Have you ever thought of getting a small business loan, but were turned off because of something someone said about them? Contrary to popular belief, many businesses apply for SBA loans. Your personal feelings about lines of credit may affect your decision to apply for an SBA loan, often to your company’s detriment. Think about the reasons why you are against these loans and try to gauge the sensibility of your rationale. Finance experts readily agree that there is a whole load of hearsay in the corporate world about SBA loans. Call them myths, fallacies or misconceptions if you will, but they all point to the same thing: misinformation.
Is it difficult to qualify for a small business loan?
It depends. It’s certainly not a walk in the park to get approved for a large line of credit, but there are steps that you can take to move in that direction. Small business loans experts tend to agree that the best way to prepare for your SBA loan application is deliberately. In other words, take all necessary steps required to secure your loan. This means you will have to collect lots of paperwork, conduct due diligence, and be flexible enough to provide satisfactory answers to questions that may come up. What pray tell does this entail? It depends on who you’re going to apply to for an SBA loan.
Any aspiring entrepreneur will tell you that financing is the biggest bugbear in the equation. You need to have the necessary resources to grease the proverbial wheels of your business operation. There are traditional and nontraditional options available to you. The former includes banks which have a bad reputation for denying business loans across the board. Regardless of these rejection rates, SBA loans are among the most commonly issued lines of credit at banks. The only concern that many businesses have with bank loans is that there is excessive paperwork (bureaucracy) that needs to be submitted and approved at multiple layers in the bank.
Non-bank loans are growing in popularity for obvious reasons
The proliferation of non-bank financial services has exploded in recent years. It is possible to apply to alternative lenders for loans of all shapes and sizes, often at competitive rates. What’s great about these types of small business loans is that the applications can be submitted entirely online. Be advised that not every non-bank service provider is above board. There are many sharks in the water, and it behooves you to do your homework to ensure that you’re not caught short with extortionary interest rates and unfavourable repayment terms and conditions. It’s one thing getting denied by a bank – it’s another getting taken for a ride by a loan shark.
Fact or fiction: If you don’t have perfect credit, you might as well kiss your SBA loan goodbye?
Once again, the naysayers have propagated a myth about who qualifies for an SBA loan. The concept of perfect credit is in itself an anomaly. Businesses with perfect credit are probably finely tuned machines that do not require massive amounts of financing. That being said, it certainly helps in your loan application to have an above average credit score. Banks and non-bank lenders will offer you loans provided the structural framework of your business is intact.
If you can provide the necessary documentation about your business’s operations, you will be offered SBA loans at varying rates. Traditional banks are a lot stricter than non-bank entities when it comes to credit scores. The general rule is as follows: If your credit score is high, the interest rate on your loan and the repayment terms and conditions are better. If your credit score is low, the opposite holds true.
Where Should You Get Your SBA Loan From?
If you get denied for a business loan through your bank, don’t lose heart. Sure, traditional lending institutions are the first choice of many business owners, since they appear to have the credibility, backing, licensing and approval of the highest regulatory authorities. However, there are many credible non-bank lenders who offer safe, secure and trusted credit facilities to their clients. Plus, with non-bank lenders, you get much quicker processing times, quicker responses, and quicker access to your lines of credit.
The entire process could take anywhere from 24 hours to 1 week with a non-bank lender. By the same token, do not be deluded into thinking that being approved for a bank SBA loan is the worst option. If you qualify for a bank loan, go for it. The rates are typically comparable or better to non-bank lenders, and you have added peace of mind with all the constraints banks are subject to.
These are but a few of the many issues that business owners are concerned with when applying for SBA loans. Remember: it’s not how much money you’re applying for, or how good your credit score is that determines whether you get approved or not. It’s the type of lender you go to, the rates you’re willing to pay, and the information that you submit. If you meet the requirements, you will be approved!