I hear this day in and day out; “My bank turned down my business loan request, now what do I do?”
And, it is not just those talking to me personally but I see this same statement on forums and in discussion groups around the globe.
If your bank says no, then you just have to look at the many other business lenders and their options that are out there.
Banks don’t necessarily look for ways to approve business loans; they look for ways NOT to approve them. Give them one excuse and it is over.
But, there are other lenders out there that want to make business loans – in fact, as lending is all they do, they have to make business loans or close their doors. So, they actually look for ways to make these loans (read: they work with you).
Now, if you can get a business loan from a bank – then by all means. But, if your bank says no that does not mean your hunt is over.
So, where do you look?
You start by looking inside your own business.
All lenders, especially those that lend to small businesses, lend against cash flow. Now, I know that you might have heard horror stories about debt ratios, collateral and credit. But, regardless if you have all those other categories or requirements, if you don’t have solid cash flow – then you have no real chance of getting a business loan; regardless of the lender.
Even with banks, they may hoot and holler about all those other criteria items but when they really sit down to underwrite credit, they focus on your business’s ability to generate enough positive cash flow to make those monthly payments – period.
If you have overall cash flow (from all lines of business in your company) – more money moving into the business than out of it (profitable or not) – then most banks will at least review your deal.
So, focus on your cash flow and let that be the star of your business when applying for business capital.
Now, however, let’s say you don’t have solid cash flow. Let’s say that your business is barely making it on an “all company” scale. However, you do have some opportunities that will bring in some revenue (cash flow) over the next few weeks or month.
Well, there are many small business lenders out there that will lend against those cash flow events.
You receive a large order from a strong customer but don’t have the cash on hand to start or complete that order. There are purchase order financing companies that will lend your business enough capital to complete that order (including to cover any needed labor). You complete that order, get paid, and then pay back the lender.
Simple enough and all based on your cash flow prospective or a single cash flow event and not your entire business.
Or, you have completed a job order and shipped it to your customer (with payment invoice). However, your customer is not expected pay you for 30, 60 or 90 days. Well, your business can factor that invoice for capital today to ensure that your company can pay its employees and suppliers or to start work on that next job order.
There are working capital financing companies that will factor (provide your business cash) against those non-paid invoices and provide your company with the capital it needs now – focusing on these single events and not your entire business. Then, when your customer pays you, you repaid the loan.
Or, your business has been generating sales to customers day-in and day-out. But, your business is not yet profitable – meaning that your company is still seeing more cash flowing out of the business then into it (a common situation for young and growing companies).
But, you can remedy this negative cash flow condition if you can just get your hands on a little more cash to buy a new machine, launch a new marketing campaign or purchase more or new inventory.
Well, there are lenders that will leverage your business’s ability to consistently bring in cash flow from your customers – regardless if your business is profitable or not, has collateral or not or that meets all those other stringent criteria that banks use to underwrite business loans.
Some will lend against your credit card receipts (those receipts from purchases made by your customers via credit cards). Some will lend against all customers’ payments including credit/debit cards, cash and checks.
And, some will lend against whatever cash flow you have flowing in and out of your bank account – called bank statement loans (loans that follow your cash and not based on your business’s financial statements).
So, just because your bank or lender says no to your business due to overall company wide cash flow issues, you still have options that will allow your business to access capital and start moving forward.
To begin, you have to look inside your business to see where your cash in-flow is coming from. Then, look for lenders that will underwrite a business loan based on that method of cash flow.
If you have future cash events – events that bring in cash to your business in the very near future – and you need capital to help grow your unlock those potential revenue generating opportunities then look for lenders that will factor against those events.
One of the most guiding principals of any successful business is its ability to leverage its assets and processes to grow that business. So, why not leverage your ability to generate cash flow and get the business loan your company needs to get to that next level – regardless of what your bank might says.
Joseph Lizio holds a MBA in Finance and Entrepreneurship, is the founder of Business Money Today, has a strong commercial lending background and is regarded as an expert in business and finance – specifically Small Business Loans and Working Capital.