Ten Things to Do If Banks Won’t Lend to You

Business Coach Column by Ruben Anlacan, Jr. (President, BusinessCoach, Inc.) from the Manila Bulletin

You can raise cash quickly for your business when you need it! 

People new to business usually turn to banks when they need cash. Unfortunately, banks rarely lend to start-ups nor to those with no track record.

This is not the end of the road; in fact, there are alternatives that may even be more attractive. Try these options if they fit your situation:

1. Lease instead of buy. If possible try leasing an asset instead of buying it. This applies not only to land and building but also when purchasing expensive equipment. Doing this will not only improve your cash position but also enable you to charge the lease payments as a business expense.

2. Borrow from parents or relatives. This is relatively safe because it is almost impossible for them to foreclose you in case you fail to pay on time. They will be more flexible in case you need to postpone your payment.

3. Get trade credits. Suppliers will be willing to give you credit lines if you have developed a good and trust-based relationship with them. If you already have a credit line then ask if it is possible to extend it. The strategy here is not to wait; you must actively ask how and when you can be given your desired credit terms. Ask around to know the best terms possible.

4. Ask for down payment. Always ask for a down payment whenever possible. This also lessens the chances of non-payment. If you were able to close a big project, you may talk the client into giving you an advance payment so you can minimize drawing money out of your own pocket.

5. Liquidate assets. Sell items you do not really need or can be exchanged for a less costly asset. This may be a vehicle, a machine, or a property. One small company I know solved its cash crunch by selling its brand new truck and using its old van instead since it rarely hauled truck sized loads. Identify your non-performing assets, and make money out of them. Check if you really need the asset’s capacity.

6. Have your receivables discounted. There are some banks or financial institutions that will buy your post dated checks and receivables from suppliers.

7. Reduce your inventory. You can only do this if the cost of stock outs would not be significant. Increasing the frequency of purchases may lower your inventory levels without incurring stock outs.

8. Draw investors. If you have a good business plan, you may ask an investor to help finance your business. You may not like to share your profits but half of something is better than all of nothing!

9. Improve your credit policy. Do not be too lenient on terms. Check if you have clients that take too long to pay. Often, not only will your cash position improve but your bad debts expense will also be reduced.

10. Postpone payments. In urgent cases, you may be forced to select which supplier you must delay payment. Consider this only if you have no other choice because it may damage your relationship with your supplier.

So, before giving up on your plans, exhaust first all possible ways of getting more capital!

(All rights reserved. Copyright by Manila Bulletin and Ruben P. Anlacan, Jr. May not be reproduced or copied without express written permission of the copyright holders.)


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