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The Secrets to Finding a Line of Credit for Your Business…

Invoice Factoring U.S. and ChinaWhy is it that business I speak with so often say, “…We have been with our bank for so many years, but they won’t make us a loan.” Large traditional banks are designed in most cases for retail banking and corporate lending. There is not much money to be made by making small loans at 5% per year to 1000 small customers. Frankly, the larger banks rather lend one large corporate client $100 million at 3% than a 100 smaller loans. So, how does a smaller commercial bank lender make smaller loans when the larger banks cannot? There are clear reasons why smaller lending institutions can lend to smaller businesses more successfully. Here are some of the secrets to why and how businesses qualify for money.

First a small business owner must rate their business in the A, B or C credit categories in order to know what they qualify for and where to look. This the secret to finding a successful bank lending relationship.

A small business in the A credit category would have a company that is profitable, been in business 2 or more years, has a strong equity position on its balance sheet, and a strong principal guarantee with a credit score of +720. This business would be a good candidate for an SBA loan from $100k to $1 million with sales of approximately $1 to $10 million with not too much difficulty at a smaller, more specialized bank. Traditional loans are typically not available to small businesses even at this level without an SBA guarantee to support their loan.

A small business in the B credit category usually lacks one of the above criteria that an A credit has (as listed above). This places the business in the area of receivable financing (aka invoice factoring) or some other form of collateral based lending (i.e. 2nd TD on business property, inventory financing, etc.). These loans are typically with recourse or limited non-recourse and are highly structured. If your customer base is strong and there is payment records to support trends, then this form of lending can very helpful to growing and graduating to the A credit category.

A small business in the C credit category is missing several items from an A credit criteria and often has other items like tax or lien issues that complicate the lending scenario. A seasoned commercial lender can still place creative financing together. The price will obviously be higher due to the higher risk, but if a small business has cleaned up its act and is on a good sales trajectory with descent margins then seeking this type of lending is a great move to maintain stable working capital and cash flow while the business continues to grow so no sales momentum is lost.

“Providing working capital to businesses that have had a few bumps in the road, but are still growing is challenging for traditional banks. Smaller more aggressive lenders are much better suited to actually lend in this area and they can provide a surprising array of products like receivable financing, inventory financing, invoice factoring, trade financing, PO financing, etc.” states, Stephen Perl, CEO of 1st PMF Bancorp.

By Stephen Perl, CEO

1st PMF Bancorp (USA)

1st PMF Capital (HK)

Author of “Dancing with the Dragon: The Secrets of Doing Business with China” (2012)


China’s 3rd Plenum and President Xi’s New Powers

China is becoming more intriguing all the time because as it moves towards a stronger capitalistic economy, the government is apparently consolidating power in their President’s position.  This could be seen as a move for more centralized power, or alternatively an attempt at copying the US’s system and the President’s powers in the US.  It is no secret that the Chinese have modeled many of their systems, roads, infrastructure projects, etc. after the US.  The Chinese feel the US has been tremendously successful and there is no reason to copy any other (however, its only my opinion, but they may want to pass on copying our health care system and retirement system).

In simple terms, what did this Third (3rd) Plenum achieve… the top line statement given after the meeting was that China’s leadership would make more decisive movements toward a free market system, while maintaining a firm central state grip on the overall picture…not sure about you but I am confused.  However, in contrast to the past 2 Chinese President’s,  the 3rd Plenum did appear to have granted President Xi the following new powers:

1.  Control over Military, Foreign Affairs, Intelligence, and Economic Officials (not quite like the US Reserve model)

2. Creation of a National Security Council

3. Control over most of Domestic Security issues

4. Control Foreign Defense without Leadership approval

There are many similarities to the US…too many to comment on but this is probably a good thing as having a President with too little power can create more problems and frustrations so another ally that is aligned with our business interests can only be a good thing for the overall future for both countries and the world.

by Stephen Perl, MS, MBA

Author of “Dancing with the Dragon: Doing Business with China (2012)

China’s Social Stability is the World’s Problem….

Many think that the social issues and welfare of China are the sole problems of China…in fact, I would argue just the opposite.  China’s social stability is directly tied to “global growth” and stability.  How can this be?

