Creative Financing Insights for Commercial Bankers
Early in my career, a mentor told me something I’ve never forgotten: “The income statement tells you what happened. The balance sheet tells you what’s left. But the receivables ledger tells you what’s coming.”
He was right. And in 39 years of commercial lending, I’ve seen more good businesses declined — and more troubled ones approved — because lenders focused on what happened instead of what was coming.
Here’s a pattern I’ve seen dozens of times. A small manufacturer lands a major contract. Revenue jumps 40% in a single quarter. On paper, the business looks stretched: margins compressed by startup costs, payables elevated, cash thin. The trailing twelve-month income statement looks worse than it did two years ago when the business was smaller and slower. A lender looking at that snapshot sees risk. What they’re actually seeing is growth.
The businesses that benefit most from invoice factoring are often the ones that confound traditional credit underwriting. Their customers are Fortune 500 companies, government agencies, large healthcare systems. The credit risk isn’t theirs — it belongs to their customers, who pay reliably on 30-, 45-, or 60-day terms. The small business owner just has to wait.
Invoice factoring flips that dynamic. Instead of underwriting the small business owner’s personal credit, tax returns, or trailing DSCR, we underwrite the creditworthiness of their customers. A staffing agency with a state government contract. A manufacturer supplying a major retailer. A logistics company servicing a national distributor. If the customer is creditworthy, the invoice is fundable — often within 24 hours.
What This Means for Your Declined Files
The next time you decline a small business borrower, spend sixty seconds looking at their receivables aging report. Who are the customers? Are they paying? If the receivables are real and the customers are creditworthy, that business is likely a strong candidate for factoring — and a referral to us costs you nothing.
We’ve funded startups that couldn’t show two years of tax returns. We’ve funded businesses with owner credit challenges when their customers were rock-solid. We’ve funded companies that banks couldn’t touch on DSCR — because we weren’t looking at the same numbers. That’s not a criticism of bank underwriting. It’s a recognition that different tools exist for different situations. The goal is the same: keep good businesses alive.
Warm regards,
Shaun Rovai
CEO, Asset Commercial Credit™ | 39 Years in Commercial Lending
(916) 614-1850 | www.assetcc.com | srovai@assetcc.com
CA Finance Lender/Broker License #607-1896
Have a client who doesn’t fit your credit box? Send me their name: srovai@assetcc.com
