An increasing number of businesses here and nationally are turning to nontraditional sources of financing, such as factoring, to meet critical cash-flow needs as banks constrict credit in the current economic crisis, say industry representatives.

In factoring, companies such as AMCI Finance, Northwest Business Finance LLC, Universal Funding Corp., and others here buy accounts receivable from businesses at a discount, and the sellers garner quick cash, without having to give up an ownership interest in their business or take on additional debt.

Nonprofit organizations here that offer small-business loans, or microloans for businesses with only a few employees, say they also are getting more requests for assistance, often from potential borrowers the organizations hadn't heard from before the current economic crisis and credit-market tightening began.

Bill Schweiger, president of AMCI, a factoring company that's located in the Tapio Office Center, says inquiries from potential customers have been up 100 percent recently. Schweiger says the additional inquiries are coming from businesses AMCI hasn't heard from before, many of which were referred to AMCI by banks, accountants, lawyers, and business consultants.

Before the recent upswing in AMCI's business, some banks were scooping up commercial customers that for risk-related reasons arguably should have been obtaining financing through secondary sources such as factors, Schweiger asserts.

"Banks are starting to say 'no,' where they would have said 'yes' just a year ago," he says.

If banks now adhere to tighter lending standards, the number of inquiries to companies such as AMCI should remain at their current level, he says. "It will all depend on what the banks do or don't do," Sschweiger says.

Along with factoring, AMCI provides inventory field warehousing and equipment leasing services. In the latter service, for a fee, AMCI will buy a company's inventory, then sell it back to the company as it needs it, so the company doesn't have to carry the inventory on its books. Or, it will buy a company's equipment at an appraised price, then lease the equipment back to the company, as a way to free up working capital for the client. It also will buy new or used equipment from an outside supplier and lease it to a client.

Schweiger says AMCI is looking more closely at the viability of the industry new customers are in before doing business with them.

"Only the best businesses are going to survive, and they have to have a good industry to make it," he says. For example, he asks, "Is a furniture manufacturer selling to furniture stores? That market has been very hard hit."

He says, "The money we're lending is our money, is private capital, and what we lend we want to make sure we can get back."

Tony Rund, owner and manager of Northwest Business Finance, at 711 N. Lincoln, says his business, which focuses on accounts-receivable financing, has shot up 50 percent in the last 10 months.

"I see that trend continuing for a while, at least until the whole stock market and housing crisis has hit bottom and then slowly starts creeping up again," Rund says. "In the meantime, it will work well for us."

Rund, who has one employee, says he may have to add more.

Between 2003, when he started Northwest Business Finance, and 2007, business was relatively flat as banks had plenty of money to lend, he says. Now, he's receiving referrals from banks, something that he says hasn't happened before, at least not recently.

Rund says he has about 25 customers he works with on a regular basis, including construction subcontractors, trucking companies, and manufacturers. His customers are located as far away as Portland, and usually are startups, or simply are experiencing cash-flow problems, he says. He works with businesses that are profitable and doing well—and says he isn't in business to delay the inevitable for businesses that are going to fail.

Henry Wozow, president of Spokane Valley-based Universal Funding Corp., which does factoring, says the credit crisis has "been a really big boost for us; we've increased our volume by $2 million in September, compared to the same month last year."

Wozow expects October's activity, once tabulated, to be up even more than September's.

"I think it's all the banking industry," he says. "It's all got to be related to what's going on in the economy."

Where Universal normally would receive about six calls a day this time of year, it's now getting between 20 and 25, with 90 percent of those coming from new potential customers, Wozow says. To handle rising demand, he's hired four people in the last few weeks, he says.

David Heyamoto, business development manager for Spokane Neighborhood Action Programs, a nonprofit community action agency with offices at 2116 E. First, says SNAP has been getting more calls lately from small-business owners, who have said the bank loans available to them in the past have dried up.

SNAP's guidelines enable it to loan money only to people whose household income is at or below 80 percent of the region's median income, which is $32,250 for a single-person household and $46,100 for a four-person household, he says. It's a graduated scale based on the number of people in the household.

"Recently, many of the inquiries have been coming from individuals closer to the higher end of the scale," he says. "Many have stated that they cannot meet all the requirements for bank financing, which means credit is tightening up, so they have come to SNAP for assistance."

SNAP can provide business loans from $500 to $25,000. It can go higher by teaming up with credit unions, if a business plan is solid, a credit score is reasonable, and collateral is sufficient, he says. Ultimately, SNAP's goal is to help businesses get to the point they can qualify for bank loans, he says.

Spokane Neighborhood Economic Development Alliance, or SNEDA, a nonprofit located at 715 E. Sprague that makes loans to businesses, usually for between $10,000 and $75,000, has seen a spike in interest and inquiries, says Eric Loewe, its executive director.

"We've had a lot more calls since April," Loewe says. "These were more creditworthy applicants than in the past. These were people who were bankable," or able to qualify for bank loans under normal circumstances.

Some of the increased interest is because banks are sending clients to SNEDA.

"They want to do a soft no," Loewe says. The banks want to see the customers stay in business, and continue to make deposits, but can't make a loan to them, he says.

"We've become more conservative about the risks we're willing to take," Loewe says. "The environment is too uncertain and unpredictable."

SNEDA does, however, have $400,000 available for business loans, he says.

"We don't like to have any more than $100,000 in one deal," he says. "We're very interested in talking to people who are near bankable and would like a business loan."