For every business, there comes a time when a large amount of money is needed. New inventory, upgrades to systems, expansions – no matter what you need working capital for, it’s bound to happen whether you’ve been in business for one year or one hundred years.
As long as businesses have been around, so have banks and the business loan. So, it’s only natural that most business owners assume that when they need money, they head to the bank. Most banks advertise how easy it is to get a loan through them and how quickly a business can get its money – but this couldn’t be further from the truth.
Misconception No. 1: Getting a small business loan is the hardest thing you’ll ever have to do.
When you head down to the bank to apply for a loan, do you really know what you are getting yourself into? Are you really prepared to complete all the paperwork and documentation that the bank will require? Do you even know where your business tax returns are from five years ago?
An article by Elizabeth Palermo, Business News Daily, talked about various Small Business Loan Myths. She says that traditional banks are not the only places (or necessarily the best places) to turn to for a loan. For business owners looking to borrow a relatively small sum (between $5,000 and $250,000), getting a traditional bank loan is likely to be more trouble than it’s worth.
Even though traditional bank loans may still be a great option for business owners who need to borrow a significant chunk of cash, over a long period, and still get a low interest rate. Business owners need to make sure they meet all the banks steps before applying through a bank.
For instance you will be required to provide a lot of unnecessary documentation and most likely provide some sort of collateral.
Alternative private banks and lenders can provide capital with much less hassle.
Getting a loan through an alternative lending source is usually much quicker than obtaining a bank loan. With a simple application, some bank statements, a photo ID and proof of ownership, business owners can have cash in hand in as little as a few days.
Traditional bank loans might not be the best option for every small business, but they’re far from the worst funding option out there. In fact, for established businesses looking to grow at a moderate rate, traditional bank funding is generally a great option.
It’s when a business doesn’t fit those criteria that business owners should consider shopping around and look to alternative funding. If you are a younger company, pre-revenue or low revenue, but plan to grow very quickly due to the industry that you’re in (i.e., healthcare, IT or software consulting), then a traditional bank loan may actually limit your growth.
To decide whether a traditional bank loan is right for your business, research both traditional loans and alternative funding sources. It’s also important to know your business inside and out.
If you anticipate steady growth over the next few years, then a traditional bank may be best. If you are growing like crazy, and you know you will need to keep increasing your loan size by large increments each quarter, then entertain a non-bank lending partner, as banks may not be able to keep up with your needs.”
Getting a small business loan can be complicated, but don’t believe everything you hear about the process. While obtaining a loan for your small business is no easy feat, it doesn’t have to be an insurmountable trial unless you go through a traditional bank.
Misconception No. 2: The best way to obtain a small business loan is through my bank.
Think your bank is the best (or only) place to apply for a loan? Think again. Traditional lending institutions have been a mainstay of small business funding for many decades, and still are, in some industries.
Because of all the advertising traditional banks do many small business owners think it is relatively easy to get bank funding for their small business when they are in need. However this is not the truth.
Here is a breakdown of the steps that you will have to go through before you can even be considered for a business loan from a traditional bank:
Application: This is normally a two-to-four page application that has you list everything from where your business is located to how much your business made last year to who your financial officers are. This application can be very tedious to fill out and very confusing as well. Once the application is filled out, you usually have to pay an application or credit check fee to continue from here.
Documentation: Once you have filled out your application and paid your fee, most banks will require a ton of documentation. Tax returns for the past five years, business rental or building ownership documents, employee W2 statements, insurance policies, credit card receipts, bank statements, a breakdown of all the outstanding loans you r business currently has, assets of your business, business liabilities, and much more. This is often the part of the process that takes the longest, as there is so much that they require just to look at your application, and they always ask for more.
Business plan: If you don’t have one, you soon will. Banks generally require a business plan and cash flow outlook before they will consider an application for a business loan. While every business should have a professional business plan, they are time consuming and you must get every detail correct. Usually, if you don’t have a business plan, the bank will direct you to the local Small Business Administration (SBA) to learn how to write one, or, you can simply pay a professional company to write one for you. No matter which way you prefer to go, it will take time to create a great business plan and polish it up for the bank’s approval.
