When is the last time you went to a bank for a bank line of credit or a bank loan for your business? If you did not do so recently, you are in for a shock.
Their application will take you days/weeks to fill out because of all the information they ask for.
- Banks will want balances, all bank statements, income statements, balance sheets, business tax returns and customer lists.
- They will also demand accounts payable/accounts receivable reports, personal income tax statements and any small business loan balances. In addition, you must provide property records, and information about your home mortgage status, factoring or ABL statuses.
- You should also expect to give exhaustive descriptions about your business, markets, etc.
Banks will run your personal credit record almost immediately.
- And if it isn’t over 700, then you will be out of luck.
- If they consider you too big of a risk for numerous reasons that they don’t even have to tell you about, they will deny your application.
As the business owner, even if you have a bookkeeper, CFO or assistant, you will still have to have a big hand in the process.
- Business owners just don’t have the time or patience to fill out forms.
- You have more important things to do, such as managing staff and overseeing operations.
- It’s likely that you don’t like small business finance matters nor filling out forms. In addition, it’s probably not your area of expertise.
- Banks will take weeks just for an approval letter.
If there is an emergency need for cash, it is already too late for a commercial bank to respond.
- A bank will has all types of restrictions, including industries that they don’t want to work with such as nonprofits, financing, trucking, retail, and many more.
- With a bank you will have to give audited or reviewed financials from your accountant. This takes time.
Banks want collateral to back up your line of credit.
- You can use some of your accounts receivable as collateral but that will not be enough.
- It may become necessary to pledge your house, but only if it has equity in it.
- And like your accounts receivable, a bank will only use a percentage of your home equity to cover the line of credit collateral requirement.
When it comes time to renew your line, you will have to go through the process all over again.
- You might think that because you already have a business bank line, the renewal process is just a formality, but it’s not.
- Making timely payments is no longer a sign of loyalty and good business practices. They will still reduce your line, impose new requirements and subject you to even stricter criteria.
When a Bank Line of Credit is Hard to Get, What Do You Do
Fortunately, there are now alternative lenders that can rescue you from the difficulties of working with banks. If you are looking for organizations that work with small business and nonprofit companies that have yearly revenue of $150,000 to $8 million a year, Financing Solutions (www.financingsolutionsnow.com) is the answer.
- The application from Financing Solutions takes two minutes to fill out and you will get a written offer in minutes.
- They do not check your personal credit until after you sign an offer letter indicating that you want to move forward.
- You only need to supply simple documents, like bank statements, your most recent tax return, a voided check and a driver license.
- Their line of credit program renews yearly with no hoops to jump through.
- Best of all, it doesn’t cost anything until you use it. This makes it a great backup plan for emergencies or business opportunities.