Asset Based Loans Versus Bank Loans. Which Is Better For My Business?

Asset Based Loans Versus Bank Loans. Which Is Better For My Business?

Huntington Beach, CA  Our clients come to us with an asset based loan or financing need that almost always is required in order to grow their business. If you are like most business owners, cash flow is tight and if you receive a big order outside the normal course of business, it could be challenging coming up with the cash to cover the cost of goods and deliver the product. Your cash need could also be to finance additional equipment and require an asset based equipment loan in order to meet the increased capacity required to fulfill a contract.

Traditional banking places the emphasis on the cash flow and financial strength of the company, the borrower. They are primarily concerned with how financially solid the company they are lending to is. This is good practice, and it makes sense that the companies that the banks deal with are in good financial health. The obstacle to clear however, is that most companies are leveraged to a high degree and can not meet all of the required ratios banks look for when making a credit decision.

If your company is growing quickly and every dollar is going back out the door to cover ongoing working capital needs, it is likely that you will not meet all the requirements of bank lending. For example, banks look at the leverage ratio of the company. This ratio is figured by dividing the total debt of the company by the equity of the company. Equity being the total assets minus the total liabilities. If you have more than 3 or 4 times the liabilities as you do equity, banks will shy away from offering you more credit for fear that your profits and company cash flow will not be able to pay off the new debt. Again, a prudent way to look at things, but the problem is that most borrowers do not qualify.

The advantage to bank lending is the cost. If your company can qualify, then banks will be able to offer the lowest borrowing rates.

The other option are asset based loans. Asset based loans have a broad spectrum of categories. An asset based loan can be used for commercial real estate purchases, inventory loans, equipment loans and purchase order financing to name a few. In an asset based loan, the lender is looking at the asset being used as collateral in the transaction. For example, if your company received a large purchase order and needs additional cash to pay the upfront costs or deposit required by the supplier, and asset based loan is a good option. The asset in this instance is the purchase order itself. Purchase order financing is often accompanied by a factoring loan. Factoring loans are asset based loans secured by the invoice sent to the customer versus the purchase order sent to the supplier. For more information on factoring loans click here.

In our experience, business owners are qualified for asset based loans more often than bank loans. We explore each option as appropriate and the obvious choice is always revealed in the end. Our clients like the unbiased consultation and industry insight we bring to the table. Because we are not lending our own money and acting in a consultant capacity, we are able to align ourselves on your side of the table and deliver the best options for you and your funding needs. Additionally, in the majority of cases, our services are free to our clients. Our lender network compensates us for bringing them asset based loan opportunities.

If your business would benefit from an asset based loan or equipment loan, give us a call. My direct line is 714-719-8966.

To your success!

Huntington Coast Capital Secures $400,000 Equipment Loan For Southern California Manufacturer

Huntington Coast Capital Secures $400,000 Equipment Loan For Southern California Manufacturer

Huntington Beach, CA  A $400,000 asset based loan secured by equipment was obtained for a long time Huntington Coast Capital client. The company came back to Huntington Coast Capital for some additional equipment loan needs for their expanding business. The assembly line equipment will enable them to meet growing customer orders. The asset based loan secured exclusively by the equipment offered better terms than other equipment finance companies and even the equipment supplier’s terms!

The production manager said, the new equipment will allow us to deliver the additional orders being requested by our customer and enable us to deepen our relationship with them.

Asset based loans are a great way to leverage specific collateral for a loan. Equipment loans and factoring loans are great examples of this. In factoring loans, the asset being pledged is the accounts receivable of the company. Business owners in need of cash flow to sustain operations often turn to a factoring loan for the flexibility, speed and fewer restrictions involved in the loan agreements. When compared to traditional bank financing, asset based loans offer a more user-friendly experience and allow you to grow your business without the bank hassle.

Could your business benefit from an asset based loan? Are you looking for a less complicated lender experience? Through our network of lenders throughout the United States, we have most every business loan request covered. To learn more, give us a call 714-719-8966.

To your success!
Patrick

Huntington Coast Capital Presents At The Cove At UC Irvine Applied Innovation

Huntington Coast Capital Presents At The Cove At UC Irvine Applied Innovation

Huntington Beach, CA  Entrepreneurs from around the southwestern United States came to The Cove Applied Innovation Center at UC Irvine to pitch their business plans in an effort to raise capital from venture capitalists and equity investors. The companies in attendance ranged from pre-revenue, startup concepts to established companies looking to take their business to the next level. A broad range of industries were represented some of which were video game developers, niche apparel companies, foam mattress engineers, craft tea brewers, education service platforms, and airline sanitation concept companies. There were also medical technology companies represented in the area of liver function testing and patient records management.

