Working Capital. Every Business Needs It!

Working Capital. Every Business Needs It!

How long would your business last without enough money to cover expenses? Most businesses fail within the first three years due to lack of enough working capital, and even well established operations can experience cash crunches. Competitors are a constant. How financially strong your business is, will determine how well you can compete.

The frustration for many business owners is this – traditional lending sources either require you to be financially solid before they lend you money to grow or are conservative in the amount of credit they extend to the seasoned business operator.

So where do most business owners obtain the financing they need to grow their business? In short, asset based lenders. There is a 2nd tier of lenders below bank financing that finance purchase orders, equipment needs, inventory, real estate and accounts receivable. Essentially any asset listed on a given company’s balance sheet can be eligible for financing. Their focus is either on the quality of the asset they are financing or the financial strength of the customer placing the order (in the case of purchase order and accounts receivable financing). This approach makes financing growth much more obtainable for business owners.

What about financing for the established companies? A challenge remains here as well. Financing available for the established business owners is often inadequate to meet growth needs. Banks are most typically conservative and provide small lines of credit, even to companies with strong net worth and income. Companies need creative solutions when seeking additional capital and this creativity comes from the non-regulated, more entreprenuerial thinking, capital sources in the market. Could your business benefit from knowing a partner like this?

About Huntington Coast Capital.

Huntington Coast Capital secures funding for companies in a broad base of industries. Our clients come to us to find a more flexible lending partner to meet their growth needs. Many are declined by the bank and are in need of a more creative and entrepreneurial funding solution.

We consult on a wide range of funding options for business owners throughout the United States in the following areas:

  • Supply chain financing
  • Equipment loans and lease programs (learn more about our equipment loan platform offered through our subsidiary)
  • Lines of credit for working capital needs
  • Term loans for marketing, hiring staff and general expansion needs
  • Factoring services for accounts receivable financing that also provides for back office credit and collection functions
  • Purchase order financing
  • Asset based loans
  • Business acquisition financing
  • Inventory financing
  • Private commercial real estate bridge loans
  • SBA loans for business and real estate needs

Whether you are a startup or established, in need of $100,000 or $10,000,000 we have the capital partners to meet your needs. Contact us to see how we can assist in taking your business to the next level. To your success!

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.

Introducing Equipment Finance Quotes.com!

Introducing Equipment Finance Quotes.com!

Huntington Beach, CA Huntington Coast Capital has launched a sister company specializing in asset based equipment loans and lease programs for asset based equipment loan requests of all sizes.

Equipment Finance Quotes (www.equipmentfinancequotes.com) brings business owners and/or their consultants together with the right lender for their asset based equipment loan request. It works by matching the questions asked on the online application with the requirements from lenders on the platform. Once all of the questions are received, a preliminary estimate on the chances of approval is issued. From there, a list of required items is requested from the business owner to complete the underwriting review. If approved, a term sheet is issued by the lender and the business owner and lender are placed in direct contact.

The inspiration for Equipment Finance Quotes.com was similar to what inspired Huntington Coast Capital. We want to simplify the process of finding a loan for business owners. Additionally, we want to not only find the right loan for the business owners request, we want to provide them with some options to choose from and get some lender competition going for their request. Through our online platform we are taking the time, frustration and energy out of the process and providing the business owner with a user-friendly customer experience.

We launched Equipment Finance Quotes.com to handle the amount of equipment loans being received. Our inquiries in this area required a separate platform to better streamline these requests.

If your business could use additional equipment for growth or a line of credit against existing equipment, we would like to hear from you. Please visit us at www.equipmentfinancequotes.com.

To your success!
The Huntington Coast Capital Team.

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

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

$750,000 Asset Based Equipment Loan Secured

$750,000 Asset Based Equipment Loan Secured

Huntington Beach, CA Huntington Coast Capital secured $750,000 in credit for a company in the trucking industry. The financing was a combination of a $250,000 term loan and an asset based equipment line of credit to be used as needed for new purchases. Like most of our clients, they were growing quickly and needed more money than their existing bank could extend on its own. Through our network of lenders we were able to combine two separate asset based loan programs to meet the funding needs of the company.

The term loan is set at $250,000 while the line of credit will grow with the demand the company is experiencing. Having the right funding partner makes all the difference. Could your business use and equipment loan or asset based loan to reach the next level? If so, we would like to speak with you.

To your success!

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

Asset Based Equipment Loan Secured For Contractor

Asset Based Equipment Loan Secured For Contractor

Huntington Beach, CA: A demolition contractor needed to purchase some additional excavators for a recently awarded job in West Los Angeles. The contract was awarded and the City wanted them to start within three weeks. This deadline placed enormous pressure on the contractor to perform. If the asset based equipment loan was not secured in time, he could have lost the 4.8MM contract to another supplier.

Huntington Coast Capital explored a number of asset based loan options for the client. Including an asset based real estate loan secured against his personal residence. In the end, we were able to secure an equipment loan using only the excavators as the collateral. A master lease was arranged with the ability to amend the lease with new equipment lease schedules as needed going forward.

If your company is looking for an asset based equipment loan, give us a call 714-719-8966.

To your success!

Patrick Zazueta | Founder
Huntington Coast Capital, Inc.

HCC Secures Asset Based Loan For Importer Of Baby Bedding And Gifts

HCC Secures Asset Based Loan For Importer Of Baby Bedding And Gifts

Huntington Beach, CA: Huntington Coast Capital secured a $1,250,000 asset based line of credit against accounts receivable for a company in the baby bedding and gift industry. The company was able to secure an asset based line with additional financing in the form of purchase order funding, another form of asset based loan program.

Their current lender was more conservative than the funding we secured for them. HCC was able to provide them with an asset based solution that delivered more capital availability to grow their business. Their asset based loan availability grew from $750,000 to $1,250,000 allowing them to fill more orders from their major customers!

Could your business benefit from an asset based loan? Huntington Coast Capital secures asset based loans in California and across the nation. Give us a call to see how we can assist your business.

To your success!
Patrick Zazueta
Huntington Coast Capital, Inc.
714-719-8966

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