March 14, 2019 | By Peyton Sawyer
If you are a small business owner looking to purchase commercial real estate, refinance, or infuse your current business, then you may be surprised to know that there has been an . The positive outlook on our economy and small businesses has spanned across the states. Many small business owners have taken advantage of this increase in approval rates to access the funding needed. You can be next.
According to Biz2Credit Small Business Lending Index, which started in 2011, more than 25 percent of small business funding requests have been approved. This is great news for all the small business owners out there, as well as the lenders. Access to capital can mean the difference between a businessí success or failure.
If you take the optimism in the economy and combine it with the reasonable interest rates that are available, you have the perfect formula for small business lending approval. So, why wait? If you are a small business owner in need of funding, now is the best time to get started. While there are several lenders and lending options to consider, finding the one that suits your business and situation is very important.
When considering the different types of lenders that are available to small business owners, big banks typically come out on top. With their ability to offer the borrower the lowest interest rate and longest term lengths, there is no question why using a traditional lender has been the more common choice for business owners looking for funding.
You will find that a larger bank, has a bigger deposit base and is more aggressive in their lending habits, especially when the economy is strong. The benefits can certainly outweigh the drawbacks. While it may introduce a more stringent approval process than other lenders, for borrowers, it is considered to be the better option. This makes this type of lender even more attractive to a business owner.
Small banks, or the neighborhood bank located within a community, can provide a solid source of capital for any business venture or entrepreneur. Not only have small business funding approval percentages risen with big banks, but it has also risen across the board with all lenders. That means that a business owner like you has a good chance of being approved for funding with any financial institution or product that they would like to apply for.
By using a small bank for your business funding needs, you may have an even better chance of approval than the big lenders. These institutions do not require such a stringent process. Making it easier for a borrower that does not have a long credit history of timely payments to provide the lender with. They may even be more likely to take a risk on approving a funding request for business owners just starting out or entrepreneurs looking for their next investment or business venture.
The most common type of loan small banks offer to business owners is an SBA loan. This type of loan helps to eliminate some of the risks a bank will take when investing in a business owner. While the SBA offers several loan programs, it does not actually provide businesses with money. With an SBA the bank makes the loan, that is backed by the SBA. This provides a guarantee to the bank, protecting them if a borrower defaults on their loan. The SBA guarantee is basically a promise to pay the bank or authorized SBA lender a portion of the business ownersí loan. This helps to offset the risk involved, resulting in a higher percentage of approvals.
Private lenders, otherwise known as non-traditional lenders or alternative lenders, can assist business owners who need immediate funding, or do not qualify for funding from a traditional banking institution. The approval process a big bank or even a small bank introduces can be quite intimidating. For one reason or another, business owners may find it difficult to meet their standards for approval. Whether it is because the borrower does not have good credit, or even enough credit, a long credit history of timely payments, the length of time a business has been open, or collateral to secure the loan.
If you are a business owner that is denied a loan, don't worry. It's okay to not have the necessary requirements for a traditional loan. There are many other funding options available to business owners like you. Just by using an alternative lender, you can increase your approval percentage. With alternative lending, the business owner or borrower is afforded the opportunity to secure funds without an overwhelming approval process. While the length may be shorter with an alternative lender, rather than a traditional bank loan, and the interest rates are almost always higher, you can possibly still find a happy medium that you can benefit from. Alternative lenders may accept the risk of funding your business whether your credit is good, bad, or not established, which is why the term is shorter and the interest is higher.
Merchant Cash Advance
With alternative funding, you may be eligible to receive a merchant cash advance. With the type of funding, the requirements are less stringent and can provide cash in just 24-72 hours. The funding you receive with a merchant cash advance is based upon your business revenue and the length of time a business owner has been in business. This is typically not considered to be a loan. It is a cash advance on your business sales, in return for a percentage of your daily credit card or debit card sales, plus a fee. Using this method to receive the business funding your require can help to grow or sustain the business you have created.
No matter what small business funding options you access, be sure to make an informed decision that will benefit your business.