If you’re a business owner, chances are that you’ve heard a lot of horror stories about applying for a bank loan. You may have heard of people with booming businesses get rejected, or heard about people who were extremely financially stable having to put up homes just to get approved.
Banks have become infamous for rejecting small business loans in recent years, and much of it is due to the standards imposed on borrowers. It’s no secret that bank lender standards are sky-high, but did you realize that these five factors can actually be reason alone for a bank to turn an applicant away?
- Personal credit scores. It’s sad but it’s true. Banks will turn away CEOs based on their personal credit score, simply because they think it shows that they are unreliable. The problem is that personal credit scores can be low for a variety of reasons, including family tragedy, sickness, or even job loss.
- A lack of business history. One would hope banks would give new business owners loans, right? Well, one of the leading reasons for rejection is a lack of experience as a business owner. Less than 1% of all startups get approved for a bank loan, including state-funded loans. Needless to say, startups should never seek a loan from a bank because of this sad fact.
- Recent business loss. Banks want to lend to businesses that actually don’t need loans, in most cases. If your business took a financial hit or needs funding to improve services, chances are that the bank will turn you away.
- Your industry. A lot of banks will not lend to specific industries that they deem to be “high risk.” These industries include adult services, bars, and virtually anything that involves “legal grey area.” So, even if you have a stable business, there’s a chance that you may get rejected based on principle alone.
- Down payment or collateral. These days, a lot of banks got greedy. They want extremely high down payments and pricey collateral in order to give a loan to a borrower. The problem is, most small business owners can’t afford to do that without putting everything on the line. As a result, they end up getting a rejection letter because they don’t want their lives held hostage.
Currently, banks have an incredibly low approval rate for business loans – and it’s actually putting the economy in jeopardy. Merchant cash advances are a popular alternative that has high acceptance rates, with some companies having approval rates as high as 70% or more.
Make no mistake about it. Small business owners do not need banks as much as the think they do. If you are ready to get the money that you need to keep your company afloat or improve your company’s standing, it’s time to give Maple Advance a call. We have the money, the flexibility, and the patience to help you make the most of your business endeavors.