1. You
Can’t Get a Loan if You’re Denied by a Traditional Bank
There was a point in time when your traditional brick and mortar
banks were the only financing option available to businesses. So, it was
true—unless you had a rich uncle who was willing to invest in your
business—that a denied loan application meant you were out of options. But this
is no longer the case.
After the financial crisis in 2008, big banks tightened up their
lending standards, making it nearly impossible for small business owners to get
the financing they needed. Luckily, that financial void was quickly filled with
a new group of alternative lenders, who now give small business owners more
financing options than ever before.
2. You
Have to Have a Perfect Credit Score
This is still partially true—if you’re applying for a traditional
bank loan, your personal credit score will be weighted pretty heavily during
their underwriting process. However, since the banks are no longer a small
business owner’s only option, a less-than-perfect credit score won’t completely
ruin your chances of getting the financing you need.
To give you an idea, most online lenders will want to see a credit
score of 550 or above. This includes short-term lenders and others offering more expensive products. If you’d
like to explore longer-term, lower-cost debt online, you’ll need to have a score
of at least 620. And of course, the higher your score the better. If you’re at
a 700+, you’ll have an even better chance with products like an SBA loan or the
bank, which are the most affordable products on the market.
3. You
Won’t Be Able to Get a Small Loan
The underwriting costs are the same to the lender, regardless of
the loan amount. So because smaller loans mean less of a return, banks don’t
consider the costs to be worth it and, typically, aren’t interested in smaller
loan amounts.
But thanks to the Small Business Administration, getting a loan is
no longer a problem for business owners who have low capital requirements and
don’t need a lot of money. With their Microloan program in
particular, the SBA offers loans for as little as $500 to $50,000. Interest on
these loans range from 8 to 13%.
Outside of the SBA’s Microloan program, many, if not most, online
lenders are willing to make loans with smaller amounts. For example, on the
Fundera marketplace, the average loan size is $52,000, and that’s across all types of lenders and loan
products.
If you need a small amount of working capital to pursue a business
opportunity, you have more options than ever.
4. It
Takes a Long Time to Get a Small Business Loan
If you’re seeking a loan through your local bank then, yes, you
will have hefty amounts of paperwork to fill out, and you could wait for months
before you receive funding. But getting the financing you need for your
business does not have to be a long, drawn out process.
If you need money quickly, you can find an alternative lender
online, fill out a loan application within minutes, and receive funding in as
little as two days. Often times you pay for the convenience with higher fees,
but if you’re looking to grow your business quickly, or need money in a pinch,
waiting for funding is the last thing you’ll want to do.
How quickly you can get a loan depends on the type of loan you’re
evaluating. Fast cash is expensive cash, so for a shorter-term product, you can
move quicker than with a longer-term product. If you need money fast, but want
to see if you can qualify for a lower-cost, longer-term product, make sure
you’re coming to the table with your financials completely prepared.
Although some of these myths about small businessloans were once true, alternative lenders have changed the
lending game for small business owners as a whole. Now it’s much easier for
entrepreneurs to get the funding they need in faster times than ever before.
No comments:
Post a Comment