When your financial performance falls outside your lender’s risk profile, you may have cash flow issues. Cash flow is essential to the health of any business. Yet, as many small business owners know, cash flow problems are all too common. Most businesses try to mitigate these shortfalls by applying for loans from banks and other financial institutions. But, are you ineligible for a line of credit from a traditional lender? Learn what a business owner can do when their current financial performance falls outside their lender’s risk profile. Alternative cash flow solutions, like invoice factoring, can solve the issue.
When your financial performance falls outside your lender’s risk profile, your business may be considered too risky for a bank loan…
There are a number of reasons why banks may consider you too risky to grant you a loan or extend your line of credit. Cash flow shortages in their own right do not make you a high risk. Especially, if you have the assets to support your loan. To assess the level of credit risk to which a bank might expose itself if it were to grant you a loan, it will consider five factors—the Five C’s. These are: credit history, capacity to repay, capital, character, and collateral. A poor showing in any one of these factors can adversely affect your loan application. For example, you may have the assets and repayment capacity. But, a poor credit history will make it unlikely that a lender will take a chance on you. On the other hand, good credit history may stand you in good stead, but if you have had a poor showing in revenues and profits for a long time, the lender may err on the side of caution and decline your application.
Try factoring when your financial performance falls outside your lender’s risk profile
If any of these factors have placed you outside of the risk profiles of financial institutions, invoice factoring could be the best alternative for you. Factoring does not incur debt, and it is granted on the basis of your clients’ credit histories, not your own. All you have to do is sell your receivable invoices to a factoring company, which will then pay you an advance on the total value and even relieve you of credit control responsibilities. Factoring is fast, affordable, and debt-free.
Kore Capital Corporation specializes in providing short-term capital to small businesses. For more information on our line of credit, government contract financing, inventory factoring, or invoice factoring solutions, contact us today.