Business Loans

Asset Lenders

• Hard Asset Lenders
Require good and marketable collateral as the primary underwriting criteria. These commercial lenders will loan up to a percentage of the liquidation value of the collateral. That percentage, on various asset classes, will vary between lenders.

• Cash Flow Lenders
Rely on historical and projected cash flow as the primary underwriting criteria. Collateral is a consideration but not the primary one. These lenders are looking for annual cash flow (EBITDA) to exceed annual debt service by a certain percentage. This is called Coverage Ratio.

• Factoring
Provide business loans with Accounts Receivable as collateral. Factor buys the receivables for a discounted amount, plus a service charge. Attractive to newer companies without hard assets. Discounts can run as high as 25% to 30%.

• Leasing
There is a variety of kinds of business loans. Basic considerations center around the interest rate, term of the lease, and the use of depreciation.

Non-Asset Lenders

• Venture Capital
Expensive form of commercial lending; compensation usually includes an equity position, a premium interest rate and a defined exit strategy. They prefer an IPO (initial public offering) as a long-term goal. It is a viable alternative for a start-up or early stage company with little capital and collateral. Primary asset is often "intellectual property."

• Syndications
Public and private. Ranges from IPOs and private stock offerings to limited and public partnership.

• Miscellaneous Sources
Minority development; state, city and county development agencies; franchisors; grants; HUD loans; bonds; etc.