Opening SME Credit Channels

Golden Pacific Bank in California has created a new lending subsidiary to provide SBA loans for small mid-size business enterprises (SME). The program called SmartBiz uses an advanced technology platform that allows the bank to reduce the cost of borrowing and extend credit more efficiently to creditworthy SMEs. 

The lending platform was developed by the firm BillFloat. The technology enables SmartBiz to efficiently originate, process and close SBA loans. The cost of processing loan applications and credit decisioning time frames are reduced; positioning the lender to better serve the credit requirements of small business clients. 

SmartBiz is looking to reduce a typical credit decisioning time frame from 90 days to less than a week. The bank believes its technology to be a competitive advantage; enabling the extension of longer term loans, lower rates, lower monthly payments expanding the choice of finance options currently available to small businesses. 

Golden Pacific is a community bank with $132 million in assets. Deploying the new lending platform will drive operational efficiency, strengthen compliance mandates, increase the banks return on capital and generate significant fee income for the bank. 

Sum2's clients use Credit|Redi to determine financial health and creditworthiness. Credit|Redi provides users business assessment applications to optimize financial performance and create business plans that are sure to win the confidence of lenders and capital providers. Credit|Redi improves profitability, reduces risk and enhances creditworthiness.

Get Credit|Redi on Google Play here. Get Credit|Redi

Get Credit|Redi

risk; sme, credit risk, lending, private equity, financial health, risk assessment, credit repair, business planning and analysis, SBA loan

We Can Work It Out: SME Credit Repair

As the US economy slowly emerges from the great recession many small businesses are looking upon battered and bruised balance sheets and income statements.  Before the downturn they looked young healthy and vibrant but the distress of the credit crunch, high unemployment and record business closures has taken its toll. Receivables growing longer in the tooth each month.  Write offs of bad debt up. Client defections, pinched profit margins and market erosion due to decreased buying power, business closures and clients going with competitors offering rock bottom pricing.  

No the balance sheet doesn't look as healthy as it did during the salad days of the past decade but the good news is the business survived a damning business cycle. Time to conduct a credit analysis exercise to get the company financial statements back into shape.

Here are seven quick questions one needs to answer to assess an SME's credit worthiness. 

Management

Do your business leaders have the talent, experience, character, leadership, and knowledge of the business to succeed?  If not, what should be done to close those gaps?

Are the right people in the right jobs? Should people be repositioned to optimize fit and overall performance? Should you make strategic hires to improve your talent mix in critical functions across the firm?

Business

• What is the overall health and landscape of your industry? 
• Who are the primary and secondary competitors? How is their health? 
• What does the SWOT analysis reveal for your industry and competitors? 

Financials

• How healthy are your balance sheet and income statements? (Compare to previous financials over 1, 3, and 5 year periods.) 
• What are your pro-forma projections? (1, 3; 5 yrs) 
• What significant trends do you observe? 
• What should you be doing based on the trends you have identified? 

Use of funds

• Why do you need funding? 
• How will the funds be used - 90 days, 1, 3, 5 yrs? 
• (The key here is to describe in detail with specific usage, timing, and activities.) 

Sources of Repayment

• What are your firm’s primary, secondary, and tertiary income streams? 
• How reliable or likely are those sources going forward? Most importantly, are those revenues diversified and recurring? 

Customers and Suppliers

• What are the composition and attribution metrics? Most importantly, are there any concentration risks? If so, what can be done to mitigate them? 
• How healthy are they?
• What are the demographics driving both groups? 
• Where are they in their client or product life-cycles? 
• Where are your suppliers in your products and services value chain? 

Products and Services

• Ask the same questions listed for Customer and Supplier. 
• What are the consumer demand, utilization metrics, and trends for your existing offerings? 
• What new products and services are in your pipeline? How do you envision those new products and services impacting your financials (balance sheet, income statement, and statement of cash flows) and business strategies going forward? 
• What are your competitors offering? How does that impact your business?

