I need a small business line of credit to buy inventory, but I declared bankruptcy a few years ago, and banks are turning me down because of it. I have a good credit score now and own a home. Where can I turn for funding?

Don't give up on banks until you've approached several that specifically serve the small-business community. You'll need to present your business plan, including information on your company's financial history and growth potential. You might also consider bringing in a cosigner on the loan. If you need help putting together a plan, contact a local Small Business Development Center, http://www.sba.gov/sbdc , or an office of business counseling service Score, http://www.score.org , to find free or low-cost assistance.

There also are lenders that specialize in less-than-bankable small businesses in economically distressed areas, said Jim Anderson, a consultant at Score's Orange County office. Check out the National Community Investment Fund, http://www.ncif.org , for more information and local resources.

If you've given business loans your best shot without any luck, investigate a home equity loan, Anderson suggested. "Lenders look at the value of the owner's equity … and make loans on this basis," he said. One other plus: Home equity loans generally carry lower interest rates than do business loans.

With healthy sales, your company may be attractive to lenders that provide alternative financing. "Factors," for example, lend money for cash-flow purposes secured by a company's accounts receivable. "Purchase-order financers" provide capital to fill orders from creditworthy customers. Some of those lenders may not work with retailers, however, and all of them will charge you a hefty interest rate. Calculate your options carefully.

Finally, don't forget about friends and family.

"We have clients who are able to borrow money from a relative or someone else," Anderson said. Sometimes, the ties that bind can help you get out of a bind.

 

Jim Anderson

SCORE Consultant