$250,000 Loan for a Dental Mold Company

$250,000 Loan for a Dental Mold Company

Huntington Beach, CA Huntington Coast Capital secured a $250,000 asset based loan for a company providing dental mold services for orthodontists!

The company has been operating for many years in the Antelope Valley and serving orthodontists across the country. Recently, they signed on as a provider to a number of Western Dental locations and needed more cash to cover the cost of orders.

The Challenge

The company already had an SBA loan with their existing bank. However, the existing bank was not willing to extend additional credit for the request. Huntington Coast Capital was able to secure a second position asset based loan to get them the additional capital they needed for growth. The $250,000 loan was secured behind the larger SBA loan in first position.

Next Steps

The next step in the process is to refinance both their existing SBA loan and the second position loan in to California’s Community Advantage Program. This new loan will consolidate the loans making one payment for all of the debt.

The loan re-structuring will allow the company to take on the new contracts comfortably without the financial concern of being able to afford the up front costs involved.

If your company could benefit from an asset based loan, we would like to speak with you! You can contact us at 714-719-8966.

To you success!

Patrick Zazueta
Huntington Coast Capital, Inc.

$500,000 2nd Position Commercial Real Estate Loan Secured For A Lodge In Big Bear, CA

$500,000 2nd Position Commercial Real Estate Loan Secured For A Lodge In Big Bear, CA

Huntington Beach, CA A client came to us looking to pull cash out on his lodge property in the Big Bear area of California. The funds were to be used for improvements to the property. The request was a challenging one due to the fact that the commercial real estate loan request was really more of a small business loan.

Commercial real estate loans for specialty use or single purpose properties require a deeper analysis. Unlike traditional commercial real estate loans against traditional properties like office, industrial, multifamily and retail properties, specialty use properties need to be analyzed beyond the loan to value and income of property. If a bowling alley closes down, for example, the is significant cost in changing in to something else of improving the location under new management. The lender has to not only be in the property at a conservation loan to value, but also has to buy in to the business being able to survive on a going forward basis.

“This place has been here for years! This is not a risky loan for the lender!”

This is something we hear quite often when being sold on securing funds for specialty or single purpose properties. Anyone remember Circuit City? They were forced to close their doors and are currently under a massive re-organization. Established in 1949, they enjoyed steady success through the 70’s, 80’s and 90’s before feeling the pain of consumer shift to online shopping and competitors entering the space. I have personally witnessed McDonald’s locations closing! The point is that anything can happen with business purpose commercial real estate, no matter how large or how small the operation is.

What additional analysis is required? 

Some of the points to consider with these property types are the following:

  • market demand for property
  • competition in the surrounding area
  • obsolescence of amenities or attraction (how many kids go to the arcade nowadays?)
  • quality of management
  • customer experience (in today’s world a bad Yelp review could have damaging impacts)
  • landscaping and overall desirability of the property

This is not a complete list, but covers some key points to be considered when financing these property types.

If you have a challenging loan request, we would like to hear from you!

To your success!

Patrick Zazueta
Huntington Coast Capital, Inc.
714-719-8966

HCC Can Now Offer Commercial Real Estate Loans In California

HCC Can Now Offer Commercial Real Estate Loans In California

Huntington Beach, CA Huntington Coast Capital is now licensed to secure asset based, institutional commercial real estate loans in California. Prior to receiving the license, we were only able to place private money asset based loans for bridge or special purposes. Now that the broker license is in place, we can secure permanent funding for all asset types in commercial real estate.

We look forward to better serving our clients with our expanded asset based loan product offering. All types of commercial real estate will be considered. If you are looking for a commercial real estate loan, give us a call 714-719-8966.

