How to Secure Working Capital When the Bank Can't Provide Additional Funds

March 2019

You got a loan from a bank a few years ago. You paid it off and met all the terms of your agreement. You figure that you should now be able to go back to that bank, and easily obtain more working capital. But the bank says no. Why and what can you do about it?

Why You Got Turned Down for a Repeat Business Loan

First, know that it may not be your fault. Banks find it much easier to loan money to big enterprises. They may simply refuse to lend to businesses within specific industries (for example, travel companies, restaurants or consumer financial services) or they may not loan to businesses who are below a revenue threshold of $2 million. And they want to write loans for serious money. You may think that asking for 10,000 or so would make it easier for a bank to say yes, but frankly – small loans are just annoyances to big banks. So, you may have been lucky the first time around, or the bank may have been trying to reinvest in the community at that particular point in time. Or the business cycle may be changing, and the bank is either more risk averse or less needy.

Or, it may be something that you can correct. Ask yourself if:

Your credit score – both personal and business – has gone down recently. If your personal credit is overextended, or you don’t have a high score your loan will likely be rejected. A bank may also look at your business credit score (which is ranked from 1-100, with 75 considered a good score). Review your score and if it is low, begin working on repairing it. Many small businesses rely on their personal credit to launch their business and carry it for the first year or two so it’s not uncommon to carry high debt. Or you may have run into credit problems due to health issues or other personal issues. Assume it will take at least a year to repair your credit, so you may opt to look for funding from a company like One Park Financial, which specializes in helping small businesses access working capital.

You’re not carrying enough debt. Lenders like to see that you utilize no more than 60-70% of your available credit and make payments on time. Take a look at your debt usage ratio and correct as needed.

Your business experiences seasonal slumps. Banks tend to prefer to lend money to businesses that have a predictable cash flow and may see seasonal variances as problematic. There’s not much you can do to address this issue, unfortunately.

You didn’t ask for enough. It takes about the same amount of time to service a big loan as it does a smaller one, and bigger loans are more profitable. Bump up the amount you’re asking for (but frankly, banks may be looking to write loans in amounts that would terrify many small business owners), or work with lenders who extend loans in lower amounts.

What to Do When You’re Denied a Bank Loan

You have two options, either fix the reason for the denial or opt to work with a funding source which requirements that better meet the needs of smaller businesses. Since many small businesses will not easily qualify for traditional bank loans, we suggest that you explore your options. These include:

Peer-to-peer lending: connects small businesses with funders that include individual investors and institutional investment groups such a hedge fund or investment bank. Depending on the platform, peer-to-peer can provide an excellent way for small businesses with solid credit histories to access funding. But you typically need to have a strong credit rating, 700+ range is preferred.

Community based nonprofit groups: These funders offer loans that meet their mission statement, helping people who may be underserved by traditional business financing to access business funding. They are sometimes referred to as “microlenders” because their loans are typically $50,000 or less.

Small Business Administration: An excellent option if you have a strong credit score, excellent borrowing history, and a lot of time to devote to gathering documentation. The thing to know about these loans is that the loan is guaranteed by the Small Business Administration, the actual loan amount is provided through an SBA-approved lender, almost always a bank or credit union. That’s why the requirements are strict – the SBA promises to pay up to 85% of the loan if you fail to do so – so they want to be very, very sure you won’t default.

Alternative funding: Business owners turn to these types of funders to expedite access to fast funding, simplify the loan process, or leverage online funders more flexible credit history requirements. Alternative funding sources work with businesses that have revenues as low as $5000 a month, and funds are typically available within 72 hours. Business owners don’t need to have perfect credit scores to be approved. And the typical application process takes minutes, not months. The offerings in this space are tailored to the needs of small businesses and include options such as advances on currently unpaid invoices (also called factoring or financing advances) and merchant cash advances which provide an upfront advance on expected revenues.

How Do I Find an Alternative Business Funding Source?

One Park Financial works to help owners of small and mid-sized businesses access the funding that meets their needs. Established in 2010 and founded by entrepreneurs, One Park Financial understands the challenges associated with small business loans and their need for working capital. Visit or call 855.218.8819 and connect with a funding expert to discover the options that make sense for you and your business.