24NovNovember 24, 2022 By Patrick

Benefits of a Small Business Loan | Huntington Coast Capital, Inc.

Perhaps a friend or colleague has advised you to take out a loan for your small business, but you’re still in doubt. After all, you may not want to burden your business with debt. However, the following reasons may convince you to consider a small business loan.

1. Enjoy Flexibility

Loans for small businesses have varying terms and repayment periods that can suit your business needs. You can go for a long-term loan with an extended repayment duration or a short-term loan that has to be repaid after a short time. Your choice will depend on whether the loan is for personal, business, or mixed-use. In some cases, you can even apply for many types of loans.

2. Liability-Free

Generally, business borrowers do not need to have collateral or a specific revenue to apply for a loan. The lack of requirements is an advantage to a small business that just started and has limited income or no assets to put up as collateral. Hence, aspiring business owners can easily enter the corporate world quickly and get their businesses running.

3. Retain Full Ownership

When you get financing from investors or partnerships, you must relinquish a portion of the business. Although the arrangement may be helpful initially, problems may arise as the company expands. You have to consult partners on significant decisions and how the business operates, but a loan allows you to keep full ownership of your business.

4. Improve Business Credit

If you repay the loan on time, you will boost your business’s credit score. A good credit score makes it easier to get more loans at favorable terms in the future. For example, companies with good credit scores tend to get lower interest rates for their loans and can easily avoid accrued interest.

5. Access Funds Quickly

Business expansion requires significant capital to hire new employees and operate the business. You can choose to wait for business profits to increase before reinvesting them. However, if you have projects that should start soon, you may take out a loan. The loan allows you to buy new equipment and finance new product development before your competitors do it first.

6. Take Advantage of Low-Interest Rates

Lenders often provide low-interest rates on business loans to get customers. As competition in the lending business becomes stiffer, business borrowers can negotiate for the best deals. Also, business loans are likely to come with lower interest rates than any personal loan.

7. Nurture Relationships With a Specific Lender

When you nurture relationships with your lender, you increase your chances of getting a loan in the future. The lender will have worked with you and knows how you handle money. The next time you go to get a loan, you can always refer back to the previous loan that you repaid on time.

8. Overcome Liquidity Problems

Businesses require working capital to operate effectively. However, small businesses often face challenges that make it difficult to meet utilities and payroll requirements. Since these challenging times are temporary, the business can get through the hard times with the help of a small business loan.

9. Refinance Debt

If your business already has a loan, the mounting debt may interfere with your ability to pay bills and sustain business operations. A small business loan can help refinance your debt and give you time to pay off any loans. The new loan may have a lower monthly payment and interest rates.

10. Reduce Tax Payments

Sometimes, your tax obligations may be lower if you take out a small business loan. For example, you can claim deductibles on the interest you pay on loans. The best approach is to consult a tax expert to know how taking a loan can impact your taxes.

Taking a loan for your small business is easy if you use the right lender. Huntington Coast Capital provides lending solutions for small and medium businesses that need quick cash. Contact us for more information.

12MarMarch 12, 2020 By Patrick

Asset Based Loans – How To Figure The True Cost

Understanding the cost of an asset based loan when contemplating the business loan options available in the marketplace is critical to making an informed decision. Most all business owners need capital from time to time to meet the needs of a growing business. They self-fund operations for as long as they can and if they hit their growth goals, they often require additional capital to get there.

The problem is that fast growing companies are often not profitable and have little in the way of retained earnings. This due to the fact that every dollar going in to the business is going back out to meet working capital needs. This is where asset based business loans are a dependable source of capital.

However, the analysis is much different. Your typical business loan is an SBA loan with a 10-year amortization and fixed monthly payments. This type of term loan is great for fixed costs and long term assets such as equipment, real estate, etc. But what if your needs are revolving in nature?

For example, our typical client comes to us because he has a big order that they can not fulfill on their own. Here’s a breakdown of a common scenario we secure funding for:

$1,000,000 loan request to cover the cost of goods and pay suppliers
The company has a 30% margin or can make $1,300,000 upon the sale to their customer (if they can get a hold of $1,000,000 to fulfill the order!)
They have a verifiable purchase order from their credit-worthy customer
They are expecting the total business cycle to be 60 days from the time of the order to shipment to the customer to being paid by the customer
Cost of the revolving credit (in this case purchase order financing, a form of asset based lending) is 2% of the loan amount per month
Simple equation: $1,000,000 x 4% equals $40,000 (cost of capital), $1,000,000 carrying a 30% margin equals $300,000 profit
Net profit on the transaction after the funding cost is $300,000 minus $40,000 or $260,000.

