What To Do When The Bank Says No
If you’re like the majority of small business owners, chances are you’ve been turned down by the banks when applying for a loan. Perhaps your FICO score is too low, or you haven’t been in business for 3 or more years or maybe you have a blemish on your business credit. Even if you have a healthy business with positive cash flow, banks will still say no if you don’t meet their long list of stipulations. In fact, a recent report found that nearly 60% of small businesses in need of capital went to a bank first, but only 27% were approved for a loan. However, there are still several viable options to consider when the banks say no.
What to do next?
Before you explore other options, get an understanding of why you were declined by the bank. There may be some factors that are in your control and with some adjustments, the creditworthiness of your business can improve.
The alternative lending options below are used by small business owners, like you, to secure the funding their businesses need. Factors like application process, funding speed, and loan terms will all play a part in your decision when choosing one of these popular options.
Small Business Association (SBA) – While the SBA doesn’t lend directly to small businesses, they do take some risks off the table, which enables the bank to lend when traditional Business loans aren’t an option. If you’re eligible to apply, you will need to meet specific criteria and provide documents including a sound business plan and financial statements to name a few. The process can take anywhere from several weeks to several months to complete.
Business Line of Credit – An unsecured line of credit provides fast access to funds, flexibility in repayment, and separation from personal credit. One downside is the risk of building up debt as payback terms aren’t preset. You have two options in this category; traditional lines from a bank or non-traditional lines from alternative sources. Like business loans, banks will have a number of stipulations to obtain a line of credit. Non-traditional alternatives require far less scrutiny than the banks and can deliver decisions much faster. These non-traditional alternatives also provide small business loans for women. So, all women who are looking for an opportunity can get help from these organizations.
Crowdfunding – Depending on your business model and strategy, you may consider crowdfunding. This new model enables a number of individuals to make small contributions toward funding your project via a web platform. The business offers a product or service to each individual in return. If this option sounds attractive be prepared to invest your time in developing and marketing your project, as it will be essential to attract as many individuals as possible.
Alternative Lending – The fastest growing option for small business owners to access capital is alternative non-bank lending. Driven by simplicity, convenience, and speed, alternative lenders, like BitX Funding, offer loan decisions within hours and delivers funding in just days.
This is a great alternative business financing. Approvals are based on unique data points and evaluation of cash flow, but the cost of capital is higher than that of a traditional bank loan. Transparent terms, fixed automatic repayments, and convenience make for better customer experience.
Merchant Cash Advance – Another non-bank option for funding is a Merchant Cash Advance. MCA’s are not loans, so if the business has a limited history or poor credit that may be ok. Funding is based on credit/debit card sales and once approved, fixed automatic repayments are made based on a preset daily percentage. The cost is typically higher than alternative loans and certainly higher than banks, but business owners can get funding in days with a simple application and transparent terms.
If you’re tired of getting turned down at the bank or want to avoid the headache altogether, take a look at one of the options discussed above.