Essential Business Loans: SBA, Commercial Banks, Alternatives.
It’s nice to know that your business or nonprofit is an essential business according to the government during the corona virus outbreak. It would be even nicer if a business or nonprofit could get a fast, essential business loan! Luckily, since the recessions after 9/11 and 2008, businesses and nonprofits can get a business loan or line of credit quickly. You now have more options than in the past.
During past recessions, there were only 2 options for a business.
- A) Go to a commercial bank and wait 2-3 months for them to tell you,“Not at this time.”
- B) Work with a factoring company, that only works with very specific industries.
The good news? Things have changed. There are expedited SBA loans and there are alternative financing companies that move super-fast.
Many business owners have already known about Small Business Administration loans . The recent efforts by Congress to get even more money into essential businesses isn’t really a surprise. However, the big unknown is how quickly these “expedited” SBA loan applications will move.
Even in good times in the past, the SBA loan process was always long and required a lot of paperwork. With so many businesses in bad shape, and the budget for SBA consistently being cut for the past 3 years, can the SBA be responsive? While it’s still a good idea to apply and get into the queue, this isn’t going to help your organization right now.
A New Business Line of Credit for Essential Businesses
In the aftermath of 9/11 and the 2008 banking liquidity crisis, commercial banks stopped lending. However, in 2010 new, innovative, financing companies emerged. These innovative financing companies filled the void of commercial banks. They allowed for lightning fast turnaround times, more flexible terms and better pricing that banks just couldn’t compete with.
Lightning Fast Turnaround Times
In the past, a commercial bank would take 3-6 months to approve a loan or line of credit. Innovative companies like Financing Solutions are providing lines of credit in 48-72 hours. Why is Financing Solutions able to move so fast? Unlike a commercial bank, Financing Solutions isn’t requiring a line of credit to be backed up with collateral. Requiring collateral includes waiting a long time for appraisals. And this is only one of the old fashion ways that banks evaluate a loan application.
An alternative financing company, like Financing Solutions, can move super-fast. It’s not looking at hundreds of data points requiring multiple documents like the bank or SBA. It is purely looking at your personal credit score, past cash flow, current debt, profit margins and your industry. This speeds up the process quite a bit.
Commercial banks nowadays are just not designed anymore to work with small businesses or nonprofits with yearly revenue under $10 million. They have decided that they just can’t compete in that space anymore.
More Flexible Terms
A commercial bank will almost ALWAYS be cheaper than an alternative financing company. However, sometimes there are costs involved that are overlooked. A commercial bank almost ALWAYS requires a yearly application and maintenance fee. Also, if your company has the line of credit in place but doesn’t use it, then you still must pay for the line.
Alternatively, Financing Solutions line of credit costs nothing to get in place and nothing when not being used. It’s a totally different product than a bank. Financing Solutions’ line of credit is a cash backup plan for emergencies or opportunities. Most small businesses or nonprofits should have an emergency line of credit in place, just in case.
Plus, unlike expensive cash advance companies, a line of credit from Financing Solutions can be paid back at anytime incurring no additional charges or fees.
One of Financing Solutions, managing partners, Stephen Halasnik, is a popular guest on many podcasts/conferences. He is also an Amazon bestselling coauthor for his book about inspiring entrepreneurs, called Crash and Learn.
Mr. Halasnik talks often about his experiences over 25 years of dealing with banks himself as a business owner. He says that what business owners want is speed and a cash backup plan. Cost is often less important because often a line of credit isn’t really used that often. And, when it is, it is for only a short period of time. The cost differential is insignificant as compared to the problem it solves.
Mr. Halasnik uses this same example often to talk about a line of credit from a bank versus an alternative lender. Let’s say you are about to miss payroll and you need an extra $40,000 for only a week or two until a customer payment comes in. Do you really care that you might have to pay a few hundred dollars more because you went with an alternative lender versus a bank?
Add to that the fact that many companies/nonprofits will not be approved for a line of credit anyway. It makes complete sense that the first place a company should look to is an alternative lender.
A Cash Back Up Plan
These are challenging times. Small businesses and nonprofits are looking for a cash backup plan for emergencies and opportunities. Luckily, there are now more options. An application for a line of credit with Financing Solutions takes 2 minutes to fill out. There is no obligation and your credit is not run until you decide to set up an account.