Business Loan Declined? Steps to take to get Funded.
A Bank Line of Credit Turndown is Not the End of the World
After going through the tedious business loan application process, you have solid open invoices, and are still denied a small business loan and feel as though there are no options. The main question is, what do I do now? Luckily, Business LOC loan denial is not the end of funding options.
With alternative financing options with Bankers Factoring such as invoice or A/R (accounts receivable) factoring or PO Financing, your business has options to pursue after a business loan declined or bank LOC turndown.
Accordingly, it is equally important to understand the factors the led to your loan denial. To improve your credit, you must check your credit reports and the lender who denied the loan. Poor credit is not the end of the world, but you must address it while obtaining alternative financing with Bankers Factoring.
How to Continue After Loan Denial
After your loan denial, speak with your lender and ask what disqualified you. If you are not told why they turned down your loan request, call the traditional lenders head of credit providing the loan and ask to speak with a manager in this department. Reasons that could contribute to your loan denial include:
- High debt to income ratio
- Business Credit Score
- Tax Issues
- Poor payment history
- Time in business or Startup
- Client concentration
- Weak balance sheet & business financials
- Negative Cash Flow
- Adverse Action
- Derogatory Marks
- Personal bad credit score
- Excessive Loans: MCA, Mortgage, Auto, or Student
- Credit Card Debt-maxed Credit Limits
Once you know why you were denied, you can take steps to improve your creditworthiness for the future.
Analyze Your Credit Report and Score
Check your credit reports, where you will see your score and your overall credit history. Improve your credit by looking deeper into your credit report and seeing potential areas of concern for lenders.
Credit is a critical factor in approval for conventional financing facilities. The major credit bureaus are Equifax, Experian, and TransUnion and your credit reports from these entities are what lenders will assess in creditworthiness and credit history. You can obtain your credit reports from these companies directly for free.
Luckily, Bankers Factoring can help clients with credit scores down to 525.
Examining your credit can uncover debts or liabilities that are not accurate. Accordingly, if there are credit card debts that you never opened, you can file a dispute with each bureau to resolve the issue. This is one way to help build your credit.
When you apply for a loan, lenders look at your borrowing history, which is reflected in your credit scores. They want to see a solid record of borrowing and repaying loans.
Develop a Plan
After examining your loan denial and credit report, it is time to move forward and obtain funding. Your plan must correct the reasons for loan denial.
For example, if your credit score is low due to high outstanding balances and a high debt to income ratio, work on paying off your balances. More importantly, set goals and create accountability systems for fiscal responsibility.
If you were denied financing because you are a startup, consider alternative financing with Bankers Factoring. We offer factoring lines and facilities for clients just starting out or across the globe selling into the US.
What is Invoice Factoring?
Invoice factoring, also referred to as accounts receivable (A/R) factoring, AR financing, or invoice financing, is the process of selling your accounts receivable and the associated invoices for an upfront cash advance (80-90%) and then the balance when your B2B or B2G client pays.
Moreover, this is ideal for companies with commercial clients and payments terms of 30-90 days which can take up to 120-day to receive payment. With Bankers Factoring, you receive your first installment, or the advance, the same day as your final approval.
Receiving financing through Bankers Factoring is more efficient and quicker than obtaining traditional lines of financing.
After receiving your loan denial, there are two options:
- Reapply for a traditional loan and hope that your credit repair is reflected in your credit report
- Seek funding through an alternative financing source like Bankers Factoring
Reapplying for a Traditional Loan
Reapplying for a traditional loan will require patience and time before you will qualify. When lenders run your credit report for financing, it is a hard inquiry that lowers your credit score. Furthermore, it is critical to search and speak with enough lenders before applying for a loan.
Lenders look at your work, investment, and other income before approving your loan to ensure that you can make the minimum monthly loan payments. Most lenders use your debt-to-income ratio to determine whether you can manage the payments upon approval of your loan.
The only problem is that personal credit score and balance sheet repair takes time and you need working capital now. Sales opportunities cannot wait for slow bank loan approval for a term loan or LOC even if the interest rate seems lower than non-recourse factoring including credit protection and accounts receivable management.
Exploring Alternative Lenders & Financing Solutions
There are other opportunities for funding outside of traditional bank loans. If your company is B2C, consider looking into getting a line of credit.
If your company is in the B2B or B2G space, consider accounts receivable financing or invoice factoring with Bankers Factoring.
A/R factoring is not debt on your balance sheet; instead, it is a cash advance from the factor in exchange for your invoices and receivables. Thus, there is no loan and interest to pay back – only factor fees.
Moreover, A/R factoring approval is based on the credit strength of your clients, not you or your business. Even if you have bad credit, factoring is still an option. As long as your customers are other businesses with established credit, you will be eligible to factor your invoices. Invoice factoring is extremely fast, incredibly easy, and gives you control of your own money. Factor as much or as little as you want; it is up to you!
How Does Invoice Factoring Work?
Invoice factoring is simple
The first thing you have to do is contact us. We’ll ask you a few simple questions about your business, its income, and your invoices. Then, we will use that information to qualify you for invoice factoring. Bankers Factoring is the premier employee-owned A/R factoring company across the nation with a robust global presence. You can rest assured knowing Bankers is a reliable factor with a long history of satisfied clients.
Once you go through our quick and easy approval process and receive approval, you receive same-day funding. You run your business with the immediately available funds to grow and build your business.
Bankers Factoring will fund up to 90% of your invoices in the first installment. Once your customer pays in full, we pay you the earned reserve or factoring rebate or the remaining invoice amount less the factor fees.
Non-recourse factoring is that simple. Cheaper, faster, and safer than the swipe of a business credit card.