Why You Do Not Need Good Credit For An Asset Based Loan

Why You Do Not Need Good Credit For An Asset Based Loan

Huntington Beach, CA

In the lending world, so much relies on personal credit as part of the analysis. Strong personal credit is something not everyone has, fewer than you think in fact. As business owners, when payments are delayed, you are forced to delay your payments to suppliers. However, because your business income is your primary source of income (in most cases), this means personal obligations can also be delayed. Timely payments on items such as your personal mortgage payments, electricity bill, car payments, and so forth all attribute toward your credit score. Delays in revenue and income from your business can quickly effect your personal life and negatively impact your credit score. A poor credit score makes it nearly impossible to be approved for additional credit.

Asset based loans come to the rescue in these cases! Asset based loans can be used for either real estate or business loan purposes. Let us explore below.

Asset Based Loans For Business.

The company balance sheet reflects all the assets of a business (remember assets, minus liabilities equals equity?). Assets that can be used as collateral for an asset based loan are accounts receivable, equipment, inventory, and real estate (more on asset based real estate loans below).

Accounts receivable are payment obligations from customers for goods purchased or services performed. An accounts receivable invoice reflects the amount due and when payment is expected (usually with 30, 60 or 90 days). These invoices are considered assets and can be used as collateral for a loan.

There are two types of asset based loans available against invoices and those are factoring loans and an asset based line of credit. A factoring loan is a buy sell agreement where the factor provides and advance against the face amount of the invoices to improve the cash flow of the business. Factoring loans are more than just an advance. In a factoring arrangement the factor manages the back office and credit and collection functions for the client. Outsourcing the back office functions is often more cost effective than hiring internal staff. For more information on factoring loans click here.

An asset based accounts receivable line of credit provides an advance against accounts on a total availability In this type of arrangement the lender looks at the accounts receivable aging and advances against the total balance outstanding. There is no back office management involved in an asset based line of credit and as such, the rates are a bit lower.

Asset based loans against inventory and equipment are just as you would expect. The lender advances against the value of the collateral. Proceeds are used to increase working capital and assist in growing the business. Equipment loans have been a major source of growth for us in the asset based loan category. For more information on this type of loan please visit our sister company Equipment Finance Quotes.

Asset Based Loans For Commercial Real Estate. 

Commercial real estate transactions also use asset based loans on a broad basis. If you have a traditional property type and have plenty of time to close using a bank is your best bet. High scrutiny in underwriting translates in to lower rates although the process can be tedious.

Asset based loans in commercial real estate are used as bridge loans to acquire property. Scenarios where time is of the essence or where a property requires creative underwriting, fit well with asset based commercial loan requests. Virtually all property types are considered and the process is much faster and much less document intensive than traditional bank loans. For more information on asset based loans for commercial real estate click here.

You noticed that I did not mention personal credit in any of the explanations above. This is because it does not come in to the analysis to any important degree. The only exception to this is if the borrower has a negative mark on his credit where a lender providing a similar loan took a loss on that loan. Poor credit due to inquiries, slow payment of personal obligations, charge off notices, default on credit cards and the like rarely come in to play. The main focus is the quality of the asset being used as collateral.

I hope you enjoyed reading this. If your business could use an asset based loan or if you need an asset based loan to acquire commercial real estate, give us a call at 714-719-8966.

To your success!

Patrick Zazueta | Managing Director
Huntington Coast Capital, Inc.

Choosing The Right Asset Based Loan For Your Needs

Choosing The Right Asset Based Loan For Your Needs

Huntington Beach, CA  We often receive inquiries from clients looking for an asset based loan for working capital for their business. A common mistake that traps many business owners from obtaining the capital they need to grow is taking on the wrong form of debt.

The number 1 killer of business is taking on an asset based term loan when they should be utilizing and asset based line of credit. We have seen countless times how companies strap themselves with term debt when their capital needs are really short term. Let me explain. If you were in need a $50,000 asset based loan to cover the cost of a purchase order you would not want to borrow the money on a fixed monthly payment plan. Why? FINANCE 101 never use long term debt to cover short term expenses.

Purchase order financing is a revolving need. You receive one purchase order, fulfill it, receive another and so forth. Taking out an asset based loan on a term basis straps the cash flow of the company making it difficult to pay the debt back in a lump sum.

