By JOSHUA KAHN
In a rough-and-tumble economy and tight credit market, some small-business owners -- unable to secure a small-business loan or line of credit from a bank -- have been forced to think outside the box to access capital to keep their businesses afloat.
Seeking an alternative to the loans and other financial services offered by traditional banks, some business owners have turned for help to business loan brokers such as Tony Borriboonratana, owner of Temecula-based Inland Empire Business Capital.
After eight years in the banking industry, Borriboonratana started Inland Empire Business Capital in August 2007 because he saw a "direct need" to ensure that small- and midsize-business owners were made aware of their financial options.
"A lot of business owners don't have a grasp of what they qualify for," he said.
Inland Empire Business Capital offers business owners a variety of financial options that may not be offered by traditional banks, which often are conservative about to whom they lend and are limited in what they can offer, Borriboonratana said.
A UC San Diego alumnus, Borriboonratana said his experience in the banking industry -- beginning as a teller and working his way up to commercial lending officer -- has given him the knowledge to help his clients access capital.
As an entrepreneur himself, he understands the challenges faced by business owners every day, Borriboonratana said.
"A lot of business owners need capital to be able to survive the next six months," he said.
Today's credit crunch and strict lending environment present a Catch-22 for his business, Borriboonratana said. While the number of clients seeking access to capital is growing, finding lenders is becoming more difficult, he said.
"The demand is high, but the supply is low," he said. "It's not like banks have stopped lending; they're just more selective about who they lend to.
"Banks have tightened up their lending practices."
Borriboonratana's company offers small and midsize businesses a range of financial services, such as cash advances, , according to Inland Empire Business Capital's Web site.
Businesses like retail stores and restaurants that accept credit-card charges as a form of payment probably benefit most from a cash advance, Borriboonratana said.
A business interested in a cash advance -- once approved -- could borrow from 80 percent to 120 percent of its monthly credit-card transactions, according to the Web site.
Under this plan, a business bringing in $10,000 a month in credit-card transactions could receive a cash advance of up to $12,000.
After receiving the cash advance, the business pays it back with a percentage of daily credit-card transactions until the debt is paid.
The business gets the capital it needs, and since the payment plan is based on a percentage of daily credit-card sales, business owners pay less when business is slow and more when business picks up.
A number of options are available to business owners seeking a loan, said Robert Saenz, president of the Inland Empire Small Business Financial Development Corp. in Ontario, a nonprofit, public-benefit corporation that contracts with the state of California to administer the state's loan-guarantee program. The corporation's primary service area encompasses Riverside and San Bernardino counties.
One of the options is the California Loan Guarantee Program, which helps small-business owners obtain financing from a lender by guaranteeing up to 90 percent of the loan amount up to $500,000, Saenz said.
Last fiscal year the Inland Empire Small Business Financial Development Corp. processed 41 loans. Since July, 15 loans have been awarded, Saenz said.
The state program helps small businesses obtain loans for which they would not otherwise qualify and build a positive credit history with a lender.
Getting a loan through the state program is preferable to getting a loan with a broker, Saenz said, but he understands why some businesses seeking quick capital would explore the options provided by a broker.
Business owners needing capital "go where they can get it," Saenz said.
Another popular option small-business owners have is through the U.S. Small Business Administration's Guaranteed Program, in which the SBA guarantees repayment of 75 percent of the loan once the borrower has been approved by a lender.
Loan brokers with proven access to capital always have a role to play, since there always will be a demand for capital by business owners, said Christopher Maggio, senior vice president of Inland Valley Bank in Moreno Valley.
However, some financial services offered by loan brokers, like merchant cash advances, might prove to be costly over time, Maggio said.
"The goal is to wean off of that with a good community banker," he said.
Borrowers unsure of the best way to access capital should seek the advice of trusted advisers, Maggio said.
The three most important relationships a business owner can have are with his banker, his attorney and his accountant, Maggio said.
Capital Is King
Unscrupulous brokers have given his line of work a bad rap, Borriboonratana conceded.
Some loan brokers pushed bad deals onto banks and borrowers alike by approving for loans unqualified business owners who defaulted on the loan, he said.
Because of the fraudulent deal, everyone suffers and the broker loses any relationship with the lender, he said.
He is careful about which clients he takes on, Borriboonratana said.
Since he started his company, none of his clients has defaulted on a loan, he said.
"I can't help every single person I talk to. I'm very upfront and honest with clients about loans," he said.
Borriboonratana knows that in good times and bad times, capital is king.
"Businesses will always need capital -- until the end of time," he said.
Published: Monday, November 17, 2008