Solutions · After a bank decline
The bank said no.
Your invoices say otherwise.
If your bank declined your business loan, invoice factoring can be one of the faster alternatives when a business has eligible B2B receivables. Instead of lending against your credit history, a factor advances cash against invoices your customers already owe you. Advance rates are typically 80 to 90 percent of eligible invoice value, depending on the industry, customer credit and facility terms, and once approved, eligible invoices can typically be funded within 24 to 48 hours. Factoring underwriting focuses heavily on the quality of your receivables and the creditworthiness of your customers. Your business history, liens and other underwriting factors can still matter.
Based in Oklahoma City. Funding businesses nationwide.
By the Hexagon Commercial Finance team.
A decline is a credit-box decision, not a judgment on your business.
Commercial bank credit is underwritten to a narrow, fixed template. Two or three years of tax returns, a debt service coverage ratio comfortably above 1.25, a personal credit score above the bank's floor, collateral the bank knows how to liquidate, and an industry its credit committee is comfortable with. Miss one of those and the file is declined, regardless of how profitable the business is.
The irony is that the businesses most often declined are the ones growing fastest. Rapid growth consumes cash. Every new job means payroll, materials, fuel and insurance paid this week against an invoice that will not be paid for 30, 60 or 90 days. On paper, the balance sheet shows receivables instead of cash, and the bank reads that as weakness rather than momentum.
Invoice factoring inverts the question. Rather than assessing whether you can service new debt, a factor assesses whether your customers will pay what they already owe. If you invoice commercial or government customers for completed work, that money is real and verifiable. It just has not arrived yet.
How factoring works after a decline.
You complete the work and invoice your customer as you normally would. You submit a copy of that invoice to Hexagon. We verify the work was delivered and accepted, then advance the majority of the invoice value. Advance rates are typically 80 to 90 percent of eligible invoice value, depending on the industry, customer credit and facility terms, and once approved, eligible invoices can typically be funded within 24 to 48 hours.
The remaining balance, less a transparent factoring fee, is released to you when your customer pays on their normal terms. Your customer does not change how they buy from you. You change how quickly you get paid.
Factoring is structured as the purchase of receivables rather than a traditional term loan, so there is no monthly loan repayment schedule. You are selling an asset you already own at a small discount for immediate settlement.
What we look at instead.
The credit strength of the customers who owe you money. A small contractor invoicing a national general contractor is a stronger factoring candidate than a large company invoicing shaky customers.
Whether the work is complete and accepted. Factoring funds delivered work, not future work or speculative orders. Clean documentation, signed delivery tickets, approved progress billings, and clear purchase orders all speed things up.
Whether the receivables are free of competing claims. If another lender already holds a blanket lien on your receivables, that has to be addressed, and often can be through a simple subordination or payoff.
Concentration and payment history. A customer that pays in 55 days consistently is easier to work with than one that pays anywhere between 20 and 120 days.
At a glance
- Typical advance
- 80 to 90 percent of eligible invoice value, depending on industry, customer credit and facility terms
- Typical funding speed
- Once approved, eligible invoices can typically be funded within 24 to 48 hours
- Structure
- Purchase of receivables, not a traditional term loan
- Credit review
- Each situation is reviewed individually
- Service area
- Nationwide, from our Oklahoma City office
- Primary underwriting focus
- Receivable quality and customer creditworthiness
Bank term loan compared with invoice factoring
The two products solve different problems. A bank loan buys an asset over years. Factoring solves a timing gap measured in weeks.
| Invoice factoring | Bank term loan or line | |
|---|---|---|
| Primary underwriting focus | Receivable quality and customer credit, alongside other factors | Your credit and financial history |
| Typical time to first funds | Days | Weeks to months |
| Structure | Purchase of receivables | Borrowing |
| Monthly repayment obligation | ||
| Scales with invoicing | Generally yes | Only at renewal or review |
| Minimum operating history | Often shorter | Commonly two to three years |
| Cost basis | Fee per invoice, for the days outstanding | Interest over the loan term |
Questions people ask
One decline should not stall a healthy business.
Book a Cashflow Consultation and we'll tell you plainly whether factoring fits, nationwide.