You wanted to get a business loan, but the bank said No! What do you do?
The good news is that it is not the end for you.
It is the beginning of you understanding there is a financial services world beyond the banks!
Or maybe you’re still bankable, but your broker just didn’t sell the deal in the right way!
The point is, you have options available to you! More importantly, we will cover the process by which we helped our clients get funding when others couldn't!
Why banks say no to loans?
Banks usually say no to loans for one of three main reasons.
- You are not structured properly to maximise borrowing.
- Incompetent brokers, that don’t know how to deal with banks.
- Your serviceability / credit score didn’t meet bank criteria.
As a business owner, the good news is you have options if a bank ever says no to you for any of the above reasons!
What to do to get a business loan?
Step 1. Make sure you have the right business adviser and structures.
As part of our business advisory services, we ensure you are structured properly!
Why is business structuring so important?
Because your structuring impacts how much debt, assets, liabilities and serviceability you must show to banks when going for a loan. Different structures will determine how much debt and the associated serviceability you are legally obligated to show!
Business structuring also impacts your ability to protect assets, from other lenders and business creditors should things go drastically wrong.
Structuring also impacts the level of tax you need to pay!
As a firm that provides business advisory services, we create structures and solutions for our clients to maximise bank borrowing and government grants.
Unfortunately, when most businesses go for business loans, the one critical element they are missing is proper business structuring for borrowing!
Brokers have no clue, accountants understand only tax, and lawyers understand asset protection, but neither properly understand lending. We do!
It is for this reason we have clients doing up to $100m in revenue trusting us as their business adviser to maximise their borrowing capacity and asset protection!
To get a business adviser to structure you properly, click here to read more.
Step 2. Make sure you have a competent broker team.
If you’ve ever gone for a loan through a mortgage broker and have been told you don’t meet bank or second tier criteria, it may have been because the broker didn’t know how to sell your loan, didn’t go to the right bank or didn’t fulfil the banks criteria properly!
What do we mean by sell your loan?
We mean they put forward three-way financials, they did credit checks beforehand, spoke to the lending managers before it went to the banks credit committee and got it informally approved 90% of the way.
In other words, by the time it reaches the banks credit committee, bank management should already be wanting the deal to be approved!
But most brokers don’t do this prework, because it is too much work or they don’t have the relationships to do this type of work. Which leads to a number of people being rejected and people getting unnecessary hits on their credit file!
Whilst we are experts in private lending, private corporate debt and a leading business adviser. We wanted to ensure that our business clients got the very best bankers to help them get their bank loans approved!
We don’t see bank loans as competition to us, but rather we compliment bank funding (we do what banks can’t, when they can’t).
This is why we’ve partnered with two ex-bankers who are specialist brokers in their respective fields, with the right relationships with senior bank managers.
Our HNW clients and business clients who do up to $100M in revenue, are now serviced by these two ex bankers. One broker looks after mortgages with a full credit team working behind him to process loans quickly. Whilst the other only does equipment finance, and similarly has a credit team behind him to ensure a seamless process.
This means that with our business advisory, private lending , and the two specialist ex bankers we work with, our clients are 100% covered end to end for all their finance needs!
Step 3. Incorporate private lending even if you’re bankable.
Even If you become eligible for bank funding, some of your funding solutions should be from second tiers and private lenders.
The reason for this is very simple. If you one day fail to meet bank lending criteria due to cashflow problems, which all businesses experience at some point, you will need immediate access to funds.
Even our business clients doing $100m in revenue, have incorporated private lending solutions to ensure they always have access to funds.
Most people assume businesses use a private lender because they have a bad credit score. Which is true for a small percentage of cases! However the main reason private lenders are used is to fill the gaps bank can’t, and to provide additional funding to existing bank facilities.
Step 4. Use multiple banks.
As a business, using the same lender for all your business banking facilities is one of the worst things you can do! Similarly to step 3, having multiple banks and multiple lenders is key to getting as much money as possible.
As part of our business adviser services you can watch our video here explaining all of this.
What are your options when the bank says no?
For business loans, if a bank says no, there are still a number of options for you. It may be as simple as going to another lender for all the funds you need or you may adopt a multi funding mix which is a mix of different finance solutions to get you the aggregate funds you need. Below are just a few!
Other banks
Your failed loan may be simply because you went to the wrong bank. Different banks have different lending preferences, and knowing which bank to go to for your specific loan type is critical.
To get a specialist banker from our associate network, contact us here.
Tier 2 lenders
There are many tier 2 lenders that have far less stringent conditions than the banks, with easier serviceability metrics and proof of income requirements. Whilst pricing may be 1% to 2% higher than a normal bank, this is offset by the ease by which funds are delivered.
To get a specialist banker from our associate network, contact us here.
First mortgage private loans
First mortgage private loans are typically used for short term purposes, from 3 months to two years. These loans are no doc, no credit check loans, that are interest only.
Typically business owners use these loans, as a bridge until they can rehabilitate their situation to go back to mainstream banking. Or they use first mortgageprivate loans, in addition to their other bank facilities when the bank won’t lend them more.
To learn more about first mortgage private loans click here.
Second mortgages
Second mortgages are debt that is ranked behind a bank. These provide an excellent way of getting funds quickly, for short-term loans of 3 months to two years. Second mortgages are typically used when a bank won’t lend you more money on your existing mortgage, you need money quickly or an equity release.
To learn more about second mortgages click here.
Equipment finance
Equipment finance enables you to purchase equipment you may need for your business, from vehicles to specialised equipment. By using equipment finance this helps you free up capital in your business to use for other purposes.
To get a specialist equipment finance banker from our associate network, contact us here
Capital raise against existing equipment
One thing a lot of business owners aren’t aware of is that similarly to you being able to mortgage your property, you can also take loans against your exiting vehicles and equipment to release equity. This is a great option, when you have invested heavily into vehicles and machinery, and may need to release some of your equity for other business purposes.
To get a specialist equipment finance banker from our associate network, contact us here
Private corporate debt
Private corporate debt is for businesses that make above $1M in profit. This is where a private lender, family office or private credit fund will lend on very similar terms to a bank business loan focusing primarily on business cash flows and not property security.
Typically these loans are 2 to 5 years in duration, can be interest only, and or are amortised over a longer period of time.
Business acquisition funding
There are a number of private lenders that will offer business acquisition funding, typically at between a 70% to 80% LVR of the purchase price / valuation. This is a great option if a bank has rejected your loan due to minor issues on your credit file, that other private lenders are happy to overlook.
Invoice financing
Invoice financing or invoice finance, is where you use B2B invoices as a form of security, that you can use to obtain finance against in advance. This can help solve free cashflow issues within your business, allowing you to redirect business funds elsewhere.
Read more here about invoice financing/ debtor finance here.
Heritage plate lending
Heritage plate lending is where you use your Victorian Heritage plates as a form of security to gain access to equity without having to sell your heritage plates.
To read more about heritage plate lending click here.
Cashflow revenue based loans
There are several secured and unsecured cashflow lenders, that can help give you the liquidity you need or help solve part of the shortfall of funding you may need . Typically these loans are last resort as they tend to be the most expensive. These types of loans will lend according to a percentage of your yearly revenue without property security.
To speak to us about overcoming your issues with the bank, you can contact us here.
To learn more about private lending click here.
To get a business adviser to help you, click here.
