How to Requalify for Bank Financing: A Guide for Business Owners

If you’re a business owner and you’ve been asked to exit your banking relationship, it can feel like the rug has been pulled out from under you. But this moment, while challenging, can also be an opportunity. It’s a chance to reassess, re-strategize, and come back stronger, either with your current bank or a new lender better suited to your business’s needs. This guide will help you understand why banks ask businesses to exit, how to uncover the root cause of the issue, and the concrete steps you can take to requalify for financing.

Why Banks Ask Businesses to Exit Lending Relationships

Banks don’t typically sever relationships without reason. Understanding why you’re being asked to exit is the first and most crucial step.

Common reasons include:

Rapid Growth: While growth is typically a good sign, growing too fast can strain cash flow, inventory, and operational capacity. Banks may see this as a risk.
Declining Profitability: Sustained losses or weak margins make it harder for a lender to justify ongoing support.
Broken Loan Covenants: If your business has failed to meet the financial covenants or ratios required by your loan agreement, the bank may see this as a red flag.
Industry Risk: Sometimes, banks de-risk their portfolios by reducing exposure to certain industries.

Step 1: Have an Honest Conversation with Your Banker
Don’t make assumptions. Set up a meeting with your relationship manager and ask for a detailed explanation:

What specific metrics or behaviors triggered the exit?
Was it related to your financial statements, cash flow, collateral values, or a covenant violation?
Are there risk policies at the bank that changed recently?

Getting clarity will help you form a plan. Ask:

What would the bank need to see to bring your business back into compliance?
What are the steps to requalify in the future?

Document this information. It becomes your roadmap to rebuilding that relationship or a benchmark when seeking a new one.

Step 2: Prepare for the Transition
If exiting is inevitable, start preparing:

Engage a financial advisor: An experienced advisor can help you navigate this process, evaluate options, recommend other lenders, and assist with packaging your financials.
Review your financial statements: Make sure they’re accurate, up-to-date, and clearly tell the story of your business.
Build a 12-month cash flow forecast: Lenders like to see proactive planning.
Identify internal improvements: Tighten expense controls, boost margins, and reduce operational inefficiencies.

Step 3: Seek a New Lending Partner
Not all lenders are the same. A bank that was once a good fit may no longer align with your growth or structure. That’s okay. What matters is finding one that does. And typically, if you don’t meet the criteria of one bank, you won’t meet it for other banks either. That’s where asset-based lenders come in. They offer more flexibility than banks, and the good ones help businesses requalify for bank financing as soon as possible.

Here’s what to look for:

Flexible underwriting: Asset-based lenders place their emphasis on collateral and lend against that; typically accounts receivable, inventory, equipment, and real estate.
Industry experience: A lender who understands your industry will better evaluate risk and offer realistic terms.
Access to decision-makers: You want a lender who will structure financing to meet your business needs and work with you to help you succeed.

Ask the prospective lender:

What is your approval process and timeline?
Are there covenants, and how strictly are they enforced?
How do you support clients during downturns, periods of change or when business opportunities arise?

Step 4: Stay Connected and Build Trust with Your New Lender
Once you’ve secured a new relationship, don’t treat it as “set it and forget it.” Build trust with your new lender proactively:

Meet quarterly: Review financials, operational updates, and upcoming initiatives.
Ask for feedback: Understanding what your lender sees as risks or opportunities can help you fine-tune your strategy.
Be transparent: If challenges arise, let your lender know early. Most will work with you through the tough times if communication is strong.

Step 5: Set a Course for Requalification
If your ultimate goal is to re-enter a traditional banking relationship, either with your previous bank or a different one, start preparing now:

Maintain clean, timely financials: Banks scrutinize your income statement, balance sheet, and cash flow statement.
Demonstrate consistency: A track record of stability, even modest growth, goes a long way.

Requalification isn’t always about massive change. Often, it’s about demonstrating that you’ve stabilized operations, addressed past issues, and have a plan to manage future risks.

Final Thoughts: Turn a Setback Into a Growth Strategy

Being asked to exit your bank can feel like rejection, but it’s also feedback. Use that information strategically. Ask the hard questions. Improve where needed. Seek the right lending partner, not just any lender.

Then, take control of your financial future. With the right preparation, the right team, and a commitment to transparency, you can requalify for bank financing and come back stronger than ever.

Need Help? If your business is in transition or has recently exited a banking relationship, we can help you with the financing you need for your business. Contact Celtic Capital today.

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 $8 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.

If you know of, or are, a business in need of non-traditional financing, contact Mark Hafner at 800.742.0733 or mhafner@celticcapital.com, or visit us at celticcapital.com.