The energy in the room was high with business owners given either 1-minute or 5-minutes to present their business and plans for the future and the opportunities that existed. The time frames were offered at different ticket price levels. The pressure was on from the beginning as the moderator kicked of the program by stating bluntly, if you can not explain your business and justification for investment in the first minute, the investors will not listen to what you have to say in the second minute! 

After the entrepreneurs were placed in the hot seat to present with hundreds of eyes fixated on them, the panelists were given the opportunity to ask questions about the business to dig deeper to see if an investment opportunity existed. Feedback was direct and pointed as the venture fund and equity groups inquired about the financial details and assessed the likelihood of earning a return on an investment. Investor comments were direct, cold and objective as they assessed the quality of the opportunities being presented.

Huntington Coast Capital was at the program to discuss the other side of business lending, asset based loans. Successfully securing an equity investment for your company is a gratifying feeling. It is an acknowledgement from discerning and critical investors that your business plans have merit and potential. Sometimes, this endorsement and confidence can be supported with investments of over a million dollars!

The harsh reality is however, that very few companies earn the privilege of an equity investment. These equity groups are reviewing upwards of three business investment opportunities per day. I often equate companies looking for an equity investment as sea turtles. Millions are born and sadly only a few hundred make it to open water!

This success ratio can be discouraging. However, when companies can not qualify for an equity investment, capital may be available on the debt side. If you are looking for money to hire staff, complete research and development of a product, market your company or gain inroads to supplier and customer contacts, equity is a great option. Conversely, if you are looking for funds to cover purchase orders or improve your working capital cycle, an asset based loan is a better option. You should not give up equity in your company if all you are looking to do is cover your cost of goods, purchase equipment or increase your inventory to meet demand. These capital expense items are all met with asset based loans.

Huntington Coast Capital specializes in securing asset based loans for companies of all sizes throughout the United States. Our typical funding amount is anywhere from $250,000 to $1,500,000. If you have solicited an equity investment with no success, look in to an asset based loan. We would welcome the opportunity to speak with you about your business goals. Call me directly at 714-719-8966.

To your success!

Patrick Zazueta | Founder
Huntington Coast Capital, Inc.

Asset Based Loans In California In Demand!

Asset Based Loans In California In Demand!

Huntington Beach, CA: Business owners have been increasingly inquiring about asset based loans in California and nationwide. Frustrated with the banks, they come to us for answers. We have successfully secured loans for inventory purchases, equipment lease and purchase programs, purchase order financing, lines of credit, term loans and SBA loans to name a few. Is your bank making it difficult to get a loan to grow your business? Contact us and explore your options 714-719-8966 or at patrick@huntingtoncoastcapital.com. How far can your business go?

Patrick Zazueta - Huntington Coast Capital - Orange County CA 4 - Half DR

What Is An Asset Based Loan?

What Is An Asset Based Loan?

Huntington Beach, CA: The term asset based loan is widely used to describe a loan secured against an asset of value as security for the money borrowed. Huntington Coast Capital has been securing asset based loans for our clients in California and across the nation since 2010. Asset based loans consist of loans secured by commercial real estate, inventory, accounts receivable, purchase orders or equipment. Below is a brief summary on how we have assisted our clients in securing asset based loans in California and across the United States in these different categories.

  1. Commercial and investment real estate. Companies that lack sufficient business collateral are often required to pledge outside collateral as an abundance of caution in this type of asset based loan. Often referred to as bridge loans, these loans usually have terms of 6 months to 3 years and are offered through private money capital providers. These asset based loans are offered in California and throughout the country.
  2. Inventory loans. For companies in the manufacturing, distribution, wholesale and retail spaces, inventory represents cash tied up in goods for sale. Inventory can be used as security in an asset based loan. Depending on the type of inventory however, a loan may not be available. For example, if a company is selling fresh fish, meat or poultry, finding an asset based loan will likely not be possible due to the quick turn of this type of product and the potential for spoilage. Other forms of inventory such as t-shirts, tires, dried goods and other products with long shelf lives have a much better chance of being accepted as collateral for an asset based loan.
  3. Accounts receivable and purchase orders. These two assets represent an amount owed and an order for shipment. Both of these asset types qualify for an asset based loan. In fact, these two asset classes are the most popular asset based loan being requested from our clients in California. Companies in search of improved working capital utilize their accounts receivable as collateral for an asset based loan and their purchase orders as collateral when looking to obtain funding to cover their cost of goods to suppliers.
  4. Equipment loans. Asset based loans used to purchase or refinance equipment are for a specific purpose. Retail sector companies such as restaurants are big users of equipment loans as well as companies in the manufacturing sector. Often times in business acquisitions, equipment loans provide a portion of the funds required for the purchase if the equipment is currently owed free and clear and has a usable life of over 10 years.

