Business Owners: Bank Asks You Out. Now What?
When your bank asks you to exit, don’t panic. This may just be the best way to get your business back on track. And don’t ask for an extension. Prolonging your exit is not in your best interest and here’s why:
- The more time that goes by without your business having access to the financing it needs, the more your business will suffer.
- The more time it takes to secure new financing, the less time you have to run your business and opportunities could be lost.
And don’t waste time by looking for another bank. If you’re not bankable with one; chances are very great that you won’t be with any others.
So what should you do? Ask your banker and other business advisors (e.g. your CPA) for referrals to alternative lenders. Most likely, you’ll be referred to asset based lenders who are primed to take companies asked out of banks. They are willing to take on the risk banks won’t take. That’s because asset based lenders finance the business’ collateral (accounts receivable, inventory and equipment); the financial statement is secondary. What you really need to think about is which asset based lender is right for your business?
Basing your decision on rate is counter-productive. Don’t expect to pay bank rates. Asset based lenders are more expensive than banks; again, it’s an issue of risk. Being asked to exit your bank means your business has some underlying issues. Asset based lenders are willing to take on struggling businesses and they need to be compensated for doing so. Just remember, you won’t be with an asset based lender forever. It’s a short-term scenario – just until you’re again bankable.
And when selecting an asset based lender, the least expensive is not always the best. The right lender is one that structures the financing to meet your business needs, doesn’t have covenants, and won’t abandon you if things take a turn for the worse.
You have options. Make sure you consider all the ramifications and you’ll do fine.
About Celtic Capital
Companies looking for working capital to cover operating expenses, fund growth, increase buying power and take advantage of vendor discounts and rebates turn to Celtic Capital. With an appetite for the more complex transactions, Celtic Capital has a history of success in crafting creative, flexible asset based financing solutions from $500,000 to $5 million with no financial covenants.
As an independent lender, working with companies nationwide, Celtic Capital is willing and able to alter price and deal structure and expand lines of credit to handle its clients’ increased revenues; and when cash flow is an issue, will look toward providing an inventory facility to help offset lost cash flow.