The question becomes, would you spend $40,000 to make $260,000? The answer for almost everyone is yes! As seen, figuring the cost of an asset based loan is much different than a typical business loan. The review consists mainly of looking at the return on capital versus “interest rate” which so many people are obsessed with.

We have actually had clients say that this cost of capital is “too expensive” on an annualized basis. If the business loan revolves every 60 days, the cost is $40,000 multiplied by 6 (60 days divided in to 360 days for the year) the cost is $240,000 in annualized capital cost. However, we need to remember the profit the company stands to make with this type of asset based loan. The net profit per turn was $260,000. If we multiply that by 6 we get $1,560,000 income on an annualized basis.

So, the question becomes, would you spend $240,000 to make $1,560,000? The answer is a resounding, YES, of course!

If your business could grow using a creative asset based business loan, we would like to hear from you and discuss the options.

To your success!

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

20AugAugust 20, 2019 By Patrick

Asset Based Loans The Difference Between Interest Rate and Opportunity Cost

Huntington Beach CA

What is the interest rate? How much does it cost? What fees are involved? These are some popular questions our clients ask when considering borrowing money to grow their business. These questions are typical when looking to see how much something is going to cost over the long run. However, these questions are more applicable to purchases related to a home mortgage, a car loan, applying for a credit card or other more commodity based financial products.

When considering Opportunity Cost the analysis is much different. For example, if I told you the cost of capital for fulfilling multiple $100,000 orders is 20%, you may say “that’s too expensive!” However, when you take a closer look at it, the true funding costs may be only 6% to 7% per order less early payment discounts. The borrower makes substantially more money than the cost of financing if the margins can support the cost.

Here is an example of a typical analysis we take our clients through. It’s a simple way to determine if financing is right for your business.

A purchase order is received from a customer and the cost of goods is $100,000 (your cost or wholesale cost)
Your gross margin on this sale is 60% (your sales price to the customer is $160,000)
Your financing cost is 6.5% of your wholesale cost for 120 day funding or $6,500 ($100,000 multiplied by 6.5%)
The gross profit calculated after financing cost is $53,500 on this order ($60,000 profit minus $6,500 in finance cost)

The question becomes, “would you spend $6,500 to earn $53,500?” Most all of us would agree that is a worthwhile opportunity. There are some variables that can effect these numbers both positively and negatively. For example, if your company has high fixed costs, this will chew in to the profits. On the contrary, if you are able to negotiate a discount for early payment to suppliers (i.e. a 2% discount for payment in 10 days, expressed as 2%/10 net 30) it will have a positive effect on profits.

Keep in mind that this is one sale and each additional sale will have a better net earnings ratio. This is because fixed costs typically stay the same and more profit gets kicked to the bottom line as more sales are realized. An example of where this analysis doesn’t make sense is if a company has out of control fixed expenses or super slim margins as seen in the electromics industry. In our experience, this analysis pencils out for most of our clients.

We always encourage our clients to look at how much they stand to make versus solely focusing on cost. The lender also needs to earn a return and if expectations are managed, business owners can grow their companies and earn more as a result.

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!

14JulJuly 14, 2019 By Patrick

$500,000 2nd Position Commercial Real Estate Loan Secured For A Lodge In Big Bear, CA

Huntington Beach, CA A client came to us looking to pull cash out on his lodge property in the Big Bear area of California. The funds were to be used for improvements to the property. The request was a challenging one due to the fact that the commercial real estate loan request was really more of a small business loan.

Commercial real estate loans for specialty use or single purpose properties require a deeper analysis. Unlike traditional commercial real estate loans against traditional properties like office, industrial, multifamily and retail properties, specialty use properties need to be analyzed beyond the loan to value and income of property. If a bowling alley closes down, for example, the is significant cost in changing in to something else of improving the location under new management. The lender has to not only be in the property at a conservation loan to value, but also has to buy in to the business being able to survive on a going forward basis.

“This place has been here for years! This is not a risky loan for the lender!”

