3 Ways That Big Bank Loans Disappoint Small Business Owners

As a small business owner, you may feel like the big banks aren’t there to help you. Big banks help big businesses and can’t do much to help you if you really need help.

They say the best way to get a loan from a bank is to convince them you don’t really need one. Meanwhile, if you’re in dire straights and need a loan to stay afloat, you could be seen as too risky.

business loan

If you’re a small business owner who needs a bit of help (or cash), here are 3 reasons you may not even want to waste your time applying for a bank loan.

1. Slow Turnaround Times

We probably don’t have to tell you that almost nothing involving a bank happens quickly. So, if your business needs cash in a hurry, you’re better off going online and applying at PayvantCapital.com for a merchant cash advance. You can get a response in 24 hours because they’re not limited to “bankers’ hours.”

If you go through a bank, you’re looking at a minimum of 30-45 days. And there is absolutely no guarantee on getting approved, even if you do everything they ask. You could be back to square one after 45 days.

This is not ideal if you need the money for an emergency situation or to take advantage of a sudden opportunity.

2. Stringent Lending Criteria

In recent years, we’ve seen the big banks approve a record number of small business loans. However, it’s important to know that they’re still saying “No” to almost 3 of every 4 small business owners. That means the odds are better, but they’re still not great.

If you’re a small business owner, you can be denied a loan because of:

  • A lack of income, capital or collateral
  • Bad credit (i.e. A low business credit score) or lack of credit history
  • The business owner has a low personal credit score
  • A perceived lack of prospects

Private funders are far more likely to see a business as promising, as opposed to precarious.

3. An Intrusive and Demoralizing Process

On a human level, the process is also simply not fun for small business owners and it can feel indiscreet and invasive.

The bank evaluates everything about your personal history and your business’ history and punches it into their proprietary formula to see if they deem you worthy of their help.

If they say no, it can be demoralizing and the tacit message can feel like, “We don’t think this business can make it.”

Alternative funders and lenders are far more realistic and know that small businesses face challenges every single day. They’re more interested in your future than your past.

For example, you can qualify for the merchant cash advance we mentioned above if you have been in business for 6 months and have transactions exceeding $10,000 a month.

At the same time, your repayment terms are more reasonable. You would pay back the advance by remitting a percentage of your monthly transactions. This means that when sales are down, your payments will be lower. When sales are higher, you can make a bigger dent in the balance.

These are only 3 of the reasons that the big bank system is not really set up to help small business owners. As an entrepreneur, you will probably find that you have far more options in smaller/ private funding or lending.

About Mohit Tater

Mohit is the co-founder and editor of Entrepreneurship Life, a place where entrepreneurs, start-ups, and business owners can find wide ranging information, advice, resources, and tools for starting, running, and growing their businesses.

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