There are predatory lenders out there that will sell you a term loan under the auspices that it is working capital when in fact it is actually term debt. Further, making matters even more difficult, is they will take their payments automatically from your checking account on a daily or weekly basis. This makes cash flow strapped even further and forces the business owner to take out another loan and the cycle repeats. The sales people at these companies are only interested in their commission on the loan and most have never run a business for themselves.

On the contrary, a revolving asset based business loan provides you with the revolving credit you need to allow you to borrow the money when you need it and pay it down through the normal course of the business cycle. How? Let us use the previous example of a $50,000 asset based purchase order loan. The asset is the purchase order. A promise to pay from a credit worthy customer for goods or services your company is providing. If your cost to fulfill the purchase order is $50,000 and your sale price for the sake of round numbers is $100,000, you can pay the loan back entirely upon receipt of payment from the customer. Once the $100,000 is paid by the customer, $50,000 of that payment goes to pay down the loan amount and the borrowing process repeats.

Why can we not do the same thing with a term loan? There are a couple of reasons for this. First, term loans often come with pre-payment penalties over the first two years. You can not pay them off without paying an extra fee in the first two years of the agreement. This is not ideal for short term asset based loan needs. Secondly, term loan lenders will file what is known as a UCC-1 blanket lien on the company making it impossible for another lender to provide financing until the debt is paid off. This second requirement is a major road block.

There is an exception to the rule however, but it does not favor the business owner. Some term loan asset based lenders will allow additional debt. This means that you can have more than one term loan. The problem with this is as the term debt is stacked up, your monthly payment obligations increase. Lenders measure your ability to pay by the amount of income the company has after all other debts are paid. There comes a point where the company can not take on any more debt and borrows its way out of business.

What is the solution? There are two many scenarios and variables within each to discuss here. The moral of the story is to apply the right type of financing to the right needs. This is not always easy to determine. Especially, when you have a persistent sales person telling you that his term loan is what you need for your business. Let Huntington Coast Capital manage your asset based loan decisions for you. Our unbiased consultation will give you the honest truth about which type of financing is right for you. We have a unique advantage over the lenders out there and that is simply that we are not lending our own money. Our objective is not to sell our product, but to consult with you to determine which is best for your business.

Do not trust a salesperson trying to hit a quota! We align ourselves on your side of the table and have your best interest in mind. In need of an asset based loan? Do not make the decision without contacting us first.

To your success!

Patrick Zazueta – 714-719-8966
Managing Director, Huntington Coast Capital, Inc.

Asset Based Loan Funding Announcements

Asset Based Loan Funding Announcements

Huntington Beach, CA Huntington Coast Capital is proud to announce that we secured $525,070 in new asset based term loans for our clients through the first two weeks of February! The loan details are as follows:

  • A $350,000 asset based loan for a distributor of cell phone and tablet accessories. The company once had sales of over $20,000,000 a year and had a $1,000,000 line of credit with Bank of America. However, margins in the electronic accessories industry are becoming increasingly thin with all the big players entering the market. In 2017 the company made the conscious decision to exit the high volume, low margin business and pursue the smaller volume, but higher margin business. As a result, their profits were not greatly effected, but their gross sales went down and thus their need for a $1,000,000 line of credit. Surprisingly, Bank of America asked them to find a new lender as they do not provide lines of credit of that size to their clients. They are interested in the larger borrowers. The pressure to find an asset based loan was mounting as the requirement was to pay off the entire $350,000 as quickly as possible. Huntington Coast Capital was able to find them an asset based loan to get them out of their predicament! With an asset based term loan now in place, the company can re-focus on operations with Bank of America off their backs
  • A $175,000 asset based loan for a restaurant owner. An established restaurant owner was looking for a loan to open a new concept in a second location. Due to the company ownership structure that included investor unwilling to guarantee the loan, a little creativity was required to secure the financing they were looking for to expand. HCC was successful is obtaining an asset based loan for the company after numerous lenders on both the private and institutional side. There was no interest from a number of SBA lenders and the loan was ultimately completed by a non-SBA lender offering a 10-year asset based term loan. The term of the loan kept the payments down and allowed the company enough cash flow to carry the new project.
  • A $70,000 asset based loan to a physicians consultant company. A consultancy group came to us looking to refinance some high priced MCA loans or merchant cash advance lenders. These loans are expensive to say the least and they often require direct daily debits from the bank account of the client. With high interest sucking the cash flow out of the company, they needed answers quickly. HCC secured an asset based loan to refinance these high priced lenders and also provided for a portion of cash out to be used as working capital for some new contracts coming down the pipeline.