This cursory assessment will get you started.  

Sum2's clients use Credit|Redi to rate company credit worthiness and conduct business analysis to optimize financial performance and create business plans that are sure to win the confidence of lenders and capital providers.

Credit|Redi used by effective SME managers to improve profitability, credit worthiness and grow the confidence of lenders and shareholders.

Get Credit|Redi on Google Play here. Get Credit|Redi 

Get Credit|Redi

risk; sme, credit risk, lending, private equity, financial health, risk assessment, credit repair, business planning and analysis

QE Taper Risks Spike in Global Interest Rates

Forbes Reports:

3/17/14

"...The Federal Open Market Committee (FOMC) expects the taper of the Quantitative Easing to continue. Economists expect the Federal Reserve to cut another $10 billion from its monthly asset-purchase program at its two-day monetary-policy meeting, lowering its monthly bond buys to $55 billion.

The FMOC meets Tuesday and Wednesday, and it will be the first one overseen by new Fed Chair Janet Yellen. Bond traders will focus on the commentary that accompanies the decision, which is slated to be released Wednesday afternoon. Additionally, during this meeting, the Fed will release its new economic forecasts..."

The Feds reduction in asset purchases, (primarily mortgage backed securities from banks and market makers) reduces market liquidity and cheap source of funding for banks. The goal of the Fed's QE has been to buttress the capital structure of banks to assure liquidity in credit markets. The QE program has been successful in maintaining low interest rates. This has benefited SMEs by keeping the cost of capital low and credit channels open.

Low interest rates have helped SMEs to borrow cheap money. Low interest rates have also benefited consumers by keeping borrowing rates for mortgages, car loans and credit cards low. This has stimulated market demand for SME products and services. QE has been a major market support for SMEs as the post Great Recession global economy continues to restructure. 

SME's must assess how QE tapering will affect their capital structure, business model and client purchasing power. It's critical for SME's to assess how these subtle changes in the market landscape will impact numerous aspects of the business.

Credit|Redi is a critical tool used by SME managers to determine financial health, assess business factors to improve profitability and demonstrate creditworthiness to lenders to fund business growth.

Download Credit|Redi on Google Play here. Get Credit|Redi

Risk: credit risk, sme, FOMC, interest rate, cost of capital, QE, Quantitative Easing, FOMC, Fed, Federal Reserve, Great Recession, Janet Yellen, Forbes

May Luck Be With You

It is said all the time.  May you have good luck in your new endeavor.  We realize its just an expression of goodwill but it does speak to the power and predominance of the notion of luck. Its as if the fates of chance and the charm of serendipity is the ultimate factor separating success from failure.  

This is absolutely the case for manufacturers of rabbit foot good luck charms, shaleigh wielding Leprechauns and other providers of magic elixirs and mojos that steer the gods of fate to your personal benefit.   But for the rest of us luck is a fickle thing whose appearance and consequence remains a riddle, wrapped in a mystery, inside an enigma.  

No question luck plays a big role in our lives.  The randomness of life can serve up pots of gold or oceans of despair due to minute measurements of time and space.  Consider missing a plane flight that crashed or consider the luck of someone who is shot in the chest and the bullet misses their heart by a few millimeters.  

These life altering random events are chalked up to the luck of the draw and we remain grateful that luck was on our side; yet remain a bit spooked had the circumstances gone the other way.

Though luck plays a factor in our lives and business careers, it is best to position oneself to be the beneficiary of luck when the angels of fortune flutter through the pathways of our life.

Alexander Hamilton said the spoils of fortune belong to the intrepid.  His sound advice counseling the need to engage calculated risk will more often than not result in some sort of achievement.

We at Sum2 believe this to be the case as well.  Our clients engage risk as a daily cost of doing business. We design risk management products for small business managers that empower them to lower the odds and consequences of damaging risk events while positioning themselves to be the beneficiaries of opportunity when the angels of luck flutter on by.

