Business owners and fellow entrepreneurs have lately been asking; where are businesses getting financing these days? The answer is less and less at traditional banks. The mid market firms we deal with are caught in the crunch. Too big for family and friends financing, too small for Wall Street or junk bond issuances and spurned by the banks that served them in the past.
The answer to the question is varied depending on the health of the business, where it is located and the industry it is in. Here are some of the answers:
Many companies are operating under forbearance agreements with their banks. Unable to deleverage as fast as their loan agreements expire they simply operate under the old loan agreements in default and pray. The healthy companies are finding some relief from private equity groups offering new issue non investment grade notes and partial equity buyouts. It is estimated between now and 2010 over $600 billion in revolving credit lines will mature. Look for even more creative non bank financing as billions sit on the sidelines looking for a place to park and desperate companies seek replacements for their traditional banks.
Posted by David Sheives
