[Case study] Turned down by a traditional bank for a small business loan and stuck with online-only debt? Here’s your safe way out
Have you been turned down for a business loan by a traditional bank? Did you then have to take on high-interest financing from online-only lenders?
Sergio Dorado and Jorge Alonzo, of Los Angeles County, have also been there. After entering a vicious cycle of paying exorbitant interest rates on those e-loans, they finally broke free by obtaining an affordable business loan through an affiliate of CDC Small Business Finance — a leading small business lender and award-winning nonprofit that serves California, Arizona and Nevada.
Here’s how they did it:
Dorado and Alonzo, both veterans in the logistics industry, joined forces as business partners to co-own and operate J&S Logistics.
The Hawthorne, Calif.-based trucking company performs an important role in a typical supply-chain scenario. Their commercial vehicles essentially move imported goods, such as clothing and furniture, mainly from the ports of Long Beach and Los Angeles, to their intended destinations. These destinations include well-known retailers and wholesalers like Costco and Ikea in up to 60 cities across Southern California.
In just under two years, they propelled J&S Logistics toward phenomenal growth and profitability. By then, they had already acquired five trucks in their fleet and had a staff of 13.
The main issue at this point was their operations had reached capacity, so they needed financing to continuing growing and keep up with costs.
Instinctively, they approached a traditional bank for a business loan. But they quickly realized past credit issues and being short on business ownership experience meant they would not qualify for traditional financing.
After a few turndowns, they ultimately turned to online-only lenders since they were able to get a lot of money, very quickly. The ones they worked with Dorado nicknamed “loan sharks” because of the high annual interest they ended up paying for the fast capital they were so willing to provide in a pinch.
Then deep in online-only debt, Dorado and Alonzo sought financial relief. Their faith in financial institutions was re-sparked upon hearing about CDC Small Business Finance.
We developed our Impact Loan product to address the many barriers that keep Hispanic business owners from qualifying for capital. Unlike traditional lenders, this business loan requires:
- Credit score from 620
- Lower debt coverage ratios
- Flexible underwriting terms
“It gave us hope,” Dorado said.
After a few months, they learned they received the funding, which Dorado called “a relief.” The affordable business loan went mainly toward paying bills, making payroll, performing needed vehicle repairs, and essentially “getting the business in the right place,” Alonzo said.
Also, being a borrower with CDC Small Business Finance not only means you get affordable financing, you also get meaningful business guidance along the way.
For J&S, they got advice on how to get their business’ financials in order with the help of a certified accountant.
“You helped us improve our business and get ourselves in a better situation,” Dorado said.
These logistics experts continue to eye further expansion, as demand for their services continues to grow. Mid-term, they hope to launch a warehouse and distribution center to help with efficiency, and buy more, better performing equipment.