If your company could benefit from an asset based loan or if you are in need of an asset based loan for a commercial real estate purchase or refinance, we would like to speak with you.

A Major Obstacle To Obtaining An Asset Based Loan

A Major Obstacle To Obtaining An Asset Based Loan

Huntington Beach, CA  Asset based loans are loans secured by equipment, real estate, inventory or accounts receivable. Essentially, most assets on a company balance sheet can be used as collateral for an asset based loan.

Let us discuss asset based loans secured against equipment and asset based loans secured against commercial real estate. Asset based loans secured against inventory and accounts receivable work entirely different from fixed asset loans.

For starters, lenders in the asset based lending space need to have conservative loan to value ratios. Asset based loans on real estate have loan to values in the 50 to 65 percent range. This is because the lender needs to be able to sell the property and recoup his principle (and hopefully interest) should the borrower default and go in to foreclosure.

Similarly, the loan amount for an asset based loan on equipment is measured by the forced liquidation value. This is not true in most cases, but if we are talking about strictly and asset based loan, it is. The idea behind lending on a percent of the equipment liquidation value is that the lender can sell the equipment at auction should the borrower default.

So, if you own assets free and clear, you should be able to get a loan for 50 to 65% of the assets value, correct? Not necessarily. One item borrowers over look when seeking an asset based loan for the their business is cash flow. They think that if they have the asset, that is all the lender needs. This is incorrect. In addition to having the assets available for collateral, you also have to demonstrate the ability to make the monthly payments. This sounds obvious, but many borrowers initially believe that the asset itself is enough.

Asset based lenders need to be convinced that their loan can be repaid. This was never more apparent than during the real estate meltdown of 2007-2008. Asset based loans against real estate were being made on what was referred to as stated income loans. Or in other words, you tell me how much money you make, I will believe you and then depend on the property value to be high enough to cover my loan should you go in default. This was a very short sided and poor lending practice.

If you can qualify for a million dollar loan to buy a house, it does not mean you can qualify for a five million dollar loan just because the loan to value is there for the asset based loan. Simply put, you still need to make your monthly payments. Sounds simplistic, but borrowers frequently think that having the asset is enough. Well, it is not unfortunately.

Could your company benefit from an asset based loan? Do you have the cash flow to afford to take on the loan payments? Let us talk and see what works.

To your success!

Patrick Zazueta
Huntington Coast Capital, Inc.
714.719.8966

Last Thought On Obtaining An Asset Based Loan (For Now).

Last Thought On Obtaining An Asset Based Loan (For Now).

Huntington Beach, CA There was a recent conversation with a client that I wanted to share because it had to do with asset based loans and what is required to receive one.

This particular request was for the purchase and eventual development of a lot in an in-fill location along the California coast. The asset, raw land with existing income from a billboard on the property, was specially zoned by the City. The basic requirement was that the property had to have a commercial element to it. Of the approved uses on the table were an ice cream shop, bed and breakfast and general retail. The request we received was for the purchase of the land and development of a bed and breakfast.

The land was listed at a price of around $800,000 for a small 2,600 SF parcel. The borrower felt that she could get the price down a bit, but only had a max of $100,000 to put toward the project out of her own resources. She was looking for an asset based loan secured by the real estate. The plan was to acquire the property first, then begin the process of City approval and permits for the bed and breakfast. Sounds easy enough on the surface.

