WHY BANKS SHUN SMALL BUSINESSES?

Why banks shun small businesses today?

It’s a natural fact that banks are in business to make money. They use their customers’ money and distribute it across the globe (invest it ), to make a huge profit. Click here.

Now, banks concentrate their services on credit cards, mortgages, home loans, refinance loans and business loans.

Banks will loan out money to businesses such as major corporations (IBM, Walmart, etc.), but when to a small “mom & pop store, banks tend to throw up the red flag Learn more

The reason why banks shun small businesses is that :

• little time in business
• poor or no credit
• little or no collateral

Banks do approve about 20% businesses loans to small businesses under strict guidelines.

It’s sad to say that most small businesses are left to suffer from the banks especially, if they have no massive savings, poor credit, no strong collateral.

But let me make this clear, there are some banks who are willing to take on some risk from a small business. Only if the bank in itself is doing well.

Please remember: that the bank is in business to make a profit. It’s a business too!

To be in business (especially a small business), you’re putting your best forward. Your out there making a name for yourself /family to make your brand familiar to the marketplace

Everyday, in working your small business is a great adventure. You’re taking on a new responsibility.

One of the most important tools you must utilize perfectly is “your cashflow”. Click here

Cashflow is king to any business. With a small business, the owner must pay very close attention to money that comes in and goes out.

According to an article in americanexpress.com in Aug. 3, 2021 “why is cashflow important to a business”, it stated that Around 60% of small business owners say that cash flow has been a problem for their business and with 89% of them saying these problems have had a negative impact on their business.

Now, I can see why some or most traditional banks tend to shun small businesses from lending out working capital.

When a small business owner is in need of business funding at a particular moment and time, who can he or she rely on?

If the well has dried up in his or her savings. If family and friends are struggling to make to make ends meet. He or she decide to go to their local bank because they know that’s what banks do is lend money.

The small business owner goes in their local bank, apply for working capital. Do you know that it can take between 30 days to 6 months to get a response from their local bank? Read this

Mind you my readers, this small business owner is in desperate need for business capital. Lets check out this scenario:

The small business owner has a beautiful pizza parlor that seats about 30 customers. (That pizza looks good)

Any who, the owner has 3 pizza stoves. For some odd reason, not 1, but 2 of the 3 pizza stoves broke down. Stop working.

Now, this sets off an alarm in the owner’s life and business. The owner has little cash on hand but not enough to cover the damage pizza stoves.

My readers, I don’t know if you’re thinking what I’m thinking, but it appears to me that this small business owner can’t afford to wait for a response from the local bank that may take 30 days to 6 months.

He or she will be out of business

They need business capital right NOW! Click here

Another reason banks shun small business is they don’t have enough time developed. Their roots are not planted in the soil (marketplace) as of yet. It hasn’t become a household name.

A small business has to go through a lot of red tape with traditional banks. Learn more.

There are many small businesses in the United States of America who are facing lack of capital issues and can’t depend on their traditional banks to rescue them.

When banks say no-we say yes!

So, what are they to do? Many small business owner don’t know where to turn. They have heard of S.B.A.(small business administration).

Maybe credit unions. That might be helpful. Learn more

There are M.C.A. (merchant cash advance) for small businesses. Interest rates on these advances maybe a little higher than banks. Learn more.

Don’t get me wrong readers and small business owners, bank are good with their interest rates and pretty flexible with payback terms. The banks have their perks. So if you can apply, get accepted and find the terms favorable, go for it!

What if you as a small business owner was rejected by your traditional bank and you need 50k right away and you knew a company that can hand you with that business loan in 2 days but terms were not favorable like your traditional bank? Would you take it?

Think about it before you answer. Let me tell you this last situation before I close.

Awhile ago, this real nice small business owner had a popular restaurant in her town. She had so many customers coming in that it was hard to seat them. So, she had to turn them away. Sad, but true.

Any who, she decide to increase her restaurant by adding a deck. It will cost her 50k to get it done.

She went to her local bank ( the people in the bank knew her well) and the bank shun her loan application.

She went to two more banks and the banks rejected her just the same as the first. She didn’t know what to do next.

A friend of hers referred her to a company that does “alternative financing for small business owners.

She calls the company up. She was approved for the 50k funding, but the representative told here that her payback will be expensive. Like 75k she had to pay back.

The owner of the restaurant said “I’ll take it”! She added, “each moment that go past, I’m losing customers”. Three banks turned me down and this one time fee is all I need to move my business in a very profitable position. Click here

She said that every seat in her restaurant is worth up to 20k a year.

Well, she got her deck built. Pay off her business working capital and now her small business is doing excellent.

So this is what I like to end this blog post with:

1. Follow your heart. It won’t lie to you
2. Take calculating risk.
3. Get to know how banks work. They have a system
4. Pay extra attention to your cashflow.
5. Lastly, boost your credit score. It can you when needed

Thank you so much for your time,

Derrick M.

Your business funding specialist