Why Banks Decline and Factors Approve

It happens all the time: A factor will get a call from a company that needs business financing but was recently declined by a bank.

These potential clients are fed up with the process of applying for financing and do not understand why banks don’t see the same growth potential the business owner does.

“If they just provided the cash, I could double my business!”

Banks, though, do not look so much at growth potential as they do number of years in operation. Banks look at hard assets, real estate and equipment that can be used as collateral. Simply put, banks lend against things you own.

That works great for companies with a long history of outstanding performance and flawless balance sheets.

If a company hasn’t been in business long, is in a growth phase or in the process of a turnaround, though, there may not be much for a bank to look at.

Few assets plus a short track record equals no cash.

But, let’s look at this from a factoring perspective.

When those prospective clients call and express their frustration with the financing process, a factoring company, such as Universal Funding, can often put them at ease and explain how it can help. Universal loves to look at a company’s growth potential and listen to the passion of the business owner as he or she explains what could be done with immediate cash.

Many factoring clients are companies that haven’t been in business long, or started out that way, but have since experienced vast growth and many years of profitability.

Watching clients grow is proof that factoring works. Plus, a company that factors will never outgrow its financing. As the company grows, its line of financing grows too.

If your company has had trouble getting approved for bank financing or just wants to try a different way of funding operations, contact us today!


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