In the last post, I wrote about having the cash flow in addition to the collateral in order to improve your chances on being approved for an asset based loan. There is one other very important piece, and that is, experience. The borrower on this project had some experience in marketing for a bed and breakfast, but no direct operational or ownership experience. This experience is critical to the request and something banks and lenders look at closely when considering an asset based loan. As most people are aware, most businesses fail with in the first 3 years and lack of experience could speed this average up to less than that. In this case, there was also very little, on a relative basis, coming from the cash resources of the borrower. A high loan to value is also not attractive when considering a pure asset based loan.

The three preliminary components to an asset based loan are collateral, capacity and experience. Collateral – is the collateral something of value and interest to the lender? Can it be easily liquidated in order for the lender to be repaid with interest in a reasonable amount of time? Capacity – does the borrower have the cash flow to make the monthly payments on the loan? Experience – if the use of funds are for a business acquisition or development project, does the borrower have experience in the industry?

If you meet these three criteria and are in the market for an asset based loan, we would like to hear from you. To your success!

Patrick Zazueta
Huntington Coast Capital, Inc.
714.719.8966

More Thoughts On Asset Based Loans And How To Qualify For One

More Thoughts On Asset Based Loans And How To Qualify For One

Huntington Beach, CA Asset based loans are a popular alternative to traditional bank loans. Business owners use their assets which typically consist of inventory, equipment and accounts receivable to name a few as collateral for an asset based business loan. However, having the collateral alone doesn’t qualify you for an asset based loan.

What else is needed to qualify for an asset based loan? Cash flow. Many times, business owners spend a good portion of their capital on inventory needed in their business. The inventory is sold to customers creating revenue which turns in to net income after all expenses are paid and the cycle repeats. The problem happens when the inventory is slow moving causing the cash of the company to be locked up in the goods held as inventory. As we know, inventory sitting on the shelf in the warehouse is not creating revenue. It needs to be sold or turned in order to generate cash flow which is the life blood of any business.

Companies that can not demonstrate the ability to pay the monthly payments on an asset based loan will not qualify. One half of the equation is having the collateral, the other half is having the ability to make the monthly payments and afford to take on the additional debt.

Sounds elementary, however, business owners often only look at one side of the equation. Asset based loans can work for both business and real estate purposes, but you have to have adequate income to justify the lender giving you the loan.

If the company does not have the income to cover the asset based loan payments, they will need to seek an equity investment which has a completely different analysis in asset based lending.

To your success!

Patrick Zazueta | Founder
Huntington Coast Capital, Inc.
714-719-8966

Huntington Coast Capital Secures $300,000 Factoring Line Of Credit

Huntington Coast Capital Secures $300,000 Factoring Line Of Credit

Huntington Beach, CA  An advertising company is the latest example of our asset based loan success stories! The company specializes in Social Hotspot/WiFi Advertising. Their slogan, WiFi is Smart. Phones are Smart. Is Your Advertising Smart? says it all. Their ability to target the audience of their clients with real time advertising sent to the target customers cell phone, is a powerful and engaging marketing concept. They can target age, gender, interests, location and more, to drill down and put the appropriate ads in front of people that would have the most interest. Targeted mobile marketing is the wave of the future in advertising!

The Challenge: Like most of our clients, they were growing quickly and struggling to keep up with the day to day working capital needs of the company. They needed an asset based loan secured by their accounts receivable to speed up their cash cycle. However, this was a more difficult funding request due to the fact that they bill their customers ahead of services rendered. I would estimate that 99 percent of the asset based loan providers that are lending on accounts receivable need to finance the invoices after the service or product has been delivered. We literally spoke with over a dozen companies to discuss a factoring loan for this client. After several attempts we found success with a progressive and forward thinking asset based loan lender. They secured the working capital loan they needed and can now grow the company without worry of running out of cash to support their growth!

If your company could use an asset based loan for your business or an asset based loan secured by commercial real estate, we would like to hear from you! We enjoy these success stories and would like to feature your business in the next one!

To your success!

Patrick Zazueta | Founder
Huntington Coast Capital, Inc.
714-719-8966 direct