There are many reasons why it may be challenging for business owners to receive bank loans. Let’s start with the age of the business. Most traditional banks won’t risk lending to businesses without a proven track record—perhaps of at least five years. Now how about why you need the loan. If the reason is to beef up a limited cash flow, that could be problematic since banks will want proof that you can pay back the loan.
Another reality that makes it hard to get a business loan from banks is that they operate under strict regulations that make it hard for them to innovate and use information other than credit scores to make lending decisions. That means owners with bad credit will find it tough sledding to go the traditional lending route.
When Banks Say No
Failing to secure bank funding for your business doesn’t mean you’re out of luck. Plenty of alternative lenders exist to support business owners who have bad credit, a short track record and/or modest annual revenue. Because private investors, hedge funds and specialized lending firms don’t operate within the traditional banking system, they may tolerate greater risk or focus on specific markets—providing funding even when banks won’t.
Here are five ways alternative lenders may be a good option for business owners who’ve heard “no” from a bank:
- Flexible eligibility criteria—Alternative lenders are able to take a more holistic approach when reviewing eligibility, considering factors like value of assets, projected revenue and your business’s potential instead of just credit scores, collateral and business history.
- Quick approval and funding—Because alternative lenders lack banks’ bureaucracy and stringent regulations, they are able to make funding decisions much more quickly—possibly providing the funding you need within days rather than weeks or even months.
- More flexible terms—Alternative lenders are able to customize loan agreements based on your needs instead of having to adhere to a rigid structure like banks do—negotiating terms like repayment schedules and interest rates with you.
- Funding unconventional or high-risk ventures—Banks are unlikely to provide funding to ventures that do not fit neatly into their eligibility criteria, which means startups and early-stage businesses, real estate developers and other innovative ventures are likely out of luck with them but may fare better with alternative lenders.
- Personalized relationship and expertise—Alternative lenders pride themselves on providing individual attention and customized support and you may even have direct access to the decision-makers—facilitating better communication, collaboration and personalized financial advice not usually available from a bank.
You’ll want to conduct thorough due diligence before proceeding with an alternative lender to be sure to choose the one that will best meet your needs. It’s definitely worth it to do your homework to ensure your lender operates professionally and transparently; has a strong track record of working with businesses like yours; and offers loan products that have terms, interest rates and potential risks you understand and feel comfortable with.
Contact Clear Skies Capital today at 800-230-9822 to discuss how our professional lenders can work with you to provide the funding you need. We’ve helped hundreds of business owners who’ve been turned down by banks—and we’d love to help you too.