This is something we hear quite often when being sold on securing funds for specialty or single purpose properties. Anyone remember Circuit City? They were forced to close their doors and are currently under a massive re-organization. Established in 1949, they enjoyed steady success through the 70’s, 80’s and 90’s before feeling the pain of consumer shift to online shopping and competitors entering the space. I have personally witnessed McDonald’s locations closing! The point is that anything can happen with business purpose commercial real estate, no matter how large or how small the operation is.

What additional analysis is required?

Some of the points to consider with these property types are the following:

market demand for property
competition in the surrounding area
obsolescence of amenities or attraction (how many kids go to the arcade nowadays?)
quality of management
customer experience (in today’s world a bad Yelp review could have damaging impacts)
landscaping and overall desirability of the property

This is not a complete list, but covers some key points to be considered when financing these property types.

If you have a challenging loan request, we would like to hear from you!

To your success!

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

15FebFebruary 15, 2019 By Patrick

Asset Based Loan Funding Announcements

Huntington Beach, CA Huntington Coast Capital is proud to announce that we secured $525,070 in new asset based term loans for our clients through the first two weeks of February! The loan details are as follows:

A $350,000 asset based loan for a distributor of cell phone and tablet accessories. The company once had sales of over $20,000,000 a year and had a $1,000,000 line of credit with Bank of America. However, margins in the electronic accessories industry are becoming increasingly thin with all the big players entering the market. In 2017 the company made the conscious decision to exit the high volume, low margin business and pursue the smaller volume, but higher margin business. As a result, their profits were not greatly effected, but their gross sales went down and thus their need for a $1,000,000 line of credit. Surprisingly, Bank of America asked them to find a new lender as they do not provide lines of credit of that size to their clients. They are interested in the larger borrowers. The pressure to find an asset based loan was mounting as the requirement was to pay off the entire $350,000 as quickly as possible. Huntington Coast Capital was able to find them an asset based loan to get them out of their predicament! With an asset based term loan now in place, the company can re-focus on operations with Bank of America off their backs
A $175,000 asset based loan for a restaurant owner. An established restaurant owner was looking for a loan to open a new concept in a second location. Due to the company ownership structure that included investor unwilling to guarantee the loan, a little creativity was required to secure the financing they were looking for to expand. HCC was successful is obtaining an asset based loan for the company after numerous lenders on both the private and institutional side. There was no interest from a number of SBA lenders and the loan was ultimately completed by a non-SBA lender offering a 10-year asset based term loan. The term of the loan kept the payments down and allowed the company enough cash flow to carry the new project.
A $70,000 asset based loan to a physicians consultant company. A consultancy group came to us looking to refinance some high priced MCA loans or merchant cash advance lenders. These loans are expensive to say the least and they often require direct daily debits from the bank account of the client. With high interest sucking the cash flow out of the company, they needed answers quickly. HCC secured an asset based loan to refinance these high priced lenders and also provided for a portion of cash out to be used as working capital for some new contracts coming down the pipeline.

If your company could benefit from an asset based loan or if you are in need of an asset based loan for a commercial real estate purchase or refinance, we would like to speak with you.

14Nov By Patrick

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

09AprMay 19, 2018 By Patrick

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

26FebMay 19, 2018 By Patrick

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!

25Jan By Patrick

Huntington Coast Capital Arranges A $150,000 Unsecured Loan

Huntington Beach, CA Huntington Coast Capital arranged an unsecured business loan for a company offering online teaching credentials. The company is the first online alternative certification program in South Texas to be approved by the State Board of Educator Certification (TEA) , and certifies candidates across Texas in over 25+ certification areas offered in the state of Texas including Career &Technology and Trade Vocations.

The curriculum allows candidates to review courses as many times as they need to, gives benchmark quizzes at specific intervals to ensure students are comprehending what they are studying, and provides the user with immediate feedback to track their progress. In addition, they have partnered up with companies dedicated to test preparation and have incorporated their material and curriculum to provide their candidates with more opportunities for success.

The unsecured asset based loan was supported and approved due to the positive cash flow of the company. Traditional business loans are more geared to B2B companies with inventory and accounts receivable. Finding a loan proved difficult for the company and they urgently wanted to refinance some higher priced debt.

Through our broad base of lenders, we were able to provide them with a solution. Huntington Coast Capital prides itself on providing business loans to companies who otherwise would not know they are available. Could your business benefit from additional capital? If so, we would like to talk to you.

To your success!
Patrick

16JanJanuary 16, 2018 By Patrick

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