No credit? Bad credit? Limited business experience? This is your lucky day.
"Hard money loans", those business loans focusing on "hard to finance" companies have
always been as scarce as hound's tooth. And the paperwork -- yikes,
mountains of it! And the credit reports -- page after page.
Well, not at this moment in time.
I wouldn't have believed it if I hadn't read it in the Wall Street
Journal. But there is was, tucked away on page C-1 of Friday, March 3,
2006. Titled "Din of Roaring Corporate-Debt Market Drowns Out Growing
Talk of a Bubble" sounds pretty innocuous for business borrowers. But
read the article.
It begins: "Despite a long-held anxiety that
companies soon will
find borrowing money tougher, conditions in the corporate-debt market are
as friendly as ever." And it gets better.
Basically this article says that many banks are making business loans
that are far less than stellar (i.e., hard money loans), and many that probably wouldn't have been approved a
few years ago. Credit means little in this environment. The banks make the
spurious loans, then sell them off and they wind up in esoteric
investments like CLOs ("collateralized loan obligations").
The bank isn't at risk. These very questionable hard money
loans have been sold
off. Since the bank makes their profit on the sell-off, they are under
strong pressure to make more loans.
Although the article quoted just big deals like the purchase of Nieman
Marcus and the cinema chain AMC (this is the Wall Street Journal, after
all), I simply cannot believe that smaller banks are ignoring this trend.
I suspect that bundling these smaller business loans is akin to bundling
mortgage loans and selling them off.
What happened to the conservative nature of banks? Who knows. But for
the moment it is gone. The Wall Street Journal article quoted Danile
O'Connell, chief executive of Vestar Capital partners, a major
private-equity firm, saying,, "Banks used to want to see you be more
conservative. Now they encourage us to borrow more."
