Four Michigan banks and six months wasted before LVRG. We closed $2 million in financing in 27 days.
The owners did what almost every business owner does. They went to their bank first.
That is not a mistake. It is the most natural decision in commercial finance. You have banked there for a decade. Your operating account is there. Someone in that building knows your name and has watched your deposits come in every month for years. When the business needs capital, that is where you go.
When it did not come together, they went to another bank. Then another. Then a fourth.
Six months later they were exactly where they started. Another document request each time, always a few more items than the last. Term sheets that were two weeks away for two months running. Files that left Michigan entirely and landed in front of a credit committee that had never seen the company, never walked the floor, and never met the people who built it.
Four banks ran the same model against the same numbers and reached the same answer.
The Company
A profitable Michigan manufacturer. Years of consistent performance. They owned the building they operated out of.
They were also carrying about $1 million in debt across multiple loans, and one of those was a short-term term loan at 49% interest with a half million dollar balance. The payment on that single loan was $26,000 a month.
Run the math on the delay. Six months at $26,000 a month on that one loan is more than $150,000 out of the business while they waited. Not paid toward the debt they were trying to clear. Paid for the delay itself, and it bought them nothing.
That is the cost owners never see coming. The rate on an expensive loan is a number you can calculate in about four seconds. The cost of not solving it compounds quietly in the background, and by the time you add it up, it is already gone.
Why Four Banks Reached the Same Answer
The company was profitable. It owned real estate free of any meaningful encumbrance. Nothing about the business was in question.
The problem was circular. The 49% loan was consuming cash flow. Reduced cash flow dragged down the debt service coverage ratios. Coverage ratios are the test a bank applies before it approves financing. So the debt that needed to go was the exact reason nobody would fund getting rid of it.
You cannot qualify your way out of the thing that is disqualifying you.
None of those four banks were wrong by their own standard. Each one measured a single quarter under a specific debt load and got the answer that measurement produces. The standard simply was not built to see this company.
What the Banks Were Measuring, and What Was Actually There
Cash flow measures a quarter. Assets measure a company.
Those two things usually agree. When a business is carrying expensive debt, they diverge sharply, and the gap between them is where most of the real work in commercial finance happens.
Cash flow is a snapshot. It reads this quarter, under this debt load, on these terms, and it says nothing about what the company owns. Assets are a position. A building a company owns and operates from does not fluctuate with a quarter, and its value is indifferent to what a coverage ratio calculated in March.
This company failed the cash flow test and passed the asset test decisively. Four banks ran the first one. Nobody ran the second.
Structure against the asset, clear the debt, and the cash flow measurement corrects itself. That is not a workaround. It is the correct reading of the business.
The Structure
Two facilities, built around what the company actually was.
A $1.5 million Commercial Real Estate Term Loan Mortgage secured by the building they already owned. One million of it cleared the entire existing debt stack, including the 49% loan. Multiple payments to multiple lenders became one. The remaining $500,000 went to the company as working capital.
A $500,000 working capital line of credit secured by accounts receivable, sitting behind the term loan. Capital that moves with the business, rather than capital that has to be requested again every time the company needs it.
Two million dollars in financing. One million in debt gone. A million dollars of capital available to operate and grow on, half of it in hand and half on a revolving line.
Twenty-seven days from term sheet to closing.
The Part That Matters Most
This financing is a bridge, and it was built that way from the first conversation.
With the 49% loan gone and more than $300,000 a year back in the business, the coverage ratios that failed four bank tests start clearing on their own. We move this company into conventional bank financing through one of our bank relationships, at conventional terms, on a file that will qualify without argument.
That was the plan before we structured anything. The asset-based facility solves what is in front of the company today. The conventional loan is where it lands.
We are not an alternative to banks. Conventional bank financing is half of what we do. What we are not is limited to a single bank's product menu, a single bank's credit box, or a single bank's appetite in a given quarter.
What This Costs Owners Every Day
The financing was not the hard part of this deal. The hard part had already happened before the company found us, and it happened for an entirely understandable reason.
Owners assume their bank is where commercial financing gets done. When one bank does not work, the instinct is to try a bigger one, and then another. Every cycle costs another set of document requests, another month, another file sent out of state for a decision.
Meanwhile the thing that needed the capital does not wait. A seller with a signed purchase agreement finds a buyer who already has financing in place. A backlog that needed more capacity keeps stacking up. A 49% loan keeps drawing $26,000 a month out of a profitable business.
Not because the company was not financeable. It was highly financeable. Because it went looking in places built to answer a different question.
If you own a Michigan manufacturer and you are carrying debt that costs more than it should, or you are sitting on equity in a building that is not doing anything, the capital you need is likely already on your balance sheet. It just has not been structured yet.
Send us the file. We will tell you what can be built against it.
Frequently Asked Questions
Why do banks decline profitable companies for business loans?
A bank measures debt service coverage against current operating cash flow. When a company is carrying expensive debt, that debt suppresses the cash flow the bank is measuring, so the coverage ratios fail. The result is circular. The debt a company needs to pay off becomes the reason it cannot qualify for the financing that would pay it off. Profitability and asset strength are not part of that specific test.
How can a business pay off a high interest short term loan?
For a company that owns the building it operates from, the most effective route is a term loan secured by the equity in that real estate, structured to pay off the higher cost debt. The building carries the financing rather than operating cash flow, which is why the structure works when a conventional cash flow test does not. LVRG Business Funding structures these facilities for Michigan companies in transactions from $500,000 to $15 million.
Can I use the equity in my commercial building to pay off business debt?
Yes. Where a company owns the facility it operates from and holds meaningful equity in it, that equity can secure a Commercial Real Estate Term Loan Mortgage used to pay off existing debt, fund working capital, or both. For most established manufacturers, the building is the largest asset on the balance sheet and is generating nothing.
Why did multiple banks decline the same business loan?
Banks largely run the same underwriting model against the same coverage ratios, so shopping four banks often produces four identical answers rather than four different reads. Files from local branches are frequently decided out of state by a credit committee that has never seen the company. The outcome reflects the institution's model and current appetite more than the quality of the business.
What is asset-based bridge financing into a conventional bank loan?
It is financing secured by a company's assets, structured specifically so the company's ratios recover once expensive debt is cleared, with a defined move into conventional bank financing once the numbers support it. The asset-based facility solves the immediate problem. The conventional loan is the destination, planned from the first conversation.
Who finances Michigan manufacturers when banks take too long?
LVRG Business Funding is a boutique commercial finance firm serving established Michigan manufacturers and lower middle-market companies doing $1 million to $25 million in annual revenue. LVRG provides conventional business loans, working capital lines of credit, asset-based lending, and owner-occupied commercial real estate financing from $500,000 to $15 million, funding transactions directly and through standing relationships with Michigan banks actively lending.