MONEY
When Your Loan Request is Turned Down
I
f your business needs capital, but a bank has turned down for a bank loan, consider a lease from your
you down, there are alternatives available. In this equipment provider.
article, you’ll learn about financing options for three Credit unions can also be helpful, since their busi-
different situations: obtaining a commercial mort- ness is based on close ties with the surrounding
gage, purchasing equipment, and acquiring extra community. And because they exist to serve their
capital when you have little cash on hand. members, they often provide better rates and amor-
tization terms. The downside to credit unions is that
Example 1: Obtaining a Commercial Mortgage their community-specific orientation may not allow
Although financial advisers do caution against ac- them to handle larger loans.
quiring a mortgage when cap- Other options include the
ital might better be used for
growth and expansion, some-
SB
SBA Basic 7(a) Loan Guaranty
A
C
r
e
d
i
t
program or the Certified Devel-
times purchasing property
Union
opment Company (CDC)/504
is a growth strategy in itself. Loan program discussed in the
Through two programs—the first example, since these pro-
Basic 7(a) Loan Guaranty pro- Bank grams will fund equipment
gram and the Certified Devel- purchases. And if your busi-
opment Company (CDC)/504 ness is small enough, there is
Loan program—the Small Busi- also the SBA Micro-Loan. In this
ness Administration helps direct case, the SBA makes or guaran-
mortgage loans from private tees a loan to non-profit inter-
lending institutions. Under the mediaries with experience in
7(a) program, loan maturity is 25 the field. These intermediaries,
years for fixed assets. Loans from in turn, make the Micro-Loan
Certified Development Com- to the applicant and provide
panies work a little differently. management and technical
CDC’s are private and nonprofit assistance as well. The loans
corporations designed to foster themselves are not guaranteed
economic development in their by the SBA. Micro-Loans may
communities. A 504 loan usu- provide short-term financing
ally includes a senior lien from a private institution, of up to $35,000 for working capital or the purchase
a junior lien of up to 50% from a CDC, and at least of inventory, supplies, furniture, fixtures, machinery
10% equity from the business owner. The junior lien and/or equipment. It does not, however, finance ex-
is funded by a 100% SBA guaranteed debenture. isting debts or the purchase of real estate.
Example 2: Purchasing Equipment Example 3: Acquiring Extra Capital
Companies that manufacture equipment often pro- Sometimes, businesses just need a little extra cash
vide their own financing. If your business was turned over the short-term. Although banks may not know
1 ThinkBusiness
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