In a recent survey of entrepreneurs and other small business owners, the majority indicated that they believed two troubling things. Number one was that banks did not make the requirements of various loan packages transparent enough. Number two was that they did not know all of their financing options. While there is a bit of a relationship between those two issues, there is also a wide range of small business financing options that have nothing to do with the traditional banking system, and it is important to investigate them.
Myth 1: Bank Loans are Your Best Option
The fact is that over three quarters of all loan applications are turned down by traditional lenders. In a lot of cases, otherwise qualified companies will wind up being rejected because of financial ratio equations that make long-term projections about business growth, even if their credit score and cash flow indicate that they are not a bad risk. If you are one of those entrepreneurs, then you need to know about alternative options for small business financing. These can include alternative lenders online, crowdsourcing, SBA loans, and a variety of other financial products that do not depend on your local bank alone.
Myth 2: You Need a Great Business Credit Score
If you want a traditional bank loan, then yes, you absolutely must have a stellar business credit score, as well as an established credit history that is totally segregated from your personal credit. Even then, you probably also need a stellar personal credit score, too, and a host of other things. The fact is, though, that most alternative options do not depend as fully on the credit score as traditional bank loans do. In fact, even SBA loans provided through a traditional bank put less emphasis on the credit score than they do assets, cash flow, and your business plan.
Myth 3: Finding Information About Qualifying for Financing is Difficult
This is only true if you are still pursuing traditional bank loans. Most owners are not wrong–banks do make it difficult to tell what their financing requirements are, and entrepreneurs spend thousands of hours each year preparing paperwork for loans that have no chance of approval because of it. Many of the newer lenders that are filling the gap for companies that can not obtain bank loans are making their requirements very transparent, though. Their terms are often spelled out in plain language on a website or application form, and even the SBA lists its full resources and requirements for small business financing on an accessible website. The information requires some footwork to obtain, because each lender can only speak for itself, but many players in the industry are working very hard to help inform people about their options and requirements.
If your company is poised to expand as the economy continues its recovery, then it is worthwhile to investigate some of these alternative options. Not only are they more transparent about terms, they often approve loans in minutes to hours, instead of days to weeks. Investigate them, and see for yourself.
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