Loan Options When the Bank Says No

Today's Wall Street Journal (subscription required) wrote about three creative ways companies are obtaining working capital loans from alternative lenders during the credit crunch.

The first financing option is obtaining a business loan from a credit union. Back in mid 2006, I commented on an LA Times article discussing a possible paradigm shift of credit unions moving into small business lending. The Wall Street Journal article focuses on business loan matchmaker, Zopa, which offers loans through various credit unions. I didn't realize Zopa was tied into credit unions - I thought it was strictly a peer-to-peer lending system. Zopa loans are unsecured, range in amounts from $1 thousand to $25 thousand and focus on borrowers with FICO scores of at least 640. If you need more than a micro-loan, it might be better to go to your local credit union.

With corporate cash flow suffering, many borrowers are pursuing asset based loans. I'm working a lot with these solutions. These asset based loans come in a variety of products - purchase order financing, accounts receivable financing, asset based revolvers and equipment leasing to name a few. Plus, there are lenders targeting a wide range of loan sizes - you can find lenders providing asset based loans from as little as $100 thousand to hundreds of millions and larger. The asset based credit lines are typically secured by accounts receivable and inventory which the lender can seize in the event of a default. In select cases, the interest rate for asset based loans is only marginally higher than conventional bank loans.

The last solution mentioned was business loans provided by government-funded, non-profits. Credit criterion may be a bit more flexible as lenders have another motivation. Typically these loans are available in return for a commitment from the borrower to create or retain jobs in the region.

Need help finding the right alternative lender when the bank says "no"? Read "Matchmaking for Business Loans" and give me a call!

Tags : Wall Street Journal , credit crunch , business loans , asset based loans , credit unions , Zopa