Turned Down By a Bank?

Even before the coronavirus pandemic pushed the economy into recession, there were certain types of businesses that had difficulty obtaining loans from banks. But because factoring and purchase order financing use a different model, those who are ineligible for traditional bank loans may be able to obtain financing through these other methods.

Indeed, much of our business comes from banks who refer their eligible turndowns to us.

Factors Leading to Ineligibility

Traditional banks, like all lenders, need to assess risk before lending. Small businesses are typically viewed as high-risk. In addition, businesses in certain niches or that operate on razor-thin margins may be viewed unfavorably.

Banks also tend to view businesses with just one or two large clients as too risky.

Banks will also shy away from new businesses. Indeed if you’ve been in business for less than two years, it will likely be difficult to obtain a traditional bank loan, even if you have sterling credit and own a second successful business that’s been profitable for years. And certainly startups are ruled out.

Your personal and business credit come into play as well. A bank may not be able to take into account that a hit to your credit was caused by extended illness or other factors beyond your control. And relatively new businesses may not have built up sufficient business credit yet, which is based on a history of paying invoices on time.

How Is Our Factoring Different?

First, recall that factoring offered through Spearfish is not for B2C businesses. It’s for B2B, B2G (business-to-government), and even for organizations such as non-profits or educational institutions.

  • Factoring is a form of business financing that doesn’t add debt to a business.
  • With factoring it’s the credit of your customer that’s key. That’s because they are the ones paying the bill.
  • Startups and new businesses with AR are welcome.
  • You’ll receive world-class AR management by a partner firm with 25 years of experience. This is one of the perks of obtaining debt-free financing through Spearfish.
  • A decision can be made (and funds received) much faster than with traditional bank financing: in some cases, on the same day.
  • Credit insurance: all factoring, PO financing and supply chain financing obtained through Spearfish provides credit insurance. This protects you from the risk that one or more of your creditors becomes insolvent during the factoring period.
  • Rates as low as 1%. Our underwriting partners, not Spearfish, decide eligibility and rates.

Underwriting standards for factoring are not lax. Indeed our financial partners are meticulous and exacting in their underwriting. This is why the related default rate is less than 0.05%.

To learn more book a free phone consulation with one of our staff.

Cost of Capital and ROI