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What Can You Do After The Bank Declines Your Business Loan?

Posted on January 21, 2015 in Banking Issues

The anticipation of getting a business loan to help with ongoing operating costs or other funding needs for a company can often be intense for a business owner. In many instances, the owner utilizes a bank loan out of habit because it is how he has funded his business many times before. At some point, the company will hit a subjective ceiling that the bank has set for the amount of outstanding financing that it is will be offered. When that ceiling is hit, problems can ensue.

Some business owners get so wrapped up in the routine approach to getting bank loans that they often do not have an alternative plan in case the bank denies the loan. When the bank does come back with a negative answer, there is that initial chill up the business owner's spine that is immediately accompanied by a helpless feeling. What would you do if the bank denied your business loan? How would your company react?

Operations Will Be Affected

The first thought that a business owner has when finances are short is how it will affect the company's ongoing operations? One of the more important expenses is payroll and that has to be preserved. That means that all available financial resources will be funneled towards keeping employees happy by meeting payroll obligations.

Other parts of ongoing operations, such as facilities overhead and equipment maintenance, may suffer. The electric bill may get stretched out a few extra weeks, which will result in late charges and potential service interruptions. The company vehicles may have to go an extra week without maintenance, which could cost the company more in replacement costs down the line.

Finances Will Be Affected

When your company is short on funds, then it stops paying it vendor bills on time. There are two immediate and detrimental effects to not paying vendor bills. The first effect is the damage to the relationship with the vendors is tarnished. Some vendors will understand your financial dilemma, and others will not. It will affect the way that your company does business in the future.

Late payments to vendors mean more debt in the form of late-payment penalties, and it also means a hit to the company credit profile. Even if you have spent the last several years building up good company credit, it can all be undone with one bad payment month.

What Can You Do?

If the bank turns you down, then you have a few complicated and relatively inefficient options. You can look for investors who would be willing to invest in your company and give you the cash you need. But finding investors takes time and it can also be a very frustrating and fruitless endeavor.

Another option is to take on a partner who has the resources to finance your operation. This is a long-term solution to a short-term problem. A partner is going to want to exert some kind of administrative control over your organization in return for his financial investment. In order to save the company, you will have to give up a portion of something that you have worked so hard for.

Preventing The Problem In The First Place

Companies that become reliant on bank financing to fund ongoing operations are obviously having problems with their cash flow. Either they have past due invoices and customers who do not pay on time, or they have operational costs that exceed their income. If it is the latter, then the company will need to cut back on operational costs to get back in balance. If it is the former, then the company needs to find ways to improve its cash flow and utilize its outstanding invoices.

Few things are more frustrating to a business owner than having all of the cash flow he needs sitting on his desk in the form of invoices that are 30, 60 and even 90 days past due. If the company can find a way to maintain a solid cash flow, then getting rejected for a bank loan no longer becomes such a traumatic event.

A Factoring Services Company Can Help

Invoice factoring is a financial process that advances your company cash and uses your outstanding invoices as collateral. A factoring company for business looks at your qualified invoices as assets and those assets are worth their face value in cash. A strong relationship with a good accounts receivable finance company will create the kind of cash flow you need to run your business and avoid bank loans.

1st Commercial Credit is a factoring services company that is a worldwide leader in improving cash flow for small to medium sized businesses. We have a great deal of experience in a wide range of industries, which means we know exactly what your company needs to avoid bank debt and stay profitable.

1st Commercial Credit's Factoring Services Are Easy

The 1st Commercial Credit website has a simple, two-page application that can get the entire account process started. Once your account is approved, we can advance you funds within 24 hours of receiving a qualified invoice. As long as you are creating invoiced sales revenue, you will always have the cash flow you need to run your business.

We do not ask for your financial statements when you sign up for your account and base all of our decisions on the credit scores of your clients. Since we do all of our credit approvals online, we never have to talk to your clients. You get the cash flow you need and retain your relationships with your customers.

Accounts Receivables Financing Is Straightforward

We do not have any start-up or facility fees at all. We also have no hidden fees, ever. We disclose our fees to you upfront and we will never add any extra costs to the transaction. We have no per invoice or per month minimums either. We will help you get the cash you need, regardless as to the amount of invoiced sales you have.

It Is A Line Of Credit You Can Deal With

Instead of relying on a bank's opinion about your company finances, you should let 1st Commercial Credit show you how you can stand on your own two financial feet. We will develop a line of credit for you that is based solely on your invoiced sales. As your invoiced sales grow, so does your credit limit. It is a flexible, yet organic, way for you to fund your ongoing operations.

When you are invoicing sales to your clients, there is no reason to wait for a bank to fund your operations. Instead of living from bank loan to bank loan. you need to contact 1st Commercial Credit today and we will show you how to finance your own company and avoid relying on bank financing to run your business.