How To Act When the Bank Says No

Every business has felt the crunch, that bite which comes when the business is short on money. There is no more money to be generated in the short term by the business, and money desperately needs to be pumped into the business to keep going and realize its potential.

So, the entrepreneur goes to the bank yet again... with a proposal for how much money is needed and why it is needed. The bank reviews your proposal and comes back to say, "No, not for this one".

Now the entrepreneur is really disappointed, as it is very clear to him/her that this proposal is a sound one, and he/she needs help just now, so that it leads to better business, profits and growth. Familiar story? 

What are the options open to such an entrepreneur - one who has utter belief in his business idea, but is short of funds?

  • Retreat, regroup and review: Take your proposal back. Review it once more, more critically this time. Once satisfied of its rationale & presentation, assess the business and its operation - where can costs be cut, where can you cut back on operations without very negatively affecting the business. Is there any other way money can be generated from the business? Try a couple of other banks.
  • Temporary cash advance: This facility, offered by some private lenders, is like a future credit card transaction, at a discount.
  • Social lending systems on the internet link together people with money to invest and those who have a business proposal that needs investments. This is a recent phenomenon, like Zopa, and has satisfied customers. This is a growing trend, aided by limited financing from banks and the availability of people willing to take on some amount of risk.
  • Financing can also come from Wall Street, where independent investors are looking for potential opportunities. The entrepreneur can advertise his investment opportunity and request queries from investors. Upon receiving such queries, the entrepreneur can submit his business proposal and move it forward.
  • The Government and Grants: The Government, through a variety of plans and programs, grants loans to certain small businesses. Check whether you qualify under any of their systems.
  • Clients who have been with the business long-term will understand the business and also know you and your business well enough to trust you with their money.
  • Suppliers are one source of funds you can tap, especially when funding is needed to tide over a cash crunch on inventories. They may be happy with your payment pattern and business so far and may increase the credit period, thereby helping you out.
  • Asset-based lenders will also lend the business money by way of working capital against your inventory.
  • Equipment manufacturers can extend relaxed payment terms, if the extra money is needed for purchasing new equipment that will increase production and thereby sales and profit.

When banks say ‘No', there will be those who will say ‘Yes' if you know how to make your proposal and passion strong enough. So take heart and take risks with the trust of others backing you!


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