Brooklyn's Progress
June/July 2007

BY HAROLD EGELN

When a bank turns down a business financing request, which happens often, who does a business call? Some answers were provided by business finance professionals in a small business seminar titled, "What to Do When the Bank Says 'No' – Creative Financing Alternatives."

"When a bank says 'no' to you, there are several ways of getting creative and working together with alternative sources for your financing needs," said Daniel Fisher, director of financial services, Brooklyn Business Solutions Center. He, along with Center Director Rick Russo, introduced the morning seminar at the Solutions Center on Apr. 26.

Francisco J. Acosta, chair, Brooklyn Chamber of Commerce Small Business Seminar Committee, noted "out of 100 businesses that go to banks for a loan, 92 get declined." His Committee and the Brooklyn Business Solutions Center organized the seminar, which focused on six alternative financing areas.

Mr. Fisher told the attendees that the non-banking financing resources available are microlenders, who offer financing anywhere from to $15,000 to $50,000, merchant services, factoring/AR financing, leasing companies, suppliers and equity financing.

Other Routes
"Our counselors try to teach you to put together all the information to put you on the right track," said Ana Marie Ruiz, Community Relations Specialist. ACCION-NY/NJ.  "We run your credit history to see what's going on. We can then see what fits your needs."

ACCION can provide microloans up to $50,000 for business expansion and up to $30,000 for new businesses starting up, with 11 to 17 percent interest.

Merchant account services were discussed by Richard Robertson, Global Merchant Solutions, who said, "We purchase a future asset in your business by offering cash advances to small and mid-sized merchants. We become partners in your business." The average advance is $20,000, which is directly deposited into a business account, with a six month term.

Payback is deducted from daily receipts automatically. A/B credit is not required. To qualify, merchants must be in business at least for two years and have a monthly minimum of $1,500 in Visa/MasterCard.

Another solution would be factoring resources.
"We provide what is essentially an insurance policy to measure the credit worth of your customers. If your customers don't pay for the invoice, we'll do that," said Lewis Faber, Chairman, Yale Capital, Inc. "We collect from your customers two to five percent, depending on the invoice's size. Effectively, we become your back office."

Equipment and supplier leasing was outlined by Mr. Fisher, who said that equipment loans “are similar to bank term loans.”

“These leases are used mostly for computer equipment turnovers. Out-of-date equipment can be swapped out by restructuring the lease. In supplier financing, there is a relationship which businesses must be sure to be maximized."

Equity Investment is available from American Financiers Group and MSF Capital Advisors, MSF was represented by Michael Felman, President.

"We raise capital for real estate projects by providing equity capital for businesses either staring up or looking for an exit strategy, and, especially for startup businesses, venture capital," he said.

Executing a business plan or idea, Mr. Felman said, requires a business structure. "Your managing team is so important. You must have an accountant and an attorney. You have to be ready, for that's the key, if someone gives your business a check. It has to be clear that you are set up to take that money."

As for angel investors, Mr. Felman said, they tend to invest only 10 to 15 percent of what they have available for funding requests. Usually they provide between $20,000 to $50,000. For bigger projects, it is usually $100,000 to $500,000, and then $1 million and up, depending on the situation and industry. Mr. Felman advised checking with the NewYorkAngels.com website.

To learn more about creative financing options, contact Daniel Fisher, the Chamber’s director of financial services, Brooklyn Business Solutions Center at 718-875-1000 ext. 114, or at dfisher@brooklynchamber.com.