- The one advantage to having your bank fund your business.
- To whom does a bank lend money?
- How complicated is the loan application process?
- What collateral may be needed?
- What other disadvantages are there?
- What are your options?
1. The One Advantage To Having Your Bank Fund Your Business
Almost everyone is acquainted with their local savings institution. They frequented it and used its banking features countless number of times; moreover, its naturally thought of as the “first responder” for all of their financial needs. Unfortunately, nothing can be further from the truth. We’ll start by saying that there’s only really one advantage to getting a business loan from your bank: the bank will not be an owner of your business nor involve itself in your business decisions. Moreover, once the owner of the business pays off his loan in a timely manner, no more interaction with the bank is needed unless the owner secures additional funding from the bank.2. To Whom Does A Bank Lend Money
In general, banks rarely fund new start-ups. Only established businesses that have a proven track record, substantial collateral, a good credit rating and a previous running record with that particular bank are considered for small business loans. Taking it even further, the business must also clearly show an ability to repay loans, cover losses in case of a default and further agree to pay much of the costs itself.3. How Complicated Is The Loan Application Process
A long list of prerequisites makes the process lengthy, cumbersome and mostly unnecessary. Get ready to sit back, and have a long wait.4. What Collateral May Be Needed
Collateral in the form of valuable real estate holdings, personal assets such as automobiles and personal guarantees or notes is needed to qualify. In most instances, an entrepreneur’s residence is safe from seizure by a bank.5. What Other Disadvantages Are There?
Even when a bank miraculously does provide a small business loan for a business, it may not necessarily be the entire amount requested by the business owner. Typically, loans are granted that amount to a mere 70 or 80 percent of the original loan amount requested. That creates even more hardships for business owners who’ll have to scout around looking for additional funds needed for their business. Moreover, while interest rates are typically lower than other funding sources, the banks generally offset those low rates with other additional fees and higher charges.6. What Are Your Options?
Well, you can always secure personal loans from your family, friends or get an increased credit line. Angel investors and capital investment ventures are other viable options. Some have even done it via their credit cards. In fact, any mortgage, personal loan and/or a commercial card account can beat any bank with innovating methods to finance your business. However, at reputable, qualified financial firms, such as the Advance Funds Network (AFN), you’ll find industry leaders willing to work with you to secure the best funding sources with myriads of funding options. No upfront fees are ever charged; the Advance Funds Network believes in transparent policies all the way. Approval-driven, you’ll be offered several customized programs including business credit lines and merchant cash advances. That said, everything is carried out in a quick, timely manner. With a mere three months in business minimum, $100,000 in annual revenue during the last year and no minimum FICO score threshold required, you’ll find these kinds of companies are willing and capable of securing funding you can boast about. Please call toll free now for more information at: 844-482-1939, email: [email protected] or simply fill out our convenient online form.Frequently Asked Questions
What are the main disadvantages of bank loans for small businesses?
Bank loans often come with stringent eligibility criteria, making it difficult for startups and small businesses without an extensive financial history to qualify. The application process can be time-consuming and requires extensive documentation, leading to potential delays in funding. Additionally, banks may require collateral, such as personal or business assets, which can pose significant risks to business owners. Even if approved, the loan amount granted may be less than requested, necessitating the search for additional funding sources.
Why do banks have strict lending criteria for small business loans?
Banks implement strict lending criteria to mitigate the risks associated with lending to small businesses, which may have unproven track records or limited financial stability. These criteria often include requirements for high credit scores, substantial collateral, and detailed financial documentation. This cautious approach aims to ensure that borrowers have the capacity to repay the loan, thereby protecting the bank’s financial interests.
What alternatives exist for small businesses unable to secure bank loans?
Small businesses that face challenges in obtaining traditional bank loans can explore alternative financing options such as online lenders, peer-to-peer lending platforms, and microfinance institutions. These alternatives often have more flexible eligibility requirements, faster application processes, and may not require substantial collateral. However, it’s important for business owners to carefully assess the terms and interest rates associated with these options to ensure they align with the business’s financial capabilities and goals.
How can small businesses improve their chances of securing a bank loan?
To enhance the likelihood of obtaining a bank loan, small businesses should focus on building a strong credit history, maintaining accurate and comprehensive financial records, and preparing a detailed business plan that outlines the company’s strategy and projected financial performance. Demonstrating consistent revenue streams and offering valuable collateral can also improve a business’s attractiveness to traditional lenders. Establishing a positive relationship with the bank through regular communication and showcasing responsible financial management practices can further bolster the chances of loan approval.
