Need Of The Hour
For every business, there comes a time when a large amount of money is needed. New inventory, upgrades to systems, expansions – no matter what you need working capital for, it’s bound to happen whether you’ve been in business for one year or one hundred years. As long as businesses have been around, so have banks and the business loan. So, it’s only natural that most business owners assume that when they need money, they head to the bank. Most banks advertise how easy it is to get a loan through them and how quickly a business can get it’s money – but this couldn’t be further from the truth.
When you head down to the bank to apply for a loan, do you really know what you are getting yourself into? Are you really prepared to complete all the paperwork and documentation that the bank will require? Do you even know where your business tax returns are from five years ago? Here is a breakdown of the steps that you will have to go through before you can even be considered for a business loan from a bank:
1. Application – this is normally a two-to-four page application that has you list everything from where your business is located to how much your business made last year to who your financial officers are. This application can be very tedious to fill out and very confusing as well. Once the application is filled out, you usually have to pay an application or credit check fee to continue from here.
2. Documentation – once you have filled out your application and paid your fee, most banks will require a ton of documentation. Tax returns for the past five years, business rental or building ownership documents, employee W2 statements, insurance policies, credit card receipts, bank statements, a breakdown of all the outstanding loans your business currently has, assets of your business, business liabilities, and much more. This is often the part of the process that takes the longest, as there is so much that they require just to look at your application, and they always ask for more.
3. Business plan – if you don’t have one, you soon will. Banks require a business plan and cash flow outlook before they will consider an application for a business loan. While every business should have a professional business plan, they are time consuming and you must get every detail correct. Usually, if you don’t have a business plan, the bank will direct you to the local Small Business Administration to learn how to write one, or, you can simply pay a professional company to write one for you. No matter which way you prefer to go, it will take time to create a great business plan and polish it up for the bank’s approval.
4. A breakdown of the loan – this is the part where you get to show the bank exactly where their money will be spent. This is not a place to round off or guess at where you are going to use the loan, the bank wants a to-the-penny list of where their money will be going from the time it leaves their offices. Some banks even have certain requirements on where you have to spend the money, no matter what you are taking the loan out for.
5. Special condition – Some banks may even have other special requirements for documentation or specialized applications for certain types of businesses; it all depends on the bank and their policies.
So, you jump through all of these hoops. You give the bank everything it asks for, provide every scrap of documentation they require, you even make your list of where the money will go and turn it over to them as well. Everything is now in order, and you are sure your business loan will go through with flying colors – right?
Most businesses who apply for a traditional loan through a bank are turned down before they even begin and don’t know it. No matter if you jump through all these hoops, provide all the information and documentation in the world, the vast majority of businesses are doomed from the beginning and don’t even realize it.
A large percentage of the banks today use an automated system that calculates all the paperwork and information against the owner’s credit score. This automated system usually rejects the business loan before it can get started. The banks have taken this approach in the past few years and don’t even consider about 70% of the business loans that come through their doors. No matter if the business has been doing their banking there for years, the bank won’t even consider a business loan if the numbers don’t match up to their automated system, and sometimes, not even if they do match.
Yester Years Concepts
Gone are the days of talking to the bank manager and getting your loan. Gone are the days of the good ‘ole banking system, where you can do your business there, and get a loan because you’ve always been a good customer. Now, only business owners with almost perfect credit will be able to actually get a business loan through a banking institution.
So, the smaller businesses are usually out of luck, as they don’t have the assets that the larger companies do. Most small businesses just throw in the towel and assume that there is no help for them, and they must find a way to do it all on their own. The bad part is, some make it, but a larger majority doesn’t. Their businesses flop because they could not get the funding they needed to grow or change locations or gain the new systems they needed to keep up with the larger companies.
An Opportunity And Hope
Don’t believe the myth that every business can easily get a business loan from the bank. It is simply not true in today’s business world. Seek out other options and investigate all that they have to offer, such as a business cash advance . Knowing that you have options out there when the banking industry falls through can make all the difference in whether your business grows or dies.
For more information about our business loan alternatives, please call Merchant Advisors at 1-800-870-7622 or visit www.onlinecheck.com