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How To Be a Hero Even When You Can’t Approve Your Client for Business Financing

An excellent client walks into your bank seeking funding for their small business. You go through the paperwork only to discover that while you would love to give them the funding they need, you cannot give it to them, possibly because of their credit score, immigration status, limits on financing, or regulations. Unfortunately, for many business owners, especially Latinos, this is the reality.

According to the 2020 State of Latino Entrepreneurship research study from the Stanford Latino Entrepreneurship Initiative, only 20% of Latino business owners who applied for a national bank loan of over $100,000 received the funding, compared to 50% of Caucasian business owners. In addition, for loans of any size, Latino business owners receive 51% of the loans they apply for, versus 77% for Caucasians.

Research conducted by the U.S. Small Business Administration Office of Advocacy in 2020 also found that Latino-owned businesses were more likely to have their loan applications outright denied than those owned by Caucasians. There are a number of reasons for this, including that they may not have as high of a credit score or are lacking a social security number, and are instead applying with an Individual Taxpayer Identification Numbers (ITIN), which are not always accepted at larger national banks.

While there seems to be a misconception about Latinos owning mainly service-related businesses, Marlene Orozco, lead research analyst of the Stanford Latino Entrepreneurship Initiative, says that is not the case. “We are seeing multifaceted growth across states and industries including construction, finance and insurance, transportation, and real estate,” Orozco said.

Latinos are opening businesses at a much faster rate, with a 34% growth over the last ten years, and Latino-owned businesses grow in revenue at about 25% per year, compared to 19% for Caucasian business owners. Since Latino-owned businesses are clearly growing rapidly, it would be highly beneficial for national banks to provide them with the business financing they need; they are turned down too frequently, causing these large banks to miss out on a big opportunity to help these businesses get off the ground.

How to be a Business Financing Hero to Your Clients

Even if you cannot approve a client’s business financing, there are still ways that you can help them receive the funding they need, becoming their hero.

Find a Trustworthy and Reputable Partner to Fund Them

While your bank might not be able to finance this client, there are other sources of financing that are easier to obtain. Cultiva Financial can help a business receive financing when a bank cannot. We help small and medium businesses grow and flourish with several financing options when other financial institutions fail.

Explain The Services Available and How it Works

Introducing this client to Cultiva Financial is just the first step. If you want to build a lasting relationship with the client, there is more that you can do. Take the time to explain the products are services we offer and the application and approval process. All of the business financing options that Cultiva Financial offers require some form of collateral. This includes real estate or property, invoices, assets, or clients who are reputable.

To apply for business financing from Cultiva Financial, clients need to complete our online credit application, which takes less than ten minutes to fill out. After that, our underwriting team will reach out to them if they pre-qualify, requesting a valid photo ID and six months of bank statements to verify that the business is profitable.

Invoice Factoring

Invoice factoring allows a business owner to turn outstanding invoices into immediate cash. This is great for a business that has a client taking too long to pay, but they need money fast to cover payroll, purchase materials, or other expenses, and they cannot wait. Approval for invoice factoring is based on the business’ strength instead of the owner’s credit, which means they can get approved much faster. Invoice factoring financing is available for $5,000 to $500,000. They will need to include an invoice from a client who has a contract with their business with their application.

Materials Purchasing

If their business needs materials, but they do not have access to the financing available for the materials or are stuck waiting for a client to pay before they can purchase materials, our materials purchasing financing is a great option for them. It allows the business owner to purchase a large quantity of materials now so they can move forward with a job instead of waiting and making a project take longer. Materials purchasing funding is available for $5,000 to $100,000.

Equipment Leasing

Purchasing equipment can be expensive, but so can renting equipment; however, there is a third option: leasing the equipment. Equipment leasing allows the business owner to get the equipment they need and put them on the path to owning the equipment. It is much cheaper than renting equipment long-term, and it is much easier to qualify for funding to lease equipment than to get a loan to buy it outright. In addition, they receive fixed monthly payments, so it is easier to keep an eye on their cash flow and business expenses. You can also deduct 100% of the costs of leasing or buying equipment, and this will help a business owner boost their credit.

Cultiva Financial can provide equipment leasing for industrial equipment financing, construction, utility, oil, and gas equipment leasing. We do not fund equipment that is less than $20,000. We also do not fund personal vehicles or 18 wheelers.

We calculate the monthly payments based on a combination of the owner’s credit history, business strength and credit, and cash flow. They need to provide a security deposit of 10% of the value of the equipment, which is applied to the end of the lease. Equipment leases run between two and five years, with an average of three years. Equipment leasing financing is between $20,000 and $500,000.

Asset-Based Lending

Asset-based lending is where we give working capital or term loans based on the assets of their company. The assets include real estate, inventory, equipment, or other things of value that the company owns. This is a much faster process than traditional business loans and comes with more flexible terms and higher financing amounts than traditional lines of credit. These loans are perfect for a business that is struggling with liquidity, needs large amounts of financing, has been unable to get a traditional business loan, and needs funding faster than it can get from a bank. We offer $100,000 to $5 million for asset-based lending.

The application for an asset-based loan is more paperwork intensive than some of the other financing options from Cultiva Financial. It requires a business owner to have their financial information gathered and organized. Therefore, your clients may need more help with this one since the application process is a little more complex than our other applications. In addition to the other items we need for all of our applications, Cultiva Financial also requires the last three years of tax returns for the business and owner, a detailed description of the collateral, business financial statements, and third party appraisals if there are any available.

Create a Smooth Handoff With Your Partner

Get to know the staff at Cultiva Financial when you partner with us so that you can confidently hand off clients to us with confidence. This will make the transferring process easier.

Help Them Apply for Business Financing

To be a hero to your clients, you need to go the extra mile. Help the client go through the application process and ensure they have all of the documents they need to complete the application.

After the application is completed, check back in with the client to see how the approval process is going. This keeps you a point of contact with the client, so if they need another loan in the future or financing beyond what we offer, they can come back to you. In addition, if you have a relationship with the clients that show you care, they will want to return later.

To be the hero who helps a client get funding when your bank will not approve them, work with Cultiva Financial. Contact us today to begin a partnership that is beneficial to both of us and to our clients!

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