A breakdown of the loan: This is the part where you get to show the bank exactly where their money will be spent. This is not a place to round off or guess at where you are going to use the loan, the bank wants a to-the-penny list of where their money will be going from the time it leaves their offices. Some banks even have certain requirements on where you have to spend the money, no matter what you are taking the loan out for.
Special conditions: Some banks may even have other special requirements for documentation or specialized applications for certain types of businesses; it all depends on the bank and their policies.
So, you jump through all of these hoops.
You give the bank everything it asks for, provide every scrap of documentation they require, you even make your list of where the money will go and turn it over to them as well. Everything is now in order, and you are sure your business loan will go through with flying colors – right?
Most businesses who apply for a traditional loan through a bank are turned down before they even begin and don’t know it. No matter if you jump through all these hoops, provide all the information and documentation in the world, the vast majority of businesses are doomed from the beginning and don’t even realize it.
A large percentage of the banks today use an automated system that calculates all the paperwork and information against the owner’s credit score. This automated system usually rejects the business loan before it can get started. The banks have taken this approach in the past few years and don’t even consider about 70% of the business loans that come through their doors. No matter if the business has been doing their banking there for years, the bank won’t even consider a business loan if the numbers don’t match up to their automated system, and sometimes, not even if they do match.
Gone are the days of talking to the bank manager and getting your loan.
Gone are the days of the good ‘ole banking system, where you can do your business there, and get a loan because you’ve always been a good customer. Now, only business owners with almost perfect credit will be able to actually get a bank loan through a banking institution.
So, the smaller businesses are usually out of luck, as they don’t have the assets that the larger companies do. Most small business just throw in the towel and assume that there is no help for them, and they must find a way to do it all on their own. The bad part is, some make it, but a larger majority doesn’t. Their businesses flop because they could not get the funding they needed to grow or change locations or gain the new systems they needed to keep up with the larger companies.
Don’t believe the myth that every business can easily get a business loan from the bank. It is simply not true in today’s business world. Seek out other options and investigate all that they have to offer. Knowing that you have options out there when the banking industry falls through can make all the difference in whether your business grows or dies.
Misconception No. 3: The more money you ask for, the less likely you are to be approved for a small business loan.
You might find this myth floating around Internet forums and perhaps even hear it from well-meaning friends and family members. It’s all right to ask for money, the non-expert will tell you, just don’t ask for too much. While this might be reasonable advice for a kid negotiating his allowance, it doesn’t hold much water in the business world.
A business should apply for what they need — not more, not less.
Considering both how much money you really need to grow your business and how much money you can afford to pay back every month.
Make sure that you have cash flow to make your loan payments. That’s the biggest thing that a [lender] is going to check, that [the business owner] can actually afford to make their loan payments.
Misconception No. 4: The most important thing you need in order to obtain a small business loan is a good business plan.
No discussion of small business funding would be complete without mention of the holy grail of small business documents: the business plan. There are multiple perspectives on whether or not a traditional business plan (executive summary, market analysis — the whole 9 yards) still has a place in the loan application process.
Some funding experts seem to believe that the business plan, as a tool for measuring the likely success and fundability of a business, is a bit outdated. While traditional banks might still require business plans during the loan application process, your business won’t need a business plan to get an SBA loan online.
Most lenders won’t require a full-fledged business plan. However, having a plan at the ready is always a good idea.
Every business should have some sort of business plan. It’s just a good practice to anticipate growth, set milestones and keep yourself accountable. If you don’t have one, create one. You’ll be glad you did in the long run.”
Misconception No. 5: If I need a loan fast, you can’t get one through the Small Business Association (SBA).
Until very recently, this oft-repeated myth was more fact than fiction. The process of applying for an SBA-guaranteed loan traditionally started with an in-person visit to a local bank and could take up to four months to complete. For small business owners looking for cash in a hurry, an SBA-guaranteed loan was simply not a viable option.
