Large banks in September approved 17.5% of small-business loans, a decrease from the 17.6% reported in August, according to a report by Biz2Credit. Though the drop is small, banks were on the brink of approving more loans before concerns hit over the government shutdown, says Biz2Credit's Chief Executive Rohit Arora, who said that "the debt ceiling debate could cripple small-business lending even further."
Private investment funds are expanding their lending to businesses -- including distressed ones -- that can't get loans from banks and other mainstream lenders. These loans are typically secured by the borrower's assets. The volume of asset-based lending last year was double what it was 10 years ago.
Investors are returning to the bond market following a large sell-off in May and June, according to analysts. Goldman Sachs, Citigroup and Jefferies Group are planning to launch a $1.2 billion commercial mortgage-backed security. May and June's weakness "doesn't seem to have had as big an impact as you'd think," said Lynn Peterson, CEO of Kodiak Oil & Gas.
Asset-based lending is no longer an "option of last resort" for many companies following the credit crunch, Commercial Finance Group's Tracy Eden writes. Companies with strong accounts receivables or other assets can turn to asset-based lenders for their immediate cash-flow needs or to finance a growth opportunity, Eden writes. The practice is becoming increasingly common as banks tighten restrictions on traditional loans, even for their regular corporate customers.
Starwood Property Trust has secured $275.2 million from two lenders. It closed on a $150 million warehouse finance facility with Goldman Sachs Mortgage and a $125.2 million asset-based credit line with Bank of America. It plans to use the capital to finance acquisitions or originate commercial mortgage loans.