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    11 Replies Latest reply on Apr 20, 2008 3:18 PM by FinanceHelp4U

    Advice requested regarding recent loan denials (long)

    BuynSell Newbie
      Hi, I have a 3 yr old LLC with 2M of sales/year and 10 employees. Up until now, I've operated my business purely on a cash basis meaning that I did not take out any kind of loans/cc balances, etc. I am currently looking for working capital to expand the business, mainly to expand inventory.

      I have heard that having a separate business credit is very important - so I followed instructions on another board and established my business credit - obtained a DUNS number, charge accounts from major retailers (staples, office max, home depot, lowes, gas stations, dell, amazon, etc). These are all without PG (personal guarantor). I have a spreadsheet that tracks my business credit, and now it is up to $50k. My Paydex is 75 and Experian credit score is 91. So far, so good, right?

      I received two letters to apply for BofA's LOC and Business card (all by FIA). Applied, instant denial. The decision was based on my personal credit score (660)- a paid Amex chargeoff, and debt to income. My debt to income isn't accurate because I'm a small business owner like all of us. I'm wondering if 1) BofA isn't a good choice to go with, or 2) I need to keep fixing my credit score.

      I looked into the business CD-secured loans, and it didn't seem like my cup of tea - I earn low interest, and I have to pay a loan origination fee for the LOC's. I am currently working actively to clean up my credit report, by asking the creditors of paid CO's to remove the entries, etc. Does anyone have ideas as to what I can do? I'm not interested in credit card factoring or selling A/R's.

      Thanks for everyone's help :)
        • Re: Advice requested regarding recent loan denials (long)
          CorpCons08 Ranger



          You may be in better shape than you realize. The credit score does not sound like the problem. It sounds like they are harping on the chargeoff and your DTI ratio. How much money are you looking to borrow? My firm helps small business owners obtain the financing they need, we would be more than happy to speak with you and work on obtaining this financing. You can contact me directly by emailing me at




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          • Re: Advice requested regarding recent loan denials (long)
            LUCKIEST Guide
            BuynSell, You and your business sounds great. You have a 3 years track record.
            Do you have an Accountant?? Do you have a Business and Financial Plan??
            Getting working capital to expand should not be difficult.
            Have you thought about visiting a SCORE office. SCORE Counsels business people FREE.
            Good luck, LUCKIEST
            • Re: Advice requested regarding recent loan denials (long)
              Lighthouse24 Ranger

              You note that the money is mostly to expand inventory. I'm wondering if you have contacted your suppliers regarding terms on the larger purchases that would facilitate that? By doing so, you'd reduce the amount of cash you need to borrow from an institutional lender, and increase the chances of being approved for that.

              One of the things I love about this time of year is that the account managers and salespeople for my suppliers often have year-end quotas to make (or their own holiday expenses to cover), so they are eager to get big sales on the books. Just yesterday, I purchased a product that I resell regularly in a quantity that will last me all next year. I got it for 30 percent less than the wholesale price I normally paid in lower quantity, and I have zero interest terms until 9/30/08 on the entire amount! All I had to do was take delivery by the 23rd (small item, easy to warehouse).

              Your business may obviously be different, but I'm throwing that out as something for new business owners who buy supplies, materials, resale inventory, etc. to consider. When you change the quantity, you change the terms -- and the time to buy it is when the supplier is most anxious to sell it. Best wishes!
              1 of 1 people found this helpful
                • Re: Advice requested regarding recent loan denials (long)
                  BuynSell Newbie
                  Although I do not have formal terms with my suppliers, we work so closely together that I guess you can say that we are beyond the "net terms" dealing.

                  I have an agreement with my supplier to use them exclusively in return for a matched inventory commitment. For example: If I have $100k allocated to inventory, they match my inventory 1 to 1 by placing $100k of inventory available for me, in their warehouse. When I pick up the inventory, I pay for it on the spot. There is no "terms" but essentially the meaning is the same and maybe a little deeper: Although I have $100k commited to inventory, I have access to $200k of inventory. This inventory they keep for me is specifically for me, and once its made to my specs, it cannot be sold to anyone else.

