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The Worst Advice We’ve Ever Heard About Applying for Small Business Loans

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At National Business Capital, each week we meet, speak or chat with hundreds of business owners who have challenges to overcome and opportunities to take advantage of.

When we talk with these incredible individuals, our job is to see how we can be part of their success story.

To say that we’re a “solutions-oriented” company is something of an understatement as co-creating solutions is built into our DNA. It’s what we do, and why we exist!

the worst bad advice we've ever heard about small business loans

Separating Good from Bad Advice Regarding Small Business Loans

Over the years, we’ve come across some staggeringly bad advice regarding small business loans that has compelled us press the pause button on our positive thinking, and simply shake our head — because the (so-called) recommendations are so utterly wrong and misleading.

So, today we’re taking a pause from our regularly-scheduled blog programming that is usually focused on solutions, so that we can share what we believe is the worst advice that we’ve ever heard about applying for small business loans. Here we go:

The Worst Pieces of Small Business Loan Advice We’ve Ever Heard

  • You can only get a small business loan from a bank or credit union. This one renders us (almost) speechless — especially since it is typically “advised” by bank and credit union loan officials.The truth is that the alternative lending marketplace is a multi-billion dollar industry, and it’s growing massively each year as more business owners — especially those at the helm of small and mid-sized firms — realize that there are superior funding options available outside of the bank and credit union space.What’s more, borrowing funds in the alternative lending marketplace is often less risky for borrowers than dealing with a bank, since bank loans always require collateral. Many funding solutions in the alternative lending marketplace — such as working capital loans, merchant cash advances, and business lines of credit — are unsecured, and therefore no collateral is required.
  • You should always take out a bigger business loan than you need just in case you require extra funds. Thinking ahead and planning for contingencies is wise.But after crunching the numbers, deliberately borrowing more funds than needed is shockingly bad strategy, because it typically lead to one of two bad outcomes: “dead money” sits in an account and gets eroded by inflation, or a borrower feels obligated to allocate funds even when they don’t deem it strategically necessary, in order to avoid alarming their lender.Unfortunately, many lenders — and again, banks rise to the top of this notorious list — try and push larger loans, because it means more profit. Indeed, it costs banks about the same amount of money, administration-wise, to underwrite a $50,000 loan as it does a $250,000 loan. So to them, the more money you borrow, the more interest they can get back.
  • You save money by borrowing from banks and credit unions vs. firms in the alternative lending marketplace. This “seems” like good advice if the focus is entirely on interest rates. But just as smart shoppers need to read the fine print when they take a car ad into a dealership, smart business owners need to conduct their due diligence when it comes to small business loans.Once they do this, they are often shocked to discover that the total cost of borrowing with a conventional bank loan— including collateral valuation costs, the opportunity cost of putting together a massive application package, and the costs (if applicable) of being obligated to take out a larger loan than is needed — easily offsets any perceived cost savings.Indeed, when truly comparing apples to apples and taking into consideration all variables, including application processing times and loan flexibility, many borrowers objectively determine that partnering with a firm in the alternative lending marketplace is the smarter move.

Get The Right Advice on Small Business Funding

If you have questions about any of the above and/or want to learn more, call National today at (877) 482-3008. We will provide you with honest, objective information so that you can make an informed decision that is right for YOUR business — not ours or anyone else’s.

Or, submit our 60-second application online to get the funds you need in as little as 24 hours through our expedited process!

Last Updated on April 11, 2019

National Business Capital is the #1 FinTech marketplace offering small business loans and services. Harnessing the power of smart technology and even smarter people, we’ve streamlined the approval process to secure over $1 billion in financing for small business owners to date.

Our expert Business Financing Advisors work within our 75+ Lender Marketplace in real time to give you easy access to the best low-interest SBA loans, short and long-term loans and business lines of credit, as well as a full suite of revenue-driving business services.

We strengthen local communities one small business loan at a time. For every deal we fund, we donate 10 meals to Feeding America!

About the Author, Joe Camberato

Joseph Camberato, CEO of National Business Capital, developed a passion for business at a young age. Joe started his company in 2007 in his spare bedroom and has grown to secure over $1 Billion dollars in financing for small business owners nationwide. National’s team has an amazing culture and has been name the #1 Top Workplace on Long Island 3 years in a row and counting. Joe is a trusted financial expert who’s published more than 2,000 articles in the last 3 years. His articles have generated over 5 million page views and has been featured on blogs such as Google News, Yahoo, CNBC, Forbes Magazine, etc. His passion has also inspired him to build the "GrowByJoe” YouTube channel where he shares his insights into small business trends and tips for growth. Joe also holds a seat on Forbes Finance Council and is an active member of the Young Presidents' Organization (YPO), a global leadership community.





Disclaimer: The information and insights in this article are provided for informational purposes only, and do not constitute financial, legal, tax, business or personal advise from National Business Capital and the author. Do no rely on this information as advice and please consult with your financial advisor, accountant and/or attorney before making any decisions. If you rely solely in this information it is at your own risk. The information is true and accurate to the best of our knowledge, but there maybe errors, omissions, or mistakes.