What to Do About Working Capital (financial coach) Financing When a Bank Says No
No commentsBy Garrett36 Pierson36
For commercial borrowers to adequately evaluate how to get working capital and other business financing when their bank says “no”, a prudent starting point is likely to be an extended discussion with a commercial loans expert. Finding and selecting such an expert will not be a quick or easy task for business owners, but this step is likely to be critical to eventual success in formulating a strategy for obtaining new sources of commercial funding. One aspect that should not be overlooked in locating a viable expert to help is to ensure that the selected commercial finance expert is totally independent and not affiliated in any way whatsoever with the bank which has already said “no”.
Some of our earlier advice is now likely to be especially relevant for many businesses because of a deteriorating commercial banking environment. We provided advice a few years ago about what actions business owners should consider if their bank rejected a small business financing request, and banks are currently saying “no” more frequently than they have in decades.
Banks are routinely saying “no” to small businesses which are both profitable and long-term customers. It has become common to hear phrases such as “business loans without banks” and “thinking outside the bank” when talking about options small business owners need to consider because this has become such a widespread commercial banking problem.
The process of replacing a bank is rarely an option which is openly pursued by a small business. However, an astute business owner will quickly realize that they have little recourse but to pursue such a path when their bank says “no” to routine requests for business financing. Even though this search for new small business finance strategies is undertaken under protest by most commercial borrowers, improvements to the overall financial health of a business will be achieved in a pleasantly surprising number of cases. It might be appropriate to note that one or two banks operate in a near monopoly environment in a surprising number of communities and cities. When small business owners have literally been forced to find new business finance options, they are often pleased to discover that they can not only replace existing bank financing satisfactorily but also improve their bottom line in the transition.
There are two financing situations that businesses should especially be prepared for banks saying “no”. One of these involves commercial mortgage financing and the other working capital loans (including commercial lines of credit). Recent nationwide commercial lending reports clearly show a drastic reduction in commercial loans for commercial property loans and working capital loans, although a small number of banks are still proving to be reliable sources for some small business financing options.
As emphasized in this article, small businesses are increasingly hearing their bank say “no” to requests for the working capital financing and small business financing which they require. For most commercial borrowers this represents uncharted waters and they are often not sure what to do next. While a bank saying “no” is not a result that any business owner would seek, as discussed above in many circumstances it can eventually lead to an overall improvement in business finance options.
Steve Bush has offered candid advice to small businesses for 30 years and furnishes working capital financing and commercial loans. Stephen and AEX Commercial Financing Group are a dependable source of business financing options
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Saturday, February 27th, 2010 at 7:00 pm and is filed under finance. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
