Getting the funding needed to run small to mid-sized businesses may be getting easier around Southeast Michigan, but there is still a need for alternative funding options.
Many businesses have benefited from more loan approvals than at most points in the last 24 months. However, the reason isn't because of lending standards becoming less stringent but a case of where the strong businesses survived, according to one lender.
"The change is not due to a change in credit criteria in underwriting, but businesses have been able to weather a severe economic climate and the business financials are starting to improve," said Aaron Reeder, business banking officer with Charter One Bank in Royal Oak. "Many industries are seeing a turnaround in their business, leading to improved cash flow and growth."
One example of this trend is Vigilant Technologies, a Troy-based IT firm that specializes in Oracle professional and managed services. Over the last two years, the company has seen a high amount of growth, projecting to double their year-end revenue from last year, Reeder said.
"To sustain this kind of growth, they needed to make sure they had the proper credit facilities in place. Because of that we had the lending products they needed to manage their cash flow and continue to grow."
One factor in improving the opportunities for funding is for businesses to make sure they effectively tell the story of their company, about where they have been and where they are going. The details allow their banker to convey this story to their underwriting department, and it gives a higher level of explanation to the business financials they are looking at.
"The right information and asking more questions can certainly lead to a more successful outcome," Reeder said.
In the past couple of years, collateral suddenly meant less than ever before when trying to get a business loan, said Jerry Singh, president of RTI Laboratories, a full-service analytical testing laboratory in Livonia. Bankers couldn't assign a monetary value to collateral. What has increasingly mattered has been actual cash flow.
"In particular you had many banks staying away from automotive before the turnaround in that industry began," Singh said. "They needed diversification so you weren't reliant on any one industry."
Yet lending is starting to become more available even for companies in the automotive industry. In late September President Barack Obama signed a $42 billion small...