If you’ve tried to go to a bank for a business loan, you’ve probably run into a host of problems getting your application approved, or even looked at! Of course, it’s no accident that getting a small business loan from banks is, for most applicants, frustrating and futile. Here are the key reasons why:
There’s hardly any profit for banks in it.
It costs banks about as much money to underwrite and administer a $100,000 loan as it does a $2 million dollar loan. Then when you add the costs of evaluating collateral (since all bank loans are secured loans), then shifting resources away from small businesses borrowers and towards larger enterprises is, as far as banks are concerned, a no-brainer. On top of this, interest rates are at historical lows. Banks would rather pump capital into a condo development or big merger or acquisition than wait a decade to make $10,000 profit on a small business loan.
Outstanding credit is a must.
It’s widely understood that a credit score of around 680 is the minimum threshold for getting a small business loan from a bank. However, approximately 33% of all U.S. adults have a credit score below 601, and many others hover between 601 and 680. While all of these folks aren’t small business owners in need of a loan, those who tick both boxes shouldn’t bother wasting their time applying at their bank. Unless they can get the bank manager to personally push something through, it’s not going to happen.
Revenue requirements are high.
Most small business owners aren’t, as the old saying goes, rolling in dough. In fact, the majority generate about $50,000 a year in revenue. While banks should admire these men and women for working hard and sacrificing to experience their share of the American Dream, they take a somewhat less enthusiastic view.
Basically, if a business isn’t generating a few hundred thousand a year in revenue — and has been around for a while — then a bank loan is almost certainly not in the cards. This is especially the case if we’re talking about SBA loans.
The application is excessive.
A typical small business bank loan applications makes doing taxes seem recreational. The documentation requirement is excessive, convoluted and complex. For example, applicants must submit a business plan, resumes for of all management and executive staff, a personal credit report, a business credit report, a (clear) criminal record report, financial statements, income tax returns, bank statements…and the list goes on.
Then if anything is missing or incomplete — or simply doesn’t fit the expectations of the loan officer or bank manager — the process comes to a grinding halt.
At National Business Capital, we don’t think that getting a small business loan should be an arduous, uphill battle. That’s why our small business loan application process is easy and efficient. We don’t require excessive documents, and impaired or bad credit is not a deal-breaker. What’s more, instead of taking months to review a loan application, we get the job done within 24 hours — because we know that in the small business world, time is always of the essence.
To learn more, contact us today. Because while running a country should be hard work, applying for and getting a small business loan should be streamlined and simple!