Banks

Air Purifiers Norwalk
Private lenders, who charge much higherf interest rates than banks and use differen t criteria indetermining creditworthiness, didn’t have much demandr for their services back then. “There was lots of everyone throwing it at and we probably had the worst underwriting period in the historuy ofthe country,” said Kevin president of San Jose-based Capital. “Now it’s done a 180.” That about-facee means distressed companies with no abilityg to get loans from banks are flooding alternative lenders like Graystone and finance intermediaries such as Hanleyand Co. Inc.
in Campbell as they look for fundingh to either pay offthe banks, continue businesa operations or both. “Everyone’sd hurting, everyone’s cash flow is down and everybody’s assetzs are worth less,” said Brandt managing partner at the firm bearinghis “The banks are sitting with highly leveraged loans againsft impaired collateral, and they’re stressed out due to the regulator pressure they’re under. There’s going to be a massive flood ofproblem loans.” Alternative lenders are fetching rate ranging from 15 percent to 20 percent on loans, a premiumj compared with the traditional bank loan that hoversd around 6 percent.
Banksa are able to lend at much lower interesft rates because their own borrowing costs are and they have access tocapital markets. Graystone gauges a borrower’s financialp health by reviewing the accounts specificinvoices and, in some cases, inventory. If approved by the borrower continues to be responsible for its owncollectiona activities. O’Hare said Graystone’s deal flow has doubled sincr latesummer 2008. Its loan portfolilo has increased 20 percent in the pastsix Meanwhile, revenue from exiting borrowers with revolving lines of credit has declined by about 25 percentf as businesses fall on hard times.
As opposed to a Brereton Hanley shops distressed companies to several alternative financiers such as Graystoneand Campbell-basee BFI Business Finance in order to find optimal lending terms. Brereton Hanley’s distressed restructuring business is up 40 percenty in the pasteightr months. The kind of companies seeking that service represent everg sector inthe economy, Brereton said, from constructionj to food to retail companies. In an interestingg twist, even traditional lenders are seeking helptheses days.
O’Hare said he is getting callzsfrom banks’ workout departments asking him if Graystons is willing to take them out of certaij deals because either the loan has been callefd or the bank was considering callinvg the loan. “Good bankera will always be thinking of alternatives fortheif borrowers, but it hasn’t been to the extent that we’rwe experiencing now,” he said. That’s a clear indicationb that the banks are under extremer pressure to move troubled loans offthe “Rarely would they be callinv alternative lenders to take these (loans) off their hands,” Breretonn said.
“If there wasn’t enough workouft work, they’d lose their jobs.” Gettingb those deals depended on closer relationships with specialassets bankers. “Whag that tells you is that these workouy guys are under tremendous pressure from theidr superiors to move theseassets out,” he While the potential for new borrowerzs is plenty in the current O’Hare said due diligence on new clients is more important than especially for those lenders financing a company’s accountsw receivable. The credit crisis is so widesprear thata borrower’s ability to repay the loan is incredibl vulnerable to the financial health of its own businesses.