Most business owners know they need capital to grow. Far fewer know how many doors are actually open to them — or that their bank’s rejection letter is often the beginning of the conversation, not the end.Through many years of setting up business financing deals in a wide variety of sectors including commercial, manufacturing, healthcare, hospitality and real estate, I have seen some of the most capable entrepreneurs forgo countless opportunities that could have made them millions due to a simple lack of awareness about where to find money and how to secure it.Why your bank said no (and why that’s not the whole story)Traditional banks are extremely risk-averse entities. These entities are run according to strict regulation requirements and have to see at least three years of solid performance, a large amount of collateral and no problems in either the business or its owner’s credit. If your business is new, operates in an unstable market or is undergoing some transformation — for instance, an ownership change, sudden growth or loss-making period — then the bank algorithm will red-flag your application even before your file gets reviewed by a person.This does not mean that your business is not creditworthy, just that it operates outside of the risk tolerance box of that particular bank. The world of commercial lending is much larger than a few big banks.About Adviser IntelThe author of this article is a participant in Kiplinger’s Adviser Intel program, a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.A map of the commercial lending landscapeUnderstanding your options starts with understanding who lends what — and why. Here’s a practical breakdown:SBA loans (7(a) and 504 programs). These remain the gold standard for businesses that can qualify. SBA 7(a) loans go up to $5 million and can be used for nearly any business purpose. The 504 program is purpose-built for major fixed-asset purchases — equipment and commercial real estate — and often features below-market interest rates. The trade-off is time: SBA loans involve significant documentation and can take 60 to 90 days to close. If you have the runway, they’re worth pursuing.Non-bank commercial lenders. This category includes credit funds, debt funds and private commercial lenders who operate outside the traditional banking system. They move faster — often closing in two to four weeks — and are generally more flexible on deal structure, collateral types and borrower profile. Rates are higher than bank rates, but for many borrowers, the speed and certainty of execution more than justify the premium.Revenue-based and asset-based financing. For businesses with strong receivables or recurring revenue but thin equity, asset-based lending (ABL) and revenue-based financing offer a compelling alternative. Instead of underwriting your credit profile, the lender underwrites your assets — your invoices, inventory, equipment or contracts. A distribution company with $3 million in outstanding invoices may qualify for a $2 million revolving line of credit even if its balance sheet looks modest. Factoring and invoice financing are subsets of this category and work especially well for B2B businesses with long payment cycles.Industry matters more than you thinkThe often-overlooked variable in business lending is industrial specialization. Often, lenders have niches in which they can operate to their advantage since they have ample experience and already know what to expect. For example, one who has lent money to 50 car washes knows all about them from the economic point of view better than a generic lender.Industries with active, specialized lending markets include:Healthcare and medical practices (including dental, veterinary and behavioral health)Franchises (many lenders maintain franchise brand registries that fast-track approvals)Commercial real estate and mixed-use developmentTrucking, logistics and fleet operationsHospitality, hotels and food serviceManufacturing and industrial equipmentProfessional services (law firms, accounting firms staffing agencies)You can visit US Professional Funding’s website and US Medical Funding’s website for more information on these industries. (I am the vice president of Business Development at both US Professional Funding and US Medical Funding.) When you’re seeking capital, your industry isn’t just a detail on the application — it’s a primary filter for which lenders are most likely to say yes.The five things lenders actually look atCommercial underwriting is more nuanced than personal credit, but it follows a consistent logic. Most lenders evaluate five core factors, sometimes called the Five C’s of Credit:Cash flow. Can the business service the debt from operating income? Lenders typically look for a debt service coverage ratio (DSCR) of at least 1.25x — meaning the business generates $1.25 in net operating income for every $1 of annual debt payments. Know your number before you apply.Collateral. What assets secure the loan? Real estate, equipment, inventory and receivables all carry value on a lender’s balance sheet. Even if you’re cash-flow positive, lenders want a secondary repayment source.Capital. How much equity does the owner have in the business? Lenders want to see skin in the game. A highly leveraged business with minimal owner equity is a harder credit story.Conditions. What are you using the funds for, and does the use make business sense? Expansion into a new market is a different risk than covering operating losses.Character. Your credit history, your track record and the people running the business. Personal credit scores above 680 are generally the floor for most commercial lenders; 700-plus significantly broadens your options.Looking for expert tips to grow and preserve your wealth? Sign up for Adviser Intel, our free, twice-weekly newsletter.How to prepare before you applyThe single biggest mistake business owners make is approaching lenders unprepared. A strong loan package doesn’t just improve your odds — it dramatically shortens your timeline and often secures better pricing. Here’s what to assemble before you start:Two to three years of business tax returns (and personal tax returns for any owner with 20%-plus ownership)Year-to-date profit and loss statement and balance sheet, prepared by a CPAThree to six months of business bank statementsA one- to two-page executive summary of your business and the purpose of the loanA debt schedule listing all existing loans and obligationsDocumentation of collateral (appraisals, equipment lists, accounts receivable aging)If your financials show a challenging year, don’t wait for the lender to ask about it. Write a clear, factual explanation — an addendum or letter from your accountant — that addresses what happened and why the business is positioned for stronger performance going forward. Lenders respect transparency. They don’t like surprises.The bottom lineAccess to capital is one of the most powerful levers a business owner has — for growth, for acquisition, for weathering downturns and for building enterprise value. The commercial lending market is deeper and more flexible than most owners realize.Your next step: Pull your last two years of tax returns and your most recent financial statements. Calculate your DSCR. Get clear on what you’re asking for and why. Then have a conversation with a lender or broker who specializes in businesses like yours — not just the bank where you have your checking account.The capital is there. The question is whether you’ve positioned yourself to access it.The information provided in this article is for educational purposes only and does not constitute financial advice. Loan availability, terms and eligibility vary by lender, borrower and transaction. Consult with a qualified financial or lending professional regarding your specific situation.Related ContentFive Key Wake-Up Calls for Ambitious Business Owners, From a Biz SpecialistFor Business Owners, Estate and Exit Planning Join Forces4 Retirement Risks Business Owners Often Overlook5 Actions to Set Up Your Business With Your Exit in Mind, From a Wealth AdviserThe Four Worst Mistakes to Make When Selling Your BusinessThis article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.
How Business Owners Can Unlock Capital They Didn’t Know They Had
