How to get debt relief from equity when bank says ‘no’

Sometimes nothing is more irritating than being unable to access your own equity

Do these terms sound all-too familiar — poor cash flow, increasing vendor debt, unpaid taxes or growing sales that have outpaced your working capital — also known as “cash-flow negative?” Or, worst of all, do you have equity in assets but are unable to access the cash due to poor credit score, lack of profitability or negative cash flow?

Nothing is more irritating than being unable to access your own equity. You’ve earned it — you’ve done a great job saving money or reducing your debt. But when you need the money, the bank says “no” and you’re left wondering why.

Why you get turned down

You may have taken advantage of the tax law to save money on your income taxes or pursued an investment opportunity that required a distribution of your operating cash. Or, perhaps life just happens in a way you’re not financially prepared for. We’ve all been there.

Sometimes, after you have been in business a long time, it can be very difficult to get a “yes” from the bank because your financial statements are more cluttered than your hall closet. If you remember the cartoon where Fred Flintstone opens the closet door and his bowling ball falls on top of his head, then you know what I’m talking about.

My point is, you keep doing business as usual – until you can’t. When you apply for a business loan to purchase equipment and/or a commercial building or even just to renew your business’s line of credit, your cluttered financial statements can be the cause of a decline on your loan request.

Turn the ‘no’ into a ‘yes’

There may come a time when you have to step away from the bank to help realign the balance sheet. If your business has equity in its assets — such as accounts receivable, inventory, equipment or commercial real estate — then there are private lenders that will loan against those assets.

These lenders have a lot more flexibility on what the loan proceeds can be used for. And since they are not federally regulated like a bank, they can work with businesses that do not have the perfect financial picture.

As a private lender, I recently helped two different businesses pull equity from their buildings to pay off all outstanding debts they were carrying on their balance sheets. These included bank lines of credit, equipment loans, family notes payable, credit card debt and vendor payables. Cleaning out the closet increased the loan balances on their buildings, but it greatly improved their break-even. They even saved a lot of money.

All too often, a business and its owners suffer from tight cash flow, losses and higher debt load for a long time before realizing that there’s relief in sight. Using a private lender rather than the bank — even at a higher cost — can consolidate and re-amortize these debts and give them time to recuperate. Both business owners I helped had spent countless hours trying to secure traditional bank financing because of the lower interest rate. They didn’t realize the sooner they paid off all their debt the better off they would be in the long run. Now they know, and now their financial lives are a lot less cluttered and stressful.

Suzy Oubre-Loyd is a principal with Alliance Commercial Credit Group. Alliance Commercial Credit Group has specialized in debt restructuring for 25+ years in Oregon and Washington. Contact Oubre-Loyd at (360) 225-7407.