But recent developments in the SBA loan application and underwriting process have made it possible for business owners to get the affordable, guaranteed loan they need much faster.
By automating the front-end application process for small business owners and the back-end underwriting and originating processes for banks, it is possible for small business owners to receive SBA-guaranteed funding in as soon as five days. The online application takes about 30 minutes to complete, and those who qualify can start receiving funds within five to seven days.
Terry Robinson, CEO and Jim Albertson, EVP of Sunovis say, “SBA Loans are traditionally long and cumbersome credit approvals. SBA Loan Advisor has introduced new technology that helps small business owners obtain quick, affordable working capital. See: Source:http://marketersmedia.com/sba-loans-are-now-faster-through-new-technology/52476 Release ID: 52476
Small businesses that need fast and affordable capital now have a new and improved way to apply for an SBA loan online. Entrepreneurs can now obtain $5,000 to $150,000 in as little as 5 business days after the full application is received.
SBA Loan Advisor (www.sbaloanadvisor.com) is backed by financial services small business lender, Sunovis Financial, Inc. and SBA technology partners. They have recently integrated a fully-online, automated SBA loan program offering low interest rates, simplified application process, and a quick decision for loans ranging between $5,000 to $150,000 to qualified businesses in all fifty states.
Some of the benefits of the new Express loans have extended repayment terms, low monthly payments, and no penalties for early payoff.
SBA Loan Advisor Express SBA loans help the small business owner by enabling them to keep more of their profits internally so they may continue to invest and expand. The SBA Loan Advisor Express has now been available since June 1st, 2014 and has already received significant interest in this new product and process.
“Quick, inexpensive capital is one of the biggest hurdles facing small-business owners,” said Jim Albertson, Executive Vice President of SBA Loan Advisor. “Small business owners steer away from SBA loans because the traditional process can take three to six months to close. SBA Loan Advisor changes this by using technology to expedite the process.”
The SBA Loan Advisor streamline application allows for a simple and quick application that is completed online. The speed and ease of the online process is an innovation for an SBA working capital loan. Taking into consideration the traditional bank-loan application process, SBA Loan Advisor’s expedited platform eliminates much of the time and paperwork that is usually associated with the SBA loan process.
This new technology reduces the typical drawn out bank loan application process to an estimated 15 minute online application with real-time pre-approvals. Funding a new loan can be as fast 5 days within completing a full application.
“Traditional SBA Lenders typically take too long and small business owners are unable to capitalize on immediate opportunities in their marketplace. The other downside to traditional SBA Lenders is that loans under $150,000, for most small-business owners are difficult to obtain.
The small business then resorts to alternative, more expensive lending sources like merchant cash advances or even credit cards to fill the gap,” said Jim Albertson, Executive Vice President for Sunovis Financial.
“SBA Loan Advisor offers affordable terms and meets a big need that is not offered in the marketplace. We now offer a better way to help serve small-business owners with expedited access to low interest rate SBA loans that can be completed online.”
“We are eager to support SBA Loan Advisor in their mission to assist small businesses who want a fast and affordable small business loan,” said Terry Robinson, CEO, Sunovis Financial. “Small businesses are the foundation of our economy and Sunovis Financial his committed to providing working capital to help them succeed through our small business lending platform.
Sunovis Financial specializes in working capital loans and SBA Loans. Now with SBA Loan Advisor, we can provide affordable loan options faster to small business owners with sound cash flow management.” For more information about SBA Loan Advisor, or to apply for an SBA loan now, visit www.sbaloanadvisor.com Visit http://www.sbaloanadvisor.com Video URL: http://youtu.be/e22vZcPj0VE
About SBA Loan Advisor: SBA Loan Advisor assists small businesses by helping them compete and succeed in today’s world through SBA financing. Their experienced advisors assist small business owners to navigate the process from pre-qualification and application to approval. The experienced consultants help small business owners to understand the process as well as what the SBA and lenders are looking for in a successful applicant, and they help with the preparation and packaging of the application.
For more information about the “Biggest Misconceptions About Bank Funding or getting funding for you business contact me at 415-678-9965 or email me.
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