Wealth Management

Voted #6 on Top 100 Family Business influencer on Wealth, Legacy, Finance and Investments: Jacoline Loewen LinkedIn Profile

September 14, 2011

The Need For Stable Financial Partners

Businesses beneath the $100M revenue mark and who have narrow EBITDAs, below $5M, will be struggling to find banks willing to lend to them over the next year.
After all, if you had one million dollars and you could lend it out, but at such a low rate of return, would you? That is the question banks are asking themselves. Why would they lend to SMEs who do not have the fat in their systems to take more bumps from Europe and American business news? That risk is just not worth the razor thin profits to made from SMEs below $100M.
Yet, unwittingly, banks are allowing direct competitors to flourish in this Scrooge environment because into this risk category steps Private Equity.
Banks are leaving an enormous gap for those who can take the higher risk and who will be more expensive money if the business owner just looks at the interest rate. The Private Equity firms still alive are tough and are flourishing in this hard economy because they are stepping up to invest in business owners and their companies, even if there is risk. They also get in and help grow the EBITDA.
Private equity partners will be there for business owners who realize that they can grow more with more capital and with smart partners at the Board room table. Here is a WSJ story on Private Equity taking over the bank's usual territory - small business. We will be seeing much more of this.
Private equity-backed bank holding company SKBHC Holdings continues to take advantage of the shaky environment for small community banks, picking up Seattle’s Viking Bank. Viking had assets of roughly $400 million and assets of $379 million as of June 30. read more.

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