Asset based loans are vital to the economy and provide funds to companies when more traditional finance programs can not meet the need. If you are a California company in search of an asset based loan or are located anywhere in the continental United States and looking for financing to take advantage of growth opportunities, consider an asset based loan.

Need assistance navigating the capital markets? That is our specialty and we are eager to help. For advise and counsel on asset based loans or any other form of business financing, give us a call 714-719-8966.

To your success!

Patrick Zazueta
Huntington Coast Capital, Inc.

Huntington Coast Capital Secures $1,000,000 Equipment Loan For A Distributor Of Water Station Vending Machines

Huntington Coast Capital Secures $1,000,000 Equipment Loan For A Distributor Of Water Station Vending Machines

Huntington Beach, CA: A company specializing in alkaline water vending machines was searching for an equipment loan to build the inventory required to meet new customer contracts.

Their water stations are designed for commercial and residential use. Their flagship commercial product is the WST-700 is a state-of-the-art water dispensing system that purifies drinking water to a very high standard and percolates it through layers of natural minerals to produce a soft, silky water in one, three and five gallon increments.

On the consumer side, the WST-100 is the first compact reverse osmosis water purifer with a built-in alkaline mineral cartridge. It percolates water through five beds of minerals to produce alkaline water in a very natural way.

Demand for their products has been increasing steadily over the past few months on both the consumer and commercial side. Huntington Coast Capital secured them an arrangement with a consumer lease company to manage the credit review, approval and management of the products sold directly to household users and an equipment loan purchase line to manage and fund their commercial business. Without the equipment loan products delivered by Huntington Coast Capital, they would have to turn away a lot of business and stall the company’s growth.

If traditional banks have declined your company’s equipment loan request, call us. Most business loans are approved through the private sector. If your search for financing has ended in a dead end, give us a call.

To your success!

Patrick

How Will A Rise In Interest Rates Effect Business Owners?

How Will A Rise In Interest Rates Effect Business Owners?

Things That Traditionally Increase When the Fed Increases Interest Rates

 

The recent rise in the Fed funds rate will likely cause a ripple effect on the borrowing costs for consumers and businesses that want to access credit based on the U.S. dollar. That has an impact across numerous credit categories, including the following:

  • The Prime Rate: A hike in the Feds rate immediately fueled a jump in the prime rate, which represents the credit rate that banks extend to their most credit-worthy customers. This rate is the one on which other forms of consumer credit are based, as a higher prime rate means that banks will increase fixed, and variable-rate borrowing costs when assessing risk on less credit-worthy companies and consumers.
  • Credit Card Rates: Working off the prime rate, banks will determine how credit-worthy other individuals are based on their risk profile. Rates will be affected for credit cards and other loans as both require extensive risk-profiling of consumers seeking credit to make purchases. Short-term borrowing will have higher rates than those considered long-term.
  • Savings: Money market and credit-deposit (CD) rates increase due to the tick up of the prime rate. In theory, that should boost savings among consumers and businesses as they can generate a higher return on their savings. However, it is possible that anyone with a debt burden would seek to pay off their financial obligations to offset higher variable rates tied to credit cards, home loans, or other debt instruments.
  • U.S. National Debt: A hike in interest rates boosts the borrowing costs for the U.S. government and fuel an increase in the national debt. A report from 2015 by the Congressional Budget Office and Dean Baker, a director at the Center for Economic and Policy Research in Washington, estimates that the U.S. government may end up paying $2.9 trillion more over the next decade due to increases in the interest rate, than it would have if the rates had stayed near zero.

Things That Are Largely Unaffected When the Fed Increases Benchmark Interest Rates

  • Auto Loan Rates: Auto companies have benefited immensely from the Fed’s zero-interest-rate policy, but rising benchmark rates will have an incremental impact. Surprisingly, auto loans have not shifted much since the Federal Reserve’s announcement because they are long-term loans.
  • Mortgage Rates: A sign of a rate hike can send home borrowers rushing to close on a deal for a fixed loan rate on a new home. However, mortgage rates traditionally fluctuate more in tandem with the yield of domestic 10-year Treasury notes, which are largely affected by inflation rates.

