Jim Plack Advises on Alternative Lending Options for Small Business Owners
ANNAPOLIS, MD / ACCESSWIRE / May 9, 2019 / The recession following the 2008 financial crisis spelled the end of the business line for countless small enterprises and decimated the profitability of others, leaving the survivors with depressed revenues, tenuous bank accounts, and bleak borrowing prospects. With their credit lines depleted and income battered, many existing companies struggled to remain afloat, let alone expand, while businesses planning to grow often found themselves impeded by the reluctance of banks and credit unions to resume lending after the crisis. In many cases, companies surviving the recession have faced the threat of withering away in the recovery due to the lack of new credit, veteran financial industry executive Jim Plack points out. However, he notes further that small enterprises can still realize their dreams of growth since they have access to quality alternative sources of capital in the shape of non-traditional lending institutions.
Historically, the ability of small businesses to secure growth funding has largely depended on local community banks lending them money. Data released by the US Federal Deposit Insurance Corporation at the height of the financial crisis revealed that small and mid-sized lenders (defined as those with assets of up to $10 billion) controlled just 22% of all bank assets but accounted for 54% of small business lending. Meanwhile, the 20 largest banking institutions in the country held 57% of all assets, but their share of total small business lending was 28%, with a mere 18% of their commercial loan portfolios allocated to this segment versus 56% for small banks and 33% for mid-sized lenders. According to Jim Plack, one solution for business owners is to start building relationships with non-traditional credit providers such as specialty lenders or factoring companies that extend loans based on outstanding receivables or invoices.
Jim Plack is quick to note that one has to be realistic: a battered enterprise will not be able to dictate terms. Initially, it may have to settle for higher-cost credit facilities, but once it has a proven track record, it can re-establish its overall creditworthiness. A company owner needs to reach out to a specialty lender and start with a small accounts receivable line or a heavily collateralized loan, graduating over time to more traditional, less costly funding. Another alternative is to use strong guarantors when taking out credit. It is also essential to keep business and personal credit histories separate to minimize the effect that negative events for one might have on the other. Jim Plack also advises small companies to open a business credit file with all three reporting agencies (Experian, Equifax, and TransUnion) and obtain at least one corporate credit card which is not personally linked to the business owner(s). It is also prudent to establish a relationship with minimum five vendors to create credit that the company can use when purchasing from them. Last but not least, timely payments are critical for avoiding a negative impact on the business credit even before the organization can transition to better rates.
Jim Plack assumed the leadership role at South River Capital in 2016 after two decades of serving in CEO roles for both Sports Capital Lending and American Bank. Plack brings his extensive industry expertise to a company focused on niche real estate loans, bridge financing, and credit for professional athletes and small to medium sized businesses.
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SOURCE: Jim Plack