When the Bank Says No

Why do Banks Deny Borrowers?

During this time of uncertainty, you may find that traditional banks are tightening their credit requirements, making it harder to obtain financing you need to operate your business.

Banks Are In The Business of Profits

Even before the coronavirus wreaked havoc on the economy, banks were looking for at least one year of profitability and positive cash flow before they considered approving a loan. You must remember that banks are in the business of making loans and making money, but their underwriting standards can make it tough to get approved. It can be frustrating when you believe you are on the right track to profitability and do not have the support of your own bank. The reasons may not make sense to you, and it does not solve your need for financing.

There are a number of reasons a bank will turn down a request for financing, including:

1. Limited operating history
2. Poor personal credit score by principal owner
3. Company is in a turnaround situation
4. History of operating losses
5. A weak balance sheet with high leverage
6. Conducting business in a down industry
7. High concentration with one debtor

If you have exhausted your own money and that of your family and friends, what’s next?

Where Do You Turn?

An option to finance your business needs is using your real estate as collateral. Leveraging your real estate to help finance your business will provide immediate availability to money. Real estate lenders focus primarily on the quality of the collateral and character of the management team, rather than how long a company has been in business or the strength of the balance sheet.

When the bank says no, consider this alternative. In the short term, a real estate lender can finance your immediate needs in a timely manner while you focus on growing your business.

Call or email so we can talk about the different options you have before making any decisions. Ralph Abbott at 614-339-4255 or email me at [email protected]. I look forward hearing you.