Things That Traditionally Decrease When the Fed Increases Interest Rates

  • Business Profits: When interest rates rise, that’s typically good news for the profitability of the banking sector, as noted by investment giant Goldman Sachs. But for the rest of the global business sector, a rate hike carves into profitability. That’s because the cost of capital required to expand goes higher. That could be terrible news for a market that is currently in an earnings recession.
  • Home Sales: Higher interest rates and higher inflation typically cool demand in the housing sector. On a 30-year loan at 4.0%, home buyers can currently anticipate at least 60% in interest payments over the duration of their investment. Any uptick is surely a deterrent to acquiring the long-term investment former President George Bush once described as central to “The American Dream.”
  • Consumer Spending: A rise in borrowing costs traditionally weighs on consumer spending. Both higher credit card rates and higher savings rates due to better bank rates provide fuel a downturn in consumer impulse purchasing. (For more, read How Interest Rates Affect Spending.)

HCC Secures $700,000 Factoring Line Of Credit For A Manufacturing Client

HCC Secures $700,000 Factoring Line Of Credit For A Manufacturing Client

Huntington Beach, CA: In the second tranche of financing, Huntington Coast Capital secured a $700,000 factoring line of credit for a snack food manufacturer. In the previous post we discussed the equipment loan needed to meet demand from new orders. This factoring line of credit was established for the ongoing working capital needs the company faces. Everything from managing payroll, supplier payments and other overhead burdens the company faces can now be met more quickly through the revolving line of credit.

Are your expenses piling up while you are waiting for customers to pay you? Through our network of capital providers we have most every business funding need covered. Experience the difference Huntington Coast Capital can make in your growth goals!

Call us at 714-719-8966.

Huntington Coast Capital Arranges $50,000 Equipment Loan

Huntington Coast Capital Arranges $50,000 Equipment Loan

Huntington Beach, CA:  Huntington Coast Capital arranges a $50,000 loan to purchase new equipment. A client in the snack food distribution business was growing quickly and needed new equipment to meet demand. The company has been in business for 3 years  and although they started with $2,000,000 in equity (primarily invested in existing equipment), they were showing a loss from operations.

This type of loan request is difficult for a few reasons: 1) losses the company is showing on their financial statements, 2) size of the loan. Most lenders are not interested in providing loans of this size, 3) the majority of lenders would not consider the loan on a stand alone basis, 4) most lenders need outside collateral and/or the banking relationship to provide a loan of this nature.

After a fair amount of trial and error from both our funding sources and independent research performed by the company, we found a solution.

The $50,000 loan will allow the company to purchase 2 new label machines that are needed to meet the schedule of the new contracts rolling out this year. These new contracts total over $4,000,000 in gross sales over the next 12 months. A relatively small amount of capital will enable the company to make a big difference to their top and bottom lines.

If your bank is making you feel insignificant, give us a call 714-719-8966. We specialize in securing loans for requests and companies of all sizes. Equipment loans are just one category of asset financing we focus on. Whether you’re in need of general working capital funding, tenant improvements and expansion funding or purchase order financing, we can assist.

To your success!

Patrick Zazueta | Founder
Huntington Coast Capital, Inc.

HCC Funds $1,300,000 In Business Loans In The Month Of December

HCC Funds $1,300,000 In Business Loans In The Month Of December

Huntington Beach, CA.  During the month of December Huntington Coast Capital secured a $650,000 equipment loan and two SBA loans for $500,000 and $150,000 for a total of $1,300,000 in business loans! The scenarios are outlined below:

  1. $650,000 equipment loan for a southern California contractor – The company was paying a high rate of interest on the equipment they used in their day to day operations – The high cost of financing was impacting their cash flow. They engaged Huntington Coast Capital for their equipment loan needs and we were able to reduce their financing costs by almost half, saving them thousands in monthly finance expense.
  2. $500,000 SBA loan for a growing company in the stencil business – The company produces custom stencils for any design and application. The company had an existing SBA loan and were looking to borrow an additional $350,000 to purchase additional equipment to meet growth demands. Huntington Coast Capital secured a $500,000 SBA loan to cover the equipment costs and refinance the existing SBA loan.
  3. $150,000 SBA Express Loan for a custom glass manufacturer – An established custom glass manufacturer was looking for additional funds for advertising and marketing to break in to new markets and broaden their customer base. They have a profitable business serving general contractors and are looking to expand in to direct commercial work.

Whether your business loan needs are for equipment purchases, inventory or general working capital demands, we can assist. We serve companies of all sizes from startup to established.