While loan approvals for small businesses eclipsed record highs in years past, many entrepreneurs may find it difficult to get their hands on the money they need to launch their ventures. A variety of factors weigh into your lendability including credit, the viability of your business and external forces.
With that in mind, how hard is it to get a small business loan for the average borrower?
While there’s no definitive answer to that question, below, we share some factors that can have an impact on your ability to borrow.
The Economy Matters
Lenders don’t have an official set of rules that they must abide by when considering a loan. There are certain guidelines but loan officers can exercise flexibility around requirements on a case by case basis.
One of the biggest factors that impact flexibility is the economy. If businesses are booming in today’s market, lenders will be more bullish about lending. If consumer behaviors are slowing, you can expect more rigidity when it comes to business loan approvals.
A Solid Business Plan Helps
When taking out a personal loan, your credit and income will be the two primary factors lenders will look at when considering your application. With business loans, in addition to your credit and financial situation, your business plan will be something lenders will take into consideration.
If you don’t have a business plan and want to borrow money from a bank, do yourself a favor and get one made. Having a solid plan in place can lead to a more favorable answer to how hard is it to get a small business loan question.
Collateral Can Be a Game Changer
Nothing greases the wheels when it comes to getting a business loan quite like having collateral to offer. Why? Because if you default on your loan, your lender has a guarantee that they can recoup their losses via claiming your property.
If your business deals with commercial equipment, using property like trucks or other machinery as collateral can help you secure funding. Even collateral as niche as stock certificates may be able to strengthen your application.
Alternate Sources of Funding Are Worth Exploring
Borrowing from banks to fund businesses used to be a necessity. Today, that’s far from true.
Modern entrepreneurs seek funding from a bevy of sources including credit unions, crowdfunding websites and charity-focused-micro-lending institutions (Kiva for example). So, if you’re having trouble getting your business loan approved at a bank, don’t give up and do get creative!
How Hard Is It to Get a Small Business Loan? Only You Can Know for Sure!
As we mentioned, it’s difficult to come up with a universal answer to how hard is it to get a small business loan question. Depending on how well your ask/company aligns with the factors we’ve outlined above, you may find that it’s hard or easy to secure funding.
Our hope for you is that no matter what your business aspirations are, you’re able to come into the money you need to see your ideas through to fruition. If you need more help to that end, consider browsing additional content in our blog.