Reasons Banks Won’t Lend

Understanding the reasons why banks won’t lend can help business owners better evaluate their borrowing options.

Why Banks Often Say No

Due to a plethora of government regulations, banks are obligated to lend conservatively. They prioritize predictability of profits, long operating histories, and straightforward collateral. When a business introduces complexity, losses, a short history, or a need for speed and flexibility, banks often are not supportive.

When a Bank Asks a Business to Leave

In some cases, a bank doesn’t just decline new credit, they may actively encourage a business to refinance out of the bank and end the relationship. Depending on the particular situation, the bank may be cooperative and give the business a runway to exit or they could be more draconian and require the business to leave rapidly. From the bank’s perspective, it’s about managing risk and staying within policy

Reasons a business might be asked to leave a bank:

• Short-term or recent losses

• Violation of loan covenants

• The business model evolves beyond what the bank is willing to support

Alternative Sources of Funding

When traditional bank financing no longer fits, alternative funding sources might be an option. Typically, this is in the form of an asset-based loan where the lender relies more on the collateral value than credit profile of the business..

Common collateral includes:

• Accounts receivable

• Inventory

• Equipment

• Purchase orders

• Real estate

Funding availability is tied to a borrowing base that adjusts as asset values change. As the business grows, available capital can grow with it.

In sum, if a business can't obtain a loan from a bank or is being asked to leave, there may be an opportunity to obtain funding backed by the business's collateral.

Connect With Morewood Funding

When bank financing no longer fits, alternative funding can keep a business moving forward. Morewood Funding works with non-bank and asset-based lenders who understand complex business models and structure financing around real-world operations. If you advise or manage a business considering funding options, please call or email us at:

Call: 917-561-7074

Email: howard@morewoodfunding.com

Visit: https://www.morewoodfunding.com