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Where To Go For Business Financing When The Bank Says ‘No’

So, you are an entrepreneur and you are planning on creating a company that will revolutionize the nation. However, in this nation, everything requires cash; money, currency, financing. Money is as important as the plan you developed to make your idea successful; startup costs have certainly stopped job creators dead in their tracks before. Furthermore, with banks being the major way to fund these types of ventures, many entrepreneurs find themselves with not only an empty wallet, but also a small business ball-and-chained to debt.

A study by the Federal Reserve Bank of New York found 90% of small businesses have had their loan request rejected by their bank in the past year. This is extraordinary and alarming; given the role small businesses play in the national economy. That being said, where does a small business owner go for financing when the bank says no? A highly regarded institution known as the U.S. Small Business Administration or SBA may be just one of the answers.

Business Financing Option 1 – The Small Business Administration

This agency will do more than have you fill out an application that is later stamped yes or no. The SBA offers resources, advice, mentoring, and even financing capabilities that will help the most experienced or novice entrepreneur. Even though its paperwork and process may compare to what one may experience at a bank, including an application, business plan, demonstration of cash flow, credit check, and character evaluation, after sixty to ninety days, many small business owners find themselves coming to this organization as a final option.

Business Financing Option 2 – The People Closest To You

Now, what if you decide against diving into that? Where else could you go? Perhaps your family or friends can help you. Now, what is important to remember when going this route is where it could possibly end. While some small businesses do manage to experience success, many do not, and it is where the company or idea fails, that the relationship with your boy or girlfriend, spouse, or family member can fail.

Business Financing Option 3 – Putting Your Home On The Line

Another possible resource is through your home via home equity, or a small business owner putting their home up for collateral. A loan can certainly be achieved in this manner, but owners often ignore the risk that comes with loan procurement. If a home is purchased for $250,000 five years ago, and the current listing price is valued at $350,000, that extra is the home equity. Homeowners cannot necessarily spend that extra, but they can secure a loan of the same sum against the equity. However, a drawback to this option is the interest rate that forces you to pay more and deal with the refinancing difficulties.

Business Financing Option 4 – High-Interest Credit Cards

A popular way of receiving financing, and not just for businesses, is by applying for a credit card. The offer of cash advances is more than enough to make anyone beckon to get their hands on that tiny piece of plastic. Keeping in mind that credit card interest rates are just as violent as loan interest rates, many entrepreneurs find themselves struggling, such as James and Heather Hills. “Even though we pay quite a bit, they keep raising the interest rates, which makes it even harder to pay off,” James Hills told Bloomberg Businessweek. “Virtually tripling the interest rate from the starting rate to now, that’s just amazing that they’re able to do that.”

Business Financing Option 5 – Private Investors

Investors are also a way of getting money for an entrepreneur’s startup costs. Of the two most notable kinds of investors, venture capitalists and angel investors, the former presents a potential danger to small business owners. If venture capitalists do not like the direction of the business or the way it is performing, they can make changes as they see fit. Or they will take a royalty, which takes working capital out of the company right off the top. Business owners should keep their eyes on angel investors; such investors may offer up big chunks of cash.

Business Financing Option 6 – Non-Bank Lenders, Such As ICA

Finally, alternative commercial lenders can provide you with the financing needed to start up your company. ICA has over 50 business lenders within our network. These are non-bank lenders who are willing to overlook certain issues as long as they can be documented properly. As long as we see the problems you have can be overcome, or are in the past, we may be able to help you.

If you have a story to tell, let’s hear it and see if we have options. With over 40 years of underwriting experience, you would be surprised of some of the deals we have successfully put together.


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Learn more about our various Business Loans Options When The Bank Says No.