The Difficulty of Getting a Small Business Loan

Lisa Hultz

Lisa Hultz

Lisa is the President of Sales & Marketing for Mazon Associates, one of the oldest factoring companies in Dallas, Texas.

Your business is your brainchild, and you need all the funds you can get to be successful. You might have complete faith in your skills and the potential of your business, but how can you convince your bank to give you a small business loan? A majority of small businesses that apply for a loan get rejected and thus have to face the difficulty of acquiring the necessary funds.

In your search for the required funds, you would need to contact financial institutions, big and small. They might be highly recommended, but it’s a fact that small businesses ring warning bells for these institutions. Since loaning to smaller businesses is considered a risky move, these institutions are always hesitant in forwarding the courtesy.

But why do these difficulties arise in the first place? There are a number of reasons why small businesses aren’t able to get their loans approved, and they are given below to help you out.

Invoice Financing vs Bank Financing

Startups

Small business financing doesn’t provide banks the profit they need, and if the business is a startup, there’s always a chance that it won’t even get past the initial stage. Since they are still on the track of establishing a reputation in the industry, they don’t always have a huge equity.

Banks and other business lenders are interested in a business’s past performance. That’s the reason many small businesses, especially startups, aren’t considered as the ideal loan candidate. If you are applying for a loan, it’s important to take a look at your business from the lender’s perspective. They want to make sure your business won’t default on the loans and unfortunately, that’s a guarantee small businesses can’t provide.

Low Credit Score

A strong personal credit score can brush many of your woes away. This is the lifeline of your business and ensures that you always have the option of funds when the need arises. However, if you have low credit scores, you’re likely to find that you are left with a handful of options. Most banks shy away from business owners that have low credit scores. In such a scenario, you’d do better with a business lender who doesn’t have any issue with your low credit scores.

There are many alternative lenders that accept decent credit so that you can have the required funds for business growth. If you have come across this issue, the best option you have here is to go for accounts receivable factoring or a business cash advance.

Insufficient Collateral

It’s understandable that being a small business you don’t have the collateral that banks need, but if economic conditions fall apart, banks and other financial institutions need to make sure that their business is not set to experience loss. In the event that you can’t pay the loan, banks need collateral as assurance. This ensures them that they have an asset that can be used to recover their payment in case your business doesn’t achieve the success you planned for.

In order to get a substantial loan from a bank or any other financial institution, you need to have collateral in receivables, inventory, equipment or real estate. If you can’t provide enough assets that fulfills the requirements of the bank, it’s likely that your loan will be rejected. There are alternative lenders that deal with such businesses, so you might be able to get the required funds after all. If you are looking for a small cash advance or invoice factoring, there’s a chance that they might not need collateral at all.

Excluded Industries

Even when all the factors are in your favor, you might have to face the disappointment of getting your loan rejected. Businesses that have high credit scores, the right assets to put up as collateral and even enough years of experience in the industry are rejected by banks and businesses. This usually happens to businesses that are in certain excluded industries. These businesses types construction contractors, healthcare providers, and franchisees, to name a few.

Conclusion

It might be hard for you to get a bank loan, but it’s important to not lose hope and remember that there are other financial alternatives, such as invoice factoring. Just remember that invoice factoring isn’t a loan. This small business financing solution requires you to sell your invoices at a discount and get a lump sum amount in return.

Mazon Associates is an excellent factoring company that can help you if your loan application is rejected. Mazon can provide you the funds you need for business growth and play a big part in establishing your business, in spite of your financing hurdles.

Invoice financing can help you get necessary operating capital quickly and assist you in dealing with your existing debts. This is the best way to get some fast cash in hand so you can take care of your business expenses. By improving the cash flow, invoice factoring helps you keep your loyal customers without having to compromise on your business operations.

Mazon Associates, Inc. has been providing factoring services for more than 40 years. We’ve helped thousands of clients grow their businesses and achieve their financial goals. We consistently provide a first-class experience in accounts receivable financing. You can depend on Mazon for your cash flow needs.

Call us today at (972) 554-6967!

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