Sometimes Saying “No” to Another Loan is the Right Advice

Even though I make a living helping business owners secure financing—often under real pressure—sometimes the most responsible answer I can give is, “I don’t think another loan helps you.”

That is sometimes the case when a business has little to no equity, has too much debt or is too small for commercial lenders that serve middle market businesses. For businesses strapped for cash flow and having trouble servicing their debt, I sometimes suggest options I do not offer — financing from friends and family, government-supported or non-profit organizations. Sometimes, the answer is renegotiating debt payments with their existing lenders —not another high-cost loan layered on top.

Unfortunately, it is becoming more common to encounter businesses that fall in the latter category. These businesses have often gotten hooked by predatory lenders lured by online pitches promising easy approval and quick funding in 24–48 hours. These unsuspecting business owners who are pressed for cash, often gloss over the terms of their loans and get locked into these short-term fixes that work temporarily—until they don’t. When revenue dips even slightly, the math breaks fast, and the cycle can turn brutal.

Why the Old Playbook No Longer Works

I recently spoke with a restructuring partner who deals with businesses drowning in debt payments. Early in his career, the common strategy for businesses with loan problems was to stall payments to the lenders, wait for collection calls, then negotiate a settlement. Sometimes it worked. Often, it just delayed the collapse. He didn’t sleep well when those businesses ultimately failed.

That approach is far less viable today. Today, these short-term lenders use aggressive marketing and contracts that allow rapid enforcement—often without court oversight—giving them the ability to freeze accounts, impose penalties, and cripple a business in days, not weeks or months.

Solving the Problem vs. Delaying the Inevitable

To help him better sleep at night, he and a partner started a new firm that addresses the new reality head-on. They proactively engage Merchant Cash Advance (MCA) and other on-lenders and renegotiate the terms; these include stretching payments over longer periods, and reducing the interest rate, loan balance and late fees/penalties.

This approach gives the business the chance to operate without crippling debt payments and exit the vicious cycle of borrowing more to pay off old loans. Most businesses caught in this vicious cycle aren’t “bad” businesses. They’re just fragile ones—with thin margins, limited assets, and little room for error. The firm’s pitch to the lenders is simple: they will recover more from a surviving business than a dead one.  More importantly, they have years of successful examples and the data to prove it.

What impressed me most was how this restructuring firm aligned their incentives with the business and the lenders. Their fees are built into the revised payment plan, so they are paid if the company continues to operate and make payments according to the plan.   That’s not easy work—but it’s honest work.

Capital Is a Tool, Not a Shortcut

I see daily promotions offering fast approvals, minimal diligence, and generous referral fees. The message is always the same: speed without regard to suitability.

I understand why these products exist. I understand why owners take them. But ignoring cash-flow impact and long-term viability doesn’t solve a problem—it compounds it.

Debt can be a powerful tool when it fits the business. Used reflexively, it often just delays hard decisions and increases the damage.

That’s why sometimes the best answer isn’t more debt. Sometimes it’s renegotiation. Sometimes it’s equity. Sometimes it’s family capital. And sometimes it’s acknowledging that enough is enough.

If you’re working with a business that needs capital—or you’re unsure whether another loan is actually the right next step—I’m always open to a conversation.

Sometimes the most valuable advice a debt advisor can give is not how to find another loan, but whether taking one makes sense at all.