Happy St. Patrick's Day to all and may the luck of the Irish always be with you.

Generate some good luck for yourself by downloading the S3 a risk management tool for SMEs.

Get risk aware with our just released S3: SME Risk Seismograph, an early warning and opportunity discovery app on Google Play.

Get S3 on Google Play

risk: sme, random event, Black Swans, risk management

Small Firms Missing Out on Funding Opportunities

The Liverpool Echo reports today that a Lloyds Bank study of North West small firms, many SMEs are qualified for loans but problems with managing large outstanding receivables damages the company credit profile.

Lloyds' recent report on SME market segment uncovered some startling creditworthiness indicators. The report reveals:

... More than half the North West’s small firms (54%) are confident about investing for growth this year – but many are sitting on untapped assets and are owed thousands in unpaid bills…

...the average North West small company has £223,000 of assets, but is owed £56,000 in unpaid invoices…

...The UK as a whole has a total of £770bn of untapped assets in small firms – equal to 48% of the UK’s GDP – while they are owed a total of around £291bn by customers…

Lloyds believes many firms are ignoring alternative funding options to help them expand and grow. Clare Boswell, area director of Lloyds Bank Commercial Finance in the North of England, said: “Our research found that more than half of SMEs (small- to medium-sized enterprises) in the North West are more confident about investing in growth this year than they were 12 months ago.

“Despite this, SMEs are missing out on the opportunity to recruit new staff, break into new markets or develop new products because they are not harnessing the full range of funding options available that could unlock the value in their assets or invoices to help them grow.

“As a result, businesses are turning down contracts that they think they cannot afford to fund and are holding back their own growth potential.”  

SME's need to better assert convictions to move forward with growth plans and the confidence to approach lenders and capital providers to fund business growth.

Credit|Redi is a critical tool used by SME's to improve financial health and demonstrate creditworthiness to lenders and capital providers.

Get Credit|Redi on Google Play here.    Get Credit|Redi 

Get Credit|Redi

Risk: credit, market, opportunity, sme

Small Business Credit Index Improves

The Experian Moody's Analytics Small Business Credit Index has posted its forth consecutive quarterly improvement.

"The Experian/Moody’s Analytics Small Business Credit Index rose 1.2 points to 117 due to the growth of small-business credit balances. According to the Q4 2013 report, the increase marked the fourth consecutive quarter of improvement in small-business credit conditions and provided the highest index reading since data tracking began in 2011.

"Credit is flowing more freely to small businesses," said Mark Zandi, chief economist at Moody’s Analytics. "With more credit, small businesses are increasingly able to expand their operations. This means more investment and jobs, and a stronger economy."

Findings from the report indicated that the growth in credit balances was due in part to financial institutions loosening credit terms for small businesses, as well as an increase in business-to-business credit transactions."

The index is a positive indication that the economic recovery from the Great Recession continues. SME's are principle drivers of economic growth.  SMEs are the leading sector in job creation and, innovation.  Each requiring access to capital to fund business growth.  

The improvement of the credit index is a positive indicator for the continued recovery of the financial health of the SME sector.  

SME's were especially hard hit during the Great Recession.  The need for capital to fund growth and access to expanded credit facilities remain a pressing concern for the SME sector.

Credit|Redi is a critical tool used by SME's to improve financial health and demonstrate creditworthiness to lenders and capital providers.

Download Credit|Redi on Google Play here. Get Credit|Redi

Risk: credit, market, financial health

Credit|Redi App Published

Sum2 is pleased to announce the publication of Credit|Redi Android app.

Credit|Redi combines the analytic power of the Profit|Optimizer and CreditAides Z Score report services.

Credit|Redi combines the best of quantitative and qualitative risk metrics. Users will gain in depth insights into the risk and opportunities present within the company's business model and financial structure.

Need a loan?

Trying to raise capital?

Need an accepted industry standard credit rating to demonstrate creditworthiness?

