If you”™re a quality company, banks will want to lend you money. If you”™re not, they may not want to, but there are options. And there is competition, but rational competition.
That”™s the assessment of the credit markets by a panel of lenders who spoke about the state of lending to small- and mid-sized businesses in the New York area at an event in Tarrytown hosted by the Association for Corporate Growth NY, a group of middle- market bankers and financial professionals.
“The market is bifurcated,” said Barry Karen, first vice president of privately held Israel Discount Bank in New York City. “For a profitable company, there is lending at the bank level. Four or five banks are interested in a good company ”¦ banks are chasing you.”
But if a company has financial problems, “They are pushed out of banks,” said Oleh Szczupak, chief credit officer at Keltic Financial Services in Tarrytown.
Szczupak said that banks also treat large and small companies differently in their lending. “Banks are looking for large deals,” he said. “So what does a $50-million company do? Banks can”™t react to those kinds of companies, and that void is creating opportunity for asset-based lenders.”
That type of lending, in which a loan is secured by an asset, usually is used when a company is not able to raise funds in the capital markets, such as by selling bonds to investors.
Regarding competition among lenders, “The existing players are more competitive than ever,” said Stephen Altneu, senior vice president for originations at Capital One Leverage Finance in New York City. That is especially true, he said, if a bank in the U.S. has a parent company in trouble in Europe and is looking to compensate for losses there with increased lending here.
As Szczupak put it, “There”™s competition, but it”™s rational competition. There”™s not a lot of pricing competition. The days of aggressive advance rates are gone. You”™re not doing anything stupid to win the deal.”
John Mulvey, who manages a team of bankers at Wells Fargo”™s commercial banking office in White Plains, said, “I don”™t want to be a Studebaker – overpromise and underdeliver. Don”™t make promises you can”™t keep.”
Merger activity can also create competition, said Altneu. “The pace of M&A activity is up and that is creating demand for credit. But you may have to try to win business away from a company that has a good relationship with its lender.”
The panel pointed out that there are things a company can do to help itself as it tries to find financing. Szczupak said he sometimes notices a lack of sophistication among prospective borrowers. “Get an advisor you trust,” he urged. “You need someone to come up with a plan, for example, how you”™re going to deal with creditors and vendors.”
Companies are also getting some help from the economy. “The double dip is not coming, the economy is recovering slowly but steadily,” Mulvey said. “Companies are seeing a rebound in sales.”
As a result, said Karen of Israel Discount Bank., “There”™s no question, credit is getting looser.”
