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What You Can Learn When Your Banker Says No

Discover what you can learn when a banker says no. Get insight on hearing no from a financial advisor via Fresh Insights.


Banks are in business to loan money — this is one of the main ways we help small businesses grow and prosper and the communities they serve thrive. But small and midsized businesses must be able to meet specific criteria and demonstrate a certain degree of financial strength in order for a bank to approve their loan request.

This means that there are times when business loan requests are denied. However, a declined loan request isn’t always a bad thing. There are a few important lessons you can learn if your loan application is denied.



Looking to Say “Yes”

“Bankers look for ways to get to ‘Yes,’” says Maurice Champion, a Middle-Market Commercial Banker at Cadence Bank. “Yet it’s important to know what you’re getting into, and we have the job of making sure a business owner understands all the implications of the new business loan they’re seeking. Sometimes that means we have to say ‘No.’”
Champion offered a few things a business leader can learn from a “No” at the bank:

It might be time to hire a Chief Financial Officer (CFO): Small business owners may need a CFO sooner than they think. Quick growth can be a challenge for a leader who doesn’t have the financial background to understand exactly what the numbers are saying and how to use those numbers to forecast. This is the type of expertise a CFO brings to the table.

To illustrate this, Champion shared the story of one company he worked with that wanted to purchase and occupy a new building. Their quick growth and their accounting practices (that couldn’t keep up) caused them to over-count their revenue. “Basically they were triple-counting income,” he said. “The administrative side of their business wasn’t able to keep up with their growth, and they wouldn’t have been able to make the payments on the loan they were seeking.”

It was time for them to hire a CFO — someone responsible and capable of running the financial side of the business. “It’s hard to pinpoint when the perfect time to hire a CFO might be, but it’s earlier than you think,” says Champion. “When your banker starts asking questions and you find it difficult to articulate the answers, you need a CFO.”

Fortunately, in the beginning, you might not need a full-time CFO. There are a number of companies that offer part-time contract CFOs for hire.
Maybe you should slow down the pace of growth: This might sound counter-intuitive — all growth is positive, right? Not necessarily. Your banker will help you avoid stretching your financial resources too far, compelling you to grow at a slower pace. This can help protect you from potentially damaging the financial health of your business.
Depending on the business, sometimes hyper-growth requires more than a bank loan to make it happen. Champion shared the story of a customer who had an exponential jump in national accounts, but lacked the infrastructure or experience to execute on the contract. “We introduced them to a private equity group that may help with the financing and the execution,” he said.




Some More Sound Advice

In addition to the potential lessons above, Champion offered some very important advice:
Understand the impact of your project to the business — “It’s critical to understand the benefits and the obligations associated with the capital you’re seeking,” he said. “If you’re going to fuel growth through debt, you really need to understand the benefit that capital will have on your business and the obligations that go along with it.”


Take advantage of the resources available to help you — “Local universities and the Small Business Administration (SBA) are working together to help business owners craft the business plan they’ll need to apply for a business loan,” he suggested. “And other groups like SCORE offer experienced mentors who can help you more efficiently run your business. These are often retired entrepreneurs who’ve done this before and can really help you.”


No business leader wants to hear “No” from his or her banker. Nevertheless, learning from that “No” can help make a good business great. Following Champion’s advice can help make your company one of those ready to leverage borrowed capital into increased profits.
Cadence Bank is committed to your business’ success, so we offer a wide range of small business loans to help your business prosper and grow. Please contact a Cadence Bank representative if you have questions about preparing your business loan application.
This article is provided as a free service to you and is for general informational purposes only. Cadence Bank makes no representations or warranties as to the accuracy, completeness or timeliness of the content in the article. The article is not intended to provide legal, accounting or tax advice and should not be relied upon for such purposes.

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