How to Outsmart Banks and Get The Small Business Loan You Need
If you are a small business owner who has become frustrated by looking for a small business loan, the following scenario might sound familiar to you. You go to your bank, collect a large amount of necessary documents, apply for funding, and wait for weeks or months only to be rejected for bad credit. In the instance you are not rejected by the bank because of bad credit, the time it takes to complete the application process and actually receive the funds can take so long that any opportunities will be lost or worth substantially less. If you’ve run into this scenario, this article is for you. Here are some secrets to help you outsmart big banks and get the financing you want in a timely matter so you can take advantage of opportunities that arise in your business circle.
1. Forget your credit.
Small business owners spend so much time worrying about their credit that it’s exhausting. Many of these business owners spend a significant amount of time and money just trying to add a few points to their credit score; all of this effort and stress to improve their chances of getting a small business loan from a bank. The problem is that banks continue to put heavy restrictions on the loan application process and are only looking for perfect credit borrowers, a credit history almost unattainable in today’s economic environment.
Although the banks restrictive approval process has been a long-standing approach to lending, it is actually not relevant any more. In fact, this approach has led to significant decreases in bank loan portfolios, and their overall participation in the small business loan space.
Eating up the market share from banks are privately held companies known as alternative lenders. What makes alternative lenders so attractive is that their approach to lending is way more flexible. These lenders realize that there is more to the lender/borrower relationship than a perfect credit history. For example, alternative lenders will lend to a small business, even if the small business owner has bad credit. All the borrower has to establish is that they have:
- An operating business
- The ability to make money
- The integrity to pay the loan back
And, that’s it.
Rather than spending time and money trying to fix your credit to be “worthy” of a big bank loan, ditch the big bank and opt for a more realistic option through alternative lending.
2. Time Affects the Value of Your Business Loan.
Even if credit is not a big issue for you, the time you have to wait for funding from a bank can often make a bank loan worthless. Small business owners today do not have the time to wait to make financial decisions. It is common knowledge in today’s fast based economy that time has a tremendous value, opportunities do not wait. Imagine putting together the launch of a new product or drawing up plans for expanding your business because you recognize and opportunity, but everything has to be placed on hold for weeks or months before you are approved to receive the funding. This time lapse would likely eliminate any opportunity that surfaced. There is so much red tape with getting a business loan from a bank that the time you have to wait before you actually have the cash renders the business loan unusable.
With alternative lenders you don’t have to wait for weeks or months to find out if you got an approval on your loan. Many alternative lenders offer concrete approvals within 24 hours and actual funding in your account in 2 to 3 business days. Even if it is a bad credit business loan that comes at a premium, think about the value of immediate funding versus the long and arduous process the bank way. You might receive a better rate with a bank, but the opportunity cost makes the overall value of the loan much less than how it appears on paper. Rather than waiting around for big banks to get around to processing your loan, work with a company that processes your application immediately so you can take advantage of the opportunities available to you and your business.
3. Realize You Have Several Choices, Avoid the Monopoly Approach.
Most banks today will not offer a business loan to a company or owner that they are not currently working with. If you do not have a long standing account with an established record of transactions it is extremely unlikely that a particular bank can lend you money. The loan officer would also prefer to have had prior contact with you on a personal level before they write a check. This means that you are limited to one place to submit an application if you have the established track record, and whatever rates and terms you get if you are lucky enough to be approved, is your only option.
Alternative lending is a much more flexible process. This type of lender only requires a few months of transactions to establish cash flow patterns, documents that are likely available to you in minutes. More importantly, you have the option to submit your loan application to various lenders, whatever quantity you feel will help you get the best rates and terms that work for you. Also, you never have to meet anybody, the entire application and funding process can be completed from your home or office, all you need is a computer. Alternative lending offers the opportunity to force lenders to compete for your business, not the monopoly approach that banks take where it is one and done, take what you get.
If you are looking to outsmart the big banks and get a small business loan you want in a reasonable amount of time you have options. You deserve quick service and a variety of choices, and you don’t have to have perfect credit. Alternative lenders offer you a flexible lending process which helps you avoid the problematic process associated with seeking a loan from your local bank.
Sam is an expert in small business financing and has been CEO at Shield Funding for more than a decade. The company has funded more than 1000 small businesses and has been a significant contributor to the phenomenal growth that many of those companies have experienced.