disruptions that began in 2007.
-Perhaps the most visible consequence of the economic downturn has been an increase in bank closures in Georgia. As of September 2, 18 banks have closed in 2009 out of 334 banks on Jan. 1, 2009 and 23 banks have closed out of 352 active banks at the beginning of 2008.
-Several key economic and regulatory issue continue to be of concern to many Georgia Banks:
- Real estate marketplace: continued weakness in broad housing construction and purchase market
- regulatory interpretations of accounting guidelines pertaining to the fair value of real estate
- downward pressure on asset prices caused by market forces and unintended consequences of government stability programs
If you would like to read the entire report, here is the link:
As always, the purpose of this blog is to promote conversation between bankers, other professionals and business owners. These are the thoughts from the GBA, I would welcome your constructive thoughts and comments
Friday, August 21, 2009
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