China’s top down approach to capitalism where the state manages the countries economy in a capitalistic format has worked well for many years, but there have been disruptions.  Many only see the strong GDP numbers from the financial markets and the new projects that China is developing from the media, but underneath is still a developing country as they are part of the BRIC countries.  The BRIC states have amazing potential, but they are still developing and struggling with the many issues of growth and capitalism.

What happened to China’s economy in 1989 in Beijing when Tianemen Square revolt occurred?  The Chinese GDP plunged to 2.5% for two years…thank goodness their economy was not nearly as big then.  The consumption power that China now wields is tremendous and if there is social social unrest, it will bring this economy to its knees and hobble many others.  Even the US will feel the effect.

It is important that the US guides its partners in the right direction, but only gradually.  We cannot expect a baby to walk before it crawls so we cannot expect China to jump before it can run.

Currently, China’s economy is slowing down and maturing gradually…we should not be worried as this is normal for all maturing economies, but we must foster the right economic policies and social standards for their country.  This requires Americans to step out of their comfort zone and to practice cultural sensitivity (to the right degree…so please do not take my advice out of context).

Keeping the social stability in China is a matter that the world must be concerned with.


by Stephen Perl, MBA, MS

CEO of PMF Bancorp

Author: Dancing with the Dragon (2012)

US-China Trade Promotion Event at the LA Hotel on Oct 14, 2013

US-China Trade Event at the LA Hotel Oct 14th

On October 14th, 2013, PMF Bancorp participated in the U.S.-China Trade Event at the LA Hotel in Downtown Los Angeles to promote California and China trade. The Vice Minister of Commerce of China Mr. Wang, Supervisor Michael Antonovitch, and LA Mayor Eric Garcetti all spoke on the value of increasing trade and the meaningful economic stimulus that it brings to our Southern California region. Mr. Stephen Perl, CEO of 1st PMF Bancorp discussed trade finance as a tool for small business to increase trade with Supervisor Michael Antonovitch while also discussing 1st PMF Bancorp’s support for up coming trade mission.

Supervisor Michael Antonovitch & Stephen Perl, CEO 1st PMF Bancorp discuss PMF Bancorp trade financing as a way to grow trade with China & US.US-China Trade Event at the LA Hotel Oct 14th

Supply Chain Financing: the Importance of Invoice Factoring and Trade Finance

By: Stephen Perl, MBA, MS

Stephen Perl - 1st PMF Bancorp - Accounts Receivable Financing

Stephen Perl - 1st PMF Bancorp - Accounts Receivable Financing

Often businesses grow and mature and do not even realize that their growth is being inhibited from the lack of understanding Supply Chain Financing. Simply put, Supply Chain Financing is the efficient use of working capital to finance goods as a part of a larger process.

Working capital is crucial or another way to state it, “Cash is King!” in the Supply Chain. Business like people are creatures of habit and the initial way of conducting business is often kept as long as possible because it’s comfortable, but placing cash to purchase critical inventory from your overseas buyers is often not the best use of working capital. Invoice Factoring or Accounts Receivable Financing and Trade Finance are more efficient methods of leveraging existing assets to increase cash-flow and thereby sales.

Invoice Factoring in your Supply Chain Financing process is often performed by businesses that understand the importance of a company’s value. “Increasing sales by proper use of financing allows a management team to execute its most important task… to increase shareholders’ value,” states Mr. Stephen Perl, CEO 1st PMF Bancorp. By utilizing invoice factoring, a company can leverage existing receivables to facilitate additional sales cycles without waiting for the receivables to pay in the normal NET 30 to 60 day terms. The additional working capital can be placed by into the Supply Chain to finance additional inventory and/or services to generate additional sales.

Trade financing is also an important element in the Supply Chain Financing process. It is often ignored by companies looking to increase cash-flow. Letters of credit (aka LCs) provide financing that does not even create debt on the balance sheet (this is often called “Off balance sheet financing.”). LCs are very useful but unfortunately, difficult to obtain without cash and strong credit from the large traditional banks. On the other hand, Letters of Credit are essential to the supply chain as a business grows. LCs from many respects are very necessary when business becomes large as it secures payment, quality and timing of goods with limited risk to the buyer(s).