Business Loans are more difficult to obtain than personal loans.
In most cases, lenders will not consider a business loan for a company
that has been in business less than 2 years.
The Small Business Administration (SBA), often has some exceptional
programs and rates for new businesses, but most of the time, the
SBA requires a great deal of paperwork, a large down payment, very
good credit, and it takes months to process. In addition, the SBA
takes most of your business and personal assets (such as your home)
Other types of small business loans.
There are lenders that will give you a loan at a higher market
rate simply based on having a lot of equity in your home. In such
a case, it will be easier to just use your home and not involve
yourself in all the other complications described above. Many people
who are starting businesses don’t want to put up their home
as security. This will limit your options. This means you don't
want to risk your home but you want a lender to risk their capital
on your new business. Often, this outlook not always realistic and
won’t work. And surprisingly, the SBA will often take everything
your business owns and also take your home as collateral anyway
for a small business loan. As a business owner you intend to grow
your business and you may need another small business loan for inventory,
raw materials, expansion, relocation, partner buyouts, etc. within
the next 5 years. If the SBA has all of your business assets and
personal assets as collateral, you will be in an almost impossible
position the next time your business needs capital.
Another exception when a less than 2 Year old business may be able
to get a loan is if the business wants a lower amount of money,
say $20,000 or less and the owner has strong personal credit. Some
institutions will make such a loan on the basis that if you would
have qualified for a personal loan for such an amount, why would
they turn you down simply because it’s a business loan request?
They will just make you personally guarantee it. It’s really
a personal loan set up as a business loan.
It is difficult to get a business loan through traditional sources
(Brick and Mortar Banks), even if you have a relationship with them.
Traditional sources have approximatley a 92% decline rate for business
loan requests and may decline your request for many more reasons
than non-traditional sources of capital will. They will request
financial statements, Tax Returns, have many questions along the
way, and will greatly scrutinize your cash flow, assets and secondary
sources of payment. Many business owners pay their Accountant well
in order to show that their business is making little or no money.
When it's time to request a loan, business owners will be surprised
when the bank turns them down when in fact they knowingly have documented
via the Business Tax Returns that they didn't have any profit. Show
some profit on your Business tax return.
Once the bank has turned you down, all their talk about how much
they “value your relationship”, doesn’t do you
What should you do? We can help! Our small business loan options
are far more encompassing than traditional banks and our approval
rates are much higher.