When a small- to medium-sized retail business is looking for a loan, the first place it may turn to is a bank. However, there are many factors working against these types of companies that could lead a bank to deny a request.
- Poor business credit history – One of the reasons a bank may deny a small- to medium-sized business a loan is due to it's poor credit history. Generally, these companies lack sufficient history and cash flow to obtain a loan. Also, if the business has had trouble paying any of their credit on-time in the past, it could struggle to get a bank loan. New businesses may have a limited credit history or none at all, which could also be a negative.
- Not enough profits or cash flow – When determining whether or not to give out a loan, banks will look at a businesses ability to repay. Revenue streams will be investigated to determine the likelihood of repayment, and if profits and cash flow are not there, a bank will likely say "No."
- Too much borrowed already – Businesses that already have an existing loan or line of credit could struggle to get a loan from a bank, especially if a significant amount of the company's cash flow is going toward paying this debt each month.
After running into trouble with a bank, small- to medium-sized retail businesses may think they are out of options, but that is not the case. These companies may very well qualify for either inventory financing or purchase order financing. Companies such as Crossroads Financial provide this type of financing.
Taking advantage of this type of lending allows a business to obtain financing when the bank says "no."