Why Most Small Businesses Do Not Get Bank Loans
1. Banks Are Asset Lenders:
Banks primarily make loans against hard assets which are pledged as collateral. (i.e. buildings, property, CD's, homes.) Most small businesses and their owners do not own enough equity in their assets to justify a bank loan.
2. Banks Want A Guarantor(s):
Banks often require additional people to guarantee the repayment of the loan. The majority of small business owners come from modest backgrounds without rich relatives and friends that are able and willing to guarantee their loan.
3. Banks Lend Money To Older Successful Businesses
Getting a business loan requires that you have a profitable track record of at least 2 or 3 years. This record must be documented on tax returns and financial statements (both business and personal) which are thoroughly scrutinized.
4. Banks Require Stellar Credit Ratings
Owners and businesses who do not have strong credit scores do not get business loans. Slow pays, NSF, and high debt to income ratios are disqualifiers (not to mention being turned into collection, write offs, tax liens, judgments and prior bankruptcies).
ACD Financial Services (www.acdfinancial.com) understands that small businesses need financing even when they don't meet bank criteria. ACD Financial Services specializes in providing innovative financing solutions.
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