ss_blog_claim=bd50edc517cf0b7549fe6b5f63b6b5f8 The SLS Business Finance Blog

Wednesday, March 11, 2009


For all of our long time subscribers...we have moved to our own home on the web. We are no longer renting space, but have purchased a home.


Visa Ahead Of The Curve

Strong Beginning To 2009

Just when you thought it was all doom and gloom in an ailing economy, a beacon of light. Defying economic trends, Visa reporting a net operating revenue of $1.74 billion in 2009. This is a 17% increase from its $1.49 billion at this point 2008. This figure is the result of positive growth in all categories. The largest sector being international transaction revenues, $500 million to be exact. The company anticipates positive net revenue growth for all of 2009. There is however, talk that 2010 could bring declining economic conditions in the credit card industry. Many analysts feel that the implosion that has wreaked havoc on the economic front will indeed spread to the credit card sector. As more and more people rely heavily on credit just to get by, this to could result in the house of cards tumbling. In the short term.....Visa stands strong in a turbulent market.

Southern Lending Solutions

Monday, March 9, 2009

New Program Announcement: Unsecured Business Lines of Credit

Readers of this blog know that I believe in it being informational and rarely, if ever, do I talk specifically about our services and programs. Today I have to make an exception and talk about a program returning into the fold of our offerings at Southern Lending Solutions.

The reason for this exception is due to the fact that this program addresses the primary problem for small businesses today, access to credit and credit lines.

So I am pleased to announce:

The Southern Lending Solutions Unsecured Business Line of Credit Program

This program is a revolving line of credit and as we all know these days, credit is important to the growth and sustenance of small and middle market companies.

Who qualifies:

1) A Credits (generally 700 or higher FICO scores)
2) 2 Years Time in Business (from date of incorporation)
3) Clean D&B Report (if one is listed for the company)

What's it cost?

A range of Prime plus 5 to Prime plus 12, depending. Currently, Prime is @ 3.25% so this variable rate starts at 8.25%.

If all 3 apply, then an application is all that's required. No tax returns, No business financials, No personal financials and no pre-existing relationships with the funders or banks are required.

A great program where everyone who qualifies should jump on board regardless of need, since as we have seen to need credit and not have it can devastate a business.

Southern Lending Solutions

Wednesday, March 4, 2009

Even More on Collateral

So Collateral affects pricing. How do we lend against it?

There are 2 circumstances where we lend against collateral. They are:

1) Use of additional collateral to back a lease for a new piece of equipment
2) Refinancing the collateral to generate cash (known as a Sale/Leaseback)

Clients can use existing collateral to back a new lease when they want to bring the risk to the funder down, and therefore the price or when the equipment is sitting there not being fully utilized. More often then not, existing collateral is used to back a new lease because the credit is weak and its the only way to get the deal done.

Refinancing existing collateral can occur when credit is weak or when its strong but in either case, usually it means there's a cash need in the business. A business that is equipment rich and cash poor. When credit is strong and there's extra collateral, then that's 2 strong C's and that equates to lower prices.

Southern Lending Solutions

Thursday, February 26, 2009

More On Collateral

Collateral can be a big factor in the approval process for an equipment lease.

Does collateral affect pricing? Absolutely

If collateral is strong (heavy asset or something with a large active secondary market), then a residual value can be more easily established and profit through the resale of the equipment more easily attained by the lessor. Those things mean better pricing, higher residual value and lower stream rate (interest rate payable on the monthly payment stream).

Why does a higher residual mean a lower stream rate?

Think of it this way, let's say the lessor's required return is 12%. With no residual, the 12% most come from the payment stream. With a good residual value, some of that 12% can come from the payment stream and some from the resale of the equipment (either to the lessee or in the secondary market if the equipment is returned. Here is an illustration with a $10,000 lease over 36 months:

Equip Value 10000 10000
Term 36 36
Residual 1000 1
Payment 329 329
Rate 6.26% 12.03%

Note the difference with the same monthly payment. The lessor only gets 6% of their return from the 36 month payment stream. The client (and lessee) also benefits because if the equipment is returned, then the $1000 residual value is saved since they aren't paying for that as well. A true win/win.

Southern Lending Solutions

Monday, February 23, 2009

Collateral Based Leases

Collateral can be an important factor in both the approval and the pricing of a lease. How so?

There are many companies in the equipment leasing business that make their $$ off the residual values. Many leases, and all true leases, are structured with a residual value and purchase option. Often that purchase option is $1, 10% or Fair Market Value (FMV). So leasing companies can make $$ on the residual if they do a 10% option and their real cost is 5 or 6%. That spread becomes their profit. Since lease rates have to be affordable and competitive, as well as profitable, this means lessors have to be familiar with the equipment type and know how much they can resell the equipment for should the client (the lessee) return the equipment. If the residual value is way too high, then the payments are way too low (at the same lease rate) and the lease isn't profitable so its a balancing act.

There are other factors that influence collateral's affect on pricing as well for future entries.

Southern Lending Solutions

Friday, February 20, 2009

Cash Flow

Everyone has heard that Cash is King and that's never been more true than it is today since companies have less access to credit than they used to. So what's important in analyzing a lease based on cash flow?

By cash flow, we mean cash flow circulating through the business. Cash Flow is one of the 3 primary business financial statements, along with the Income Statement (also known as P&L for profit and loss) and the Balance Sheet. The only exception to this is for startups where there is no cash flow and that cash flow has to come from another income source, other assets or from savings. One of the benefits of strong cash flow is often times, this equates to good business credit, as measured by Paydex, a service provided by Dun and Bradstreet.

In nearly every case we need the previous year's 3 financial statements and sometimes we need 2 years in order to look at trends. Remember, these companies often don't qualify on credit alone so more information is almost always required.

Debt Service Coverage Ratio is the ratio that defines the risk in this type of lease. How much cash flow runs through the business that can be used to service the debt? Most prefer to see a ratio of 2x or 2.0, meaning that the free cash flow covers twice the amount of the lease payment.

By analyzing cash flow of a company where cash flow is strong but credit is weak, we can often use the strength of the cash flow to answer the ultimate question, will they be able to pay this lease back.

Having poor credit makes it tougher but its by no means impossible especially if strong steady solid cash flow is a part of the picture.

Southern Lending Solutions