What to Do About Small Business Finance Options When a Bank Says No

For commercial borrowers to adequately evaluate how to get working capital financing and other small business financing when their bank says "no", a prudent starting point is likely to be an extended discussion with a small business 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 business 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".Because of a deteriorating business lending environment, some of our earlier advice is now likely to be especially relevant for many businesses. 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. Because this has become such a widespread commercial banking problem, it is now common to hear phrases such as "thinking outside the bank" and "business loans without banks" when talking about strategies small business owners might need to analyze.The process of replacing a bank is rarely an option which is openly pursued by a small business. Pursuing such a path when their bank says "no" to routine requests for small business financing is realistically the primary option to be reviewed by any astute business owner. Improvements to the overall financial health of a business will be achieved in a pleasantly surprising number of cases even though this search for new business finance alternatives is undertaken under protest by most commercial borrowers. Keep in mind that in many cities and communities, one or two banks frequently operate in a near monopoly environment. Small business owners are usually pleased to discover that they can not only replace existing bank financing satisfactorily but also improve their bottom line in the transition when they have literally been forced to find new small business finance options.There are two financing situations that businesses should especially be prepared for banks saying "no". One of these involves working capital financing (including business lines of credit) and the other commercial mortgage financing. While a small number of banks are still proving to be reliable sources for some small business financing options, recent nationwide commercial banking reports clearly show a drastic reduction in business loans for commercial real estate loans and working capital loans.As emphasized in this article, small businesses are increasingly hearing their bank say "no" to requests for the working capital loans and small business financing which they require. Most commercial borrowers are unsure what to do next because this represents uncharted waters for them. As described in this article, while a bank saying "no" is not an outcome that any business owner would hope for, it can eventually lead to an overall improvement in commercial finance alternatives under many circumstances.