Commentary - Market Update
The time to seek a new, aggressive line of credit is NOW, while the finance market is still making new loans. The continued lowering of the prime rate by the Fed indicates financing is available, but may not be for long.
The Los Angeles Times newspaper featured an article titled "Hard Times May Await." "It will be harder to get financing next year as venture capitalists, banks and the stock markets tighten the once wide-open money spigot. Banks are tightening their loan criteria in the face of an increase in bad loans. Down the line, companies could run out of money and be forced to close their doors."
The lending environment in the financial markets has been tightening up and will get much worse later this year. The availability of new capital and credit will be significantly diminished for companies with financial problems. The easy debt, equity and venture capital financing of earlier this year will be gone for companies with "special credit considerations," which include losses, high leverage, negative net worth, and bankruptcy. Lenders are focusing on the "better" companies to finance this year.
The Los Angeles Times newspaper featured an Associated Press article titled "Banks Tighten Standards For Business Loans." The summary is that banks have tightened standards for commercial and industrial loans since August, which was when banks first started making loans more difficult to obtain.
My interpretation is that financial institutions will continue to tighten credit, make business loans harder to qualify for, and raise financing standards and requirements. My banker friends all agree new financing will become much more difficult to obtain for companies with finance and credit problems, even though interest rates are very low!
Our bankers and financial institutions are filling their quotas for deals they are committing to at this moment. If you are seriously seeking a new credit facility for refinancing, recapitalization, restructuring, or to complete an acquisition - it is in your best interest to lock-in a financing commitment from a senior credit officer as soon as possible.
Our client companies all have their new lines of credit, new business loans, and new working capital requirements in place for this year. Please allow us an opportunity to review your finance requirements and let you know your financing options. We want your business! Thank you.
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