Cash Flow Lenders Still Hard To Find (OPINION)

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When my husband, Chris, and I moved to Bentonville in 2003 a lot of things were still hard to find: a decent farmers’ market, entertainment after 5 p.m. and a cup of coffee that wasn’t just good, but Seattle good.

Times have changed, and now you can find all of the above, as well as a world-class art museum, an eclectic culinary scene and miles of bike trails that seem to keep spawning. One thing that’s still hard to find in Northwest Arkansas, however, is a cash flow lender.

Before your eyes glaze over or you turn the page, indulge me for a moment and consider why cash flow lending is important to business owners in particular and the NWA small-business community in general.

Like all living things, businesses thrive in a healthy, supportive ecosystem. When it comes time to transfer ownership of a business — whether it’s through a management buyout, family succession, merger or acquisition — it really does take a village. Specialists like M&A advisers, attorneys and accountants all play a vital role in making successful ownership transfers happen. The same is true for providers of equity and debt financing.

Regarding the latter, banks would seem like a logical place to get a loan to help finance the acquisition of a business. But with the recent exception of Intrust Bank, a Kansas bank with an office in Rogers, our firm typically refers business buyers outside the area to find the right loan for the job.

I know what you’re thinking: A loan is a loan. If the buyer is qualified and the business is profitable, what’s the problem? In a word: collateral.

Banks have a tendency to want their loans secured by fixed assets, like real estate and equipment. If there are enough fixed assets on the balance sheet, a buyer may be able to get a conventional loan for part of the purchase price of a business. But many small businesses make money hand over fist with little in the way of fixed assets. Take for example a commercial subcontractor that does $4 million in annual sales with net income of $650,000. While the business has healthy cash flow, their fixed assets may amount to a bit of office equipment and a few trucks — not near enough collateral from a bank’s perspective.

The Small Business Administration helps fill the gap by giving banks a guarantee on cash flow loans used to purchase a business, referred to as 7(a) loans. These are not to be confused with the SBA 504 loan, which is for the purchase of fixed assets, like real estate and equipment. Many banks say they are “the biggest” SBA lender, but I always wonder how many of those loans are of the 504 variety as opposed to 7(a).

It takes a certain ethos and skill set to be a cash flow lender. It may be that the banking culture in Northwest Arkansas is still catching up to the realities of our burgeoning entrepreneurial climate. Regardless of the size or specifics of our market, the demographic age wave of retiring Baby Boomers gives urgency to making sure all areas of M&A expertise are represented.

“It’s even more important now,” said Geoff Anderman, CFO and partner at Infinity Product Group in Rogers, during a recent conversation. Anderman was an M&A attorney with a private equity group in Chicago, and occasionally consults local companies on seeking debt financing that might require them to look outside the local NWA banking community. “Ultimately there are a lot of people who started businesses here who will need to exit in short order.”

My hope is that, as the area continues to grow, we’ll see more business financing options enter the marketplace; from venture capital and private equity, to asset-based and cash flow lenders. In the meantime, entrepreneurs and advisers will do what they’ve always done; get creative. And creativity can be found anywhere. 

Barbara Taylor is the co-founder of Allan Taylor & Co., a boutique mergers and acquisition firm in Bentonville. She is a regular contributor to and a former New York Times blogger. You can follow her on Twitter @ballantaylor or visit her company website at