Blog 14: The Banks are Missing Out
You hear it time and again: a small business owner has been turned down by the bank because they don’t fit into the bank’s perfect-little-black-box when it comes to financing criteria. The measures often include lending risk and debt service ratios, but with a fairly narrow threshold in terms of approval ranges.
If you are growing rapidly, you don’t qualify – not predictable enough. If you have stable sales, you don’t qualify – no growth prospects. It seems like a catch twenty-two. So, it makes complete sense that businesses like UM Financial, one of the featured companies in the Business Challenge, and New Horizon Mortgages Investment Corp. are popping up. Traditional financial institutions, such as the banks, want to see a record of consistency, a strong credit rating, profitability, and repeat customers. It is the exact opposite of what most small and medium businesses experience, especially in the early days. The banks are missing out on ripe business opportunities that private firms seem to be scooping up and generously benefiting from given premiums ranging from 3-15% above bank rates for traditional lending products. So if you are in the situation where you continuously get turned down by the bank, or you have gotten the standard “come back in 6 months” speech, there might be light at the end of the tunnel after all.
Depending on your financing needs, here are some alternate options to check out: · Morrison Financial (www.morrisonfinancial.com) · ICICI Bank Canada (www.icicibank.ca) · Business Development Bank of Canada (www.bdc.ca) · Roynat Capital (www.roynat.com) · The Shotgun Fund (www.shotgunfund.com) This message goes out to the plethora of other private or alternate lenders: please post your information as there are thousands of small and medium businesses ready to knock down your door.
Tasha Mazza-Kelton, Partner www.torquemi.com