Small Business Loans Made Easy

Small businesses are having a hard time obtaining loans from banks. Banks have implemented a strict lending policy to mitigate risks. The result is that they finance well-established companies that don’t necessarily require the financial assistance and deny lending to small firms who have a critical need for a loan.

Here are some of the reasons why obtaining a bank loan is difficult for a small business:

Going Bust

The high failure rate is one of the main reasons why small businesses are seen as high risk customers. According to the SBA report, about half of small businesses fail in the first 5 years. This is why banks are eager to lend only to the big firms that have been established for a relatively long time.

Many of these businesses shut down because of an unavailability of financing.

But that’s just the start. Small businesses that do succeed usually don’t break even until two to three years have elapsed.

This is where the difficulty lies: small businesses are in dire need of a loan in the first two to three years but banks won’t be impressed with the fact that they can’t reach break even. That means no loans.

Economic Woes

Economic uncertainty also plays a major role in a bank’s lending policy. But the irony is that during tough economic times, small businesses have a greater need for a loan. Unfortunately, economic uncertainty is the very reason why banks want to curtail giving loans because in these hard times, banks are less likely to recover the loan.

The 4 C’s

It is also important to understand the 4 C’s of credit to better understand the reservations that banks have about giving loans to small businesses:

• Capital

More capital means brighter chances for a bank to recover the loan in case of a default on loan payment. And since small businesses have less capital, banks will hesitate to offer them loans.

• Collateral

This is the property that must be pledged to the bank as a security for the loan payment. Since small businesses have less property, banks are unwilling to grant them loans. Quite often, small business owners must pledge their personal property as collateral for the loan.

• Capacity

This means a proven record that the business has enough cash flow to pay back the loan. This, unfortunately, is a catch-22 situation because restricted cash flow is the very reason why many small businesses ask for a loan in the first place.

• Credit Rating

This is based on the credit history of the business. Even if the credit rating is good, the time period for which this credit rating has been maintained should be long enough so that financiers can be certain about the customer’s credit worthiness over the long term. This is a problem for most small businesses since they are relatively new.

As you can clearly see, and as many business owners will concur, getting a bank loan is an uphill task for small businesses.

However, all is not lost because KLB Business Funding offers SBA loans that have the lowest interest rates, the highest loan amount and the longest terms for repayment.

Contact us today.

Post:               3702 Pratt Avenue Bronx NY 10466

Telephone:    (347) 755-2257

Email:            info@klbbusinessfunding.com