Why Small Business Lenders Are Better Than Banks

When you start your small business, you need enough funding to bridge the gap between income and expenses. The first place you might think about getting the money you need is your bank.

You naturally assume that after a bank loan officer reviews your carefully-researched, highly-detailed business plan that you appear to have an excellent chance of success. Fortunately, some financial providers will work with you to figure out how you can get affordable direct loans and low interest lines of credit. When you look at the big picture, you’ll come to realize that bank loans are over-rated as a resource for small business owners.

Small Business Lenders Are Better Than Banks

Until you go through the process of getting a bank loan, you may not be aware of the many disadvantages of working with a bank.

Here are just a few reasons why getting a bank loan is not always a good way to start or grow a business and why you might just prefer to work with an alternative lender.

1. Banks have a long, tedious application process.

If you need a quick loan because you want to get to market quickly with your new product or because you need to cover some unexpected expenses to stay in business, then you will probably chew your fingernails down to the bone waiting for the bank to get through verifying all your credentials and combing through all the numbers in your business plan before even taking your business idea seriously.

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The application process is a long one. It takes time for the bank to review your entire business idea to see if it’s a viable one. Additionally, you will also find the process cumbersome. Steeped in bureaucracy, things may take longer than necessary, and from your point of view as a fast-thinking, quick acting entrepreneur, many of the petty details they ask for and need to verify may appear rather nonsensical.

By contrast, a small business lender will be able to review your business plan with remarkable speed, verify the pertinent information and give you a fast small business loan. They are not hampered by numerous unnecessary checks and balances like a bank. If they don’t give you a loan, they will tell you why so that you can correct any issue that stand in your way. For instance, your business plan may need more figures to prove that your idea is a solid one and that your business will be able to realize a profit within a reasonable amount of time.

2. Banks treat anyone who is starting up a business with suspicion.

From their point of view, speculation is dangerous. Even though a bank routinely speculates on FOREX trading all day long even when outcomes are uncertain and a large volume of money is at stake, they become super conservative when it comes to dealing with real people. Banks like solid numbers to work with and if you don’t have a track record of profitability and an exemplary credit history, you are considered something of a wild card. It doesn’t matter if you’ve proven your business leadership skills in past ventures and have a solid reputation in the community.

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By contrast, an alternative lender will view you as a business partner rather than a threat to their cash reserves. If your plan has a good chance of working, they will offer you all the support you need to get things off the ground.

3. Banks put you through an almost impossible obstacle course to prove you’re worthy of their money.

The list of pre-requisites necessary to qualify for a loan borders is often unnecessary. There are so many conditions to meet that it’s a wonder that anyone is able to get a bank loan.

By contrast, an alternative lender has a realistic and reasonable list of pre-requisites.

4. Banks want you to stake your house and property before they agree to sanction your loan.

It’s somewhat ironical that banks often consider you a risk after they have strong-armed you into offering considerable collateral in case your business does not pan out. Although you take all the risk while the banks can collect their money when things go wrong, a loan officer usually makes it sound as if they are assuming all the risk.
By contrast, an alternative lender has a reasonable approach to this whole idea of risk.

They may work with you to make sure that you are able to generate the revenues you need by giving you a loan or line of credit that will be easy to pay back.

5. Banks may not give you all the money you need.

The reason you apply for a loan is because you need all the money to get your business off the ground. If you are given 20% to 30% less because of a conservative banking philosophy, you’re now forced to scramble to get another loan from somewhere else to cover your expenses.

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By contrast, an alternative lender will get a very clear idea of how much you need and why you need it. They realize that by not giving you the full amount, they are undermining your chance of success.

In closing, you might be surprised to learn that banks are not enthusiastic about loaning money to small businesses despite their public relations statements. Only a few people manage to exactly meet their stringent pre-requisites. It’s nothing personal. On principle, banks consider a small business venture to be a risk that they would rather not take. 🙂