Need to develop a compelling business plan for investors and bankers?

Credit|Redi is a credit decision and financial health analysis tool. It generates a Z Score credit rating for Small Mid-Sized Business Enterprises (SME). It demonstrates creditworthiness to lenders and capital providers. It offers assessment tools to address risk factors present in the company's business and determines optimized capital allocation strategies to fund expansion.

Credit|Redi creates an in depth financial health assessment ranging from two to five periods. Users define data points of monthly, quarterly or annual periodicities to determine financial health trend analysis.

Credit|Redi offers users a complete series of business assessment apps to spot risks, opportunities for improvement and the capital needed to improve profitability and growth. Credit|Redi facilitates winning business plan to win the confidence lenders.

Credit|Redi supports all global accounting conventions and currencies.

SME Credit Risk

The global credit crisis and Great Recession has devastated the SME sector. Securing capital from lenders and investors is a big challenge for SMEs. Credit rating quality forms the basis for decisions lenders make about your company. Managing your business to improve your credit score enhances creditworthiness and increases your ability to raise capital.   A good credit score determines:

How much business credit a supplier will extend to you

What interest rates you will pay

How much money lending institutions will loan you

How your customers view you

What your insurance premiums will be

The level of potential investor interest

Credit|Redi App Features:

Z Score Credit Rating and Financial Health Assessment Report, Three Sets of Performance Dashboards, Self Assessment Scoring Methodology, Calculation of Capital Requirements Budget and Enterprise View of Aggregated Risk

Credit Rating and Financial Health Assessment Report:

Credit Score Calculation and full set of financial assessment reports to determine credit rating, balance sheet and income statement stress factors.

Report Package Includes:

Z Score Credit Assessments

Income Statements

Balance Sheets

Equity Reconciliation

Cash (Funds) Flow

Source and Application of Funds

Key Metrics / KPI's

Assessment Applications:

Product and Market Dynamics

Business Function & Operations

Critical Success Factors

Risk Assessment Matrix

Macroeconomic Events

Product and Market Dynamics Assessment:

Product Risk / Customer Risk / Supply Chain / Competition / Market Dynamics

Business Function Assessment:

Operations / IT / HR / Facilities / Sales & Marketing / Management / Accounting,

Critical Success Factors:

Risk Assessment Matrix / Business Ratio / Business Plan Checklist / Macroeconomic Risk

ROI calculator, 40 Page PDF workbook.

Applications:

Loan Applications

Workout Planning Program

Initial Survey for New CEO

Preparation for Capital Raise

Credit Extension / Default Mitigation

Board of Directors Presentation

Shareholder Communications

Management Team Building

Risk Management Program

Strategic Alliance / Merger Review

Capital Allocation / ROI Assessment

Users Include: Small midsize business owners, CFOs, controllers, C Level managers, commercial loan specialists, bankers, credit unions, workout specialists, alternative finance providers, IT managers, HR consultants, sales managers, facilities managers, CPA’s, private equity firms, business coaches, due diligence professionals

Sum2 partners with Credit|Aides to generate financial health assessment reports.

System Requirements: App directs users to Dropbox site to download zip file. Zip file contains MS Excel Assessment Apps and PDF input form for Z Score Financial Health Assessment Report Server. Android users require Mobile Office, PDF Reader and Zip File Manager.

Credit|Redi is a tool that demonstrates an SME's creditworthiness to lenders and capital providers. Credit|Redi generates a Z Score credit rating and in-depth financial analysis reports to spot strengths and weaknesses in the company's financial health. Credit|Redi also provides a series of enterprise assessment applications to review problem areas and determine opportunities for business growth to build a bullet proof business plan that wins the confidence of lenders. 

If your business has been turned down for a loan don't give up.

Get Credit|Redi on Google Play here. Get Credit|Redi

Get Credit|Redi

risk; sme, credit|redi,  sme lending, credit risk, Z Score, credit rating, capital raise, ERM, GRC,