                  My portion of the inventory turns over once every two months, and if you add their matched contribution, then the inventory turns over once every four months, or three times a year.

                  For my customers I work on cash only - when their credit cards authorize or when the checks come in, I ship the goods. This is the biggest issue right now, because even though these are not formal A/R terms, the money is always floating. I never forecasted that I need to allocate capital so money can float in, because I didn't consider that as an A/R. The only thing I can do to counteract this floating is if I floated myself, and that is by using credit cards and paying in full. But, this is a hassle because its difficult to find a credit card that offers limit in the tens of thousands, and that not all my purchases can be made using CC.

                  So back to the topic of loan/line of credit - how does this work? I have been researching, looking around, and sometimes applying. What blows my mind is that all of the loans I've seen are all personally guaranteed - checks personal credit, and goes after person if the loan defaults. My goal for having LLC is to have separate entity, and I always feel that the banks try to tie me back in. All of the credit I've established with the company have been without a PG, but these are store charge accounts (staples,office depot, gas, etc) and none are the useful LOC's. I have about 60% of my capital in inventory, 10% in equipment, and 30% in operating cashflow/AR floats. I don't mind securing the loan with anything except personal guarantee. Trying to learn some new tricks here :)
                    • Re: Advice requested regarding recent loan denials (long)
                      Mark SLF Wayfarer

                      Just an additional thought on your cash flow situation. It sounds like you have a very good relationship with your supplier. With 60% of your costs tied up in inventory this is still the best place to look to free up cash.


                      If your supplier has either good cash flow or has a good line of credit they can also make more money by offering you these terms if you gave them an incentive. The example below reflects offering a supplier a 1% per month carrying cost for giving you these terms. This is more than their line of credit should cost so they make money. Obviously you would want to try and make new terms with out this incentive first.


                      Annual Sales$2,000,000
                      minus Annual Profit 10%$200,000
                      Annual Costs$1,800,000
                      Inventory at 60%$1,080,000
                      mthly cost of inv.$90,000
                      Net 30 daysFrees up $90K in working capital
                      Pay supplier 1%900
                      Still frees up per mth89,100


                      Just a thought.

                      The line of credit tied to receivables works like this. After an agreement is in place with a lender you notify your customers that all checks are to be mailed to a po box. The lender controls the PO box. They have authorization to deposit the checks. You are given a line of credit based upon how much money you have in AR. As checks come in the line is paid down. When you need money you can request online and they transfer money directly into you account. Interest on this type of line can run between 1 to 3% over prime.
                      I only know of one lender that does this and would be more than happy to help you out. My contact info is in my profile.

                      Thank you,

                  • Re: Advice requested regarding recent loan denials (long)
                    Mark SLF Wayfarer

                    Are you having any issues with cash being tied up do your customers paying you 30, 60 or 90days after your service or product. I notice you said you are not interested in selling your invoices but you can use those invoices to secure a line of credit. If works a little bit like factoring but it can be set up to be seemless to your customers. The line of credit depends on your customers credit worthiness and not your own. It also increases as your sales increase. If you are interested in learning more just post a response.


                    Thank you,


                    • Re: Advice requested regarding recent loan denials (long)
                      Altloan Newbie


                      My name is Vic. We have some alternative funding routes we could entertain. I would like to discuss this with you in greater detail. Please send me an email to


                      • Re: Advice requested regarding recent loan denials (long)
                        loan guy Wayfarer



                        You have made all the right moves to improve your chances of getting a loan. Every lending institution is different. Your scores are fine. You need a no income verication type loan. email me
                        • Re: Advice requested regarding recent loan denials (long)
                          FinanceHelp4U Wayfarer

                          +I work with companies such as yours in helping them obtain loans and lines of credit all the time. This is my specialty. If you are interested in my services, please feel free to contact me,</<br />Thanks,*

                          Carol, Financial Consultant
                          (606) 598-4218