5 Things You Should Know About Small Business Loans
Do you want to apply for a small business loan? You’re most likely not alone in that respect. Small business loan demand is at an all-time high, and if you want to expand, improve, or even start your own business, you will most likely need to get business funding from somewhere. Assuming that you’re not self-funding, you probably have also thought of bank loans for small businesses as your go-to idea. Before you start applying, here’s what you should know.
- Small business loans from banks aren’t the carte blanche you think they are. The truth is that banks can and often do restrict what you can use that loan money on, and they also will typically require you to have collateral. So, if your business fails, your collateral will go out the window. In other words, it’s not as liberating as people expect it to be, and there’s often no leniency when it comes to bill payment, either.
- Almost all first time business owners will have their loan applications rejected at least once. Getting a bank loan for a business is very difficult, and banks are constantly tightening up their requirements. If you have bad credit, low or no profits, or a poor business plan, you can almost always expect to be rejected by just about every bank you will go to. Brace yourself, and come up with other options instead.
- There is a good chance that you will not get the smaller loan you want, but will be approved for a larger loan. The bigger the loan, the more banks make money. Banks will be more apt to approve a bigger loan, simply because they want more money.
- Bank standards tend to be pretty uniform, so if you get rejected from more than 3 banks, you might want to look into alternative lending sources. The good news is that there are many alternative lenders out there, including P2P business lenders, alternative lending groups, as well as venture capitalists. It’s important to look at each kind of lender that you want to work with, because each one will have its own pros and cons.
- Mainstream business loans do not come in too quickly. If you need money yesterday, a typical small business loan is not what you want to go with. Many bank loans can take weeks or even months to push through. Go another route if you’re looking for fast business funding.
If you haven’t noticed from the information we provided, getting a bank loan to fund your small business is not exactly as fun as it initially sounds. In fact, many business owners regret taking out loans because it ended up costing them more than what they initially bargained for.