Business Bank Loans, Where Small Business is Turning
It was recently reported that business bank loans to small businesses are down 36% for 2012 and one of the key reasons for the decline is that banks want to back up their loans with 100% collateral. Most people don’t understand that for every dollar the bank gets in deposits, the federal reserve gives the bank an additional $7 of free money. This is providing that the $1 is properly collateralized. This means if you need a business bank loan then you will have to have enough equity in your house, or other assets, to obtain a bank line of credit. If a bank doesn’t require assets to back up their loans then the bank auditors will penalize the bank. This is the main reason why banks are not lending to small businesses anymore. Business bank loans are no longer where small businesses are turning.
Alternative funding is now the answer
What has taken the place of small business bank loans is alternative funding. Unfortunately for most small business owners, money borrowed from an alternative lender isn’t as cheap as a loan from a bank. However, there are other key advantages. Alternative lenders like Financing Solutions move superfast and require much less paperwork to fill out. I personally have worked with various banks to get loans for my businesses. I often wonder if working with a bank is worth it. Every year I have to get reviewed financials from my accountant, I have to fill our updated personal forms, and I have to sit down with the bank to explain how my business is doing. Many times the bank has waited and not given me an answer on my yearly renew for months keeping me in a position of worry.
Important quote that explains why alternative funding is good
“Many times, I haven’t needed a line of credit but just have it in place to cover me should something unexpected happen. Now, with alternative lenders like Financing Solutions, I can get the money when I need it and pay it back from cash flow when my receivables come in.”
Also, many small businesses have seasons when cash flow is tight for maybe a month or two. Using Factoring in this case is really an outdated model and as just discussed, banks really are a pain in the butt to work with.
Looking at alternative financing companies is now, the new norm, especially if you need quick money and small business owners should be aware of this option when it comes to quick, no hassle funding.
Financing Solutions provides fast business funding of $5,000-$100,000 to good small businesses with sales of $500,000-$7 million that can be used for working capital.