How to Get Small Business Loans When Disapproved by the SBA Program
May 5, 2010scfm 9 Comments »
Many small business owners have been disappointed when their applications for small business loans were disapproved by banks under the Small Business Administration’s program for America’s Recovery Capital. According to an article written by Robb Mandelbaum in the August 12, 2009 edition of The New York Times Online, “the program is off to a slow start.” It seems that most banks are reluctant to approve applications for small business loans.
Mandelbaum reports that the Small Business Administration’s program has $255 million to give away, enough to give small businesses 10,000 loans reaching as much as $35,000 each. However, two months after the program was launched, there have only been 1,127 small business loans released, with a total of $36.8 million.
Sources are saying that banks are not very keen on participating in the Small Business Administration’s program because giving the small business loans would not be very profitable for them. Paul Merski,.chief economist of the trade association Independent Community Bankers of America, said, “There’s not a lot of profit motive in a $35,000 loan stretched over six years.” Bob Seiwert from the Center for Commercial Lending and Business Banking at the American Bankers Association reveals that, because of strict underwriting standards, servicing the small business loans becomes even more expensive.
The banks have also found more ways to restrict the approval of small business loans with the Congressional restrictions on loan eligibility. According to Congress, in order to qualify for the Small Business Administration loans, small businesses need to be both struggling and viable. That means the business should have had an “immediate financial hardship” such as a 20 percent decrease in revenue. However, the business must also be at least two years old with proof of positive cash flow in one of the previous two years. It should also submit a two year cash-flow projection proving that it will be able to afford loan payments.
Because of the Congressional restrictions, banks are more likely to approve small business loans from their existing clients. Merski said, “From a financial perspective, it really is a loan that makes sense for an existing customer. You’re not going to have to put out a lot of resources to do a very costly underwriting. You know the business.”
Those who are working in support of small businesses are very much disillusioned. An example is Alex Cooper who is a counselor at the Pima Community College Small Business Development Center in Tucson. He said he had assisted almost 30 small business owners with their loan applications but none of them had been approved. “It’s a disappointment. I thought the banks would be more interested in the community and try to help small businesses,” he said.
When the applications for small business loans are disapproved by banks under the Small Business Administration’s program for America’s Recovery Capital, small business owners still have another option. They can get the equivalent of small business loans from their credit card services.
Credit card services provide their clients with the ability to accept payments through credit cards or debit cards in person, online or through the phone. Clients who have established a certain minimum in average monthly credit card sales are qualified to apply for cash advances that are like small business loans. Payments are automatically deducted from future credit card sales.
If you are a small business owner, you do not have to go through the hassles of applying for small business loans with banks who are reluctant to participate in the Small Business Administration program. Get your trouble free small business loans from your credit card services instead.
Tags: Business Loans, business management, credit card services, home business, Small Business Loans
Posted on May 5th, 2010 at 3:48 am
Talk to the bank. You have to have a pretty good business plan describing how you'll make money and who is going to buy your product or service. Know how much money you'll need and what you'll spend it on. The more you know about you're business and the more you can convince the bank that it will be profitable, the more likely they'll be to give you lots of money.
Posted on May 5th, 2010 at 3:57 am
Try this site:
http://www.gobignetwork.com/
They may be able to get you an investor.
Good luck, I hope this helps!
Posted on May 5th, 2010 at 4:49 am
i would split the differance — pay 10k toward the cc debt and retain the 5k in savings!!!
Posted on May 5th, 2010 at 6:28 am
Just curious, what kind of business do you plan on opening? Because I'm the same age and looking to open my own business as well, but not sure what I want to do. Thanks.
Posted on May 6th, 2010 at 1:23 pm
Those companies don't need outside marketers like you to sell their services. Find much smaller businesses to market to, the ones that don't already spend millions on their own advertising.
Posted on May 8th, 2010 at 3:11 am
The truth is that it is difficult for a startup business to borrow money as a small business loan — especially without assets and without experience in the business.
However, if you're applying for a loan and if it is a big amount, banks and even the Small Business Administration may consider the following factors:
- A business plan explaining what the business is
- Your background and experience in the business — in my experience, this is KEY in the eyes of the bank because they want to make sure that you know what you are doing and that you can make the business work. If you don't have any experience with the business, have someone on board that knows the business to give banks assurance that someone will guide you
- Your credit factors because it shows your dependability and how well you handle credit. They will do a credit check on you and poor credit history may be frowned upon, or even reason for the disapproval of your loan application
- Your collateral. Banks, even SBA guaranteed loans, want the borrower to show collateral. They want to be guaranteed that somewhere somehow they can get payment from you
- Condition or terms of loans. Banks would want to know three important things: "How much money are you requesting? What will it be used for? and For how long will it be needed?" Banks oftentimes prefer to approve loans for items that can be identified, has lasting value, and can be repossessed and sold if things fail.
You have a very tight situation when you only have very little money and no assets. However, I suggest you talk to your local Small Business Development Center. They may be able to give you lists of banks and financial institutions in your area who may be able to give you a loan — even if it's not a full amount. Who knows, one of the smaller local banks would be willing to take a risk on you.
Here is an interactive map of Colorado — click on your location to find the nearest SBDC http://www.advancecolorado.com/small-business/sbdc-map.cfm and ask for their help on how you can get the financing you need
Posted on May 8th, 2010 at 6:36 am
creditreport.imess.net – try this service to boost you credit score before getting loan. After credit repair you can get the loan with minimal interest rate.
Posted on May 8th, 2010 at 8:24 am
Usually bankers are the same and you can't get a loan if you have a bad or no credit score. however, if you provide the banker with a complete business plan and projected Income then they may look into it.
The other option is to get a government loan which is more preferable as it has low interest rate.try http://www.business.gov
The last option is to seek private loans which is easy but usually the lender asks high interest rate or even wants to be a partner in the business.
I hope this helps and wish you a good luck.
Posted on May 8th, 2010 at 12:39 pm
As soon as I get the $50,000 from Mr. Sanjae Gubageghandor in Nigeria as payment for the money I loaned him to get the former Nigerian President's millions of dollars out of storage, I will send the money to you as a gift… just keep it… I have tons more where it came from.