Small business owners often struggle to obtain business financing. This is not unusual. It is difficult to get a loan for small businesses such as restaurants, shops, garages, and so forth.
However, this does not mean that obtaining a loan for a business is impossible. The location where the loan is sought depends on who you go to. Business owners typically have two options: they can approach their local banks or go to a private lender or funder.
Small business loans and banks
Small business loan applications are viewed by banks from their point of view. Their criteria determine their perspective. There are many criteria that can be used to determine the eligibility of small business loans. They are both non-flexible and stringent.
Banks require credit scores of 700 or more. A bank will reject a business’ application for a loan if they have poor credit. Banks and credit scores are not acceptable for business funding.
However, this does not mean that banks do not follow other criteria. Banks take these as seriously as any other criteria. These criteria have been developed over time based on mutual experience and are universal.
Banks aren’t keen to fund small business loans, as it is well-known. There are many reasons why this is so. One of them is because small businesses are seen as high-risk investments from banks’ perspectives and experiences.
Small business loans and private funders
Private lenders offer a completely different experience than a bank for business owners. Private lenders use a different set of criteria to approve cash advances for business owners.
Private lenders offer MCA (Merchant cash Advances) and the criteria is very simple. MCA loans are unsecured loans that do not require credit score requirements. This makes it easy to get this type of funding.
Many small business owners do not view MCAs as friendly. They have their reasons. MCAs have higher interest rates than traditional bank loans and business owners prefer low rates.
MCAs are not meant to compete with banks financing. They operate in very different areas. They both finance businesses. However, the process, features, and other details of funding are entirely different.
The question of how to get small-business loans is not answered by an MCA loan. Private lenders are rarely able to turn down small businesses. Most businesses get the financing they need to grow their business.
MCA loans V/S Bank loans
High interest rates are often associated with merchant cash advances, or MCA for short. These are short term unsecured loans that have interest rates much higher than the bank offers.
Many businesses are not eligible for traditional bank loans, no matter how urgently they need or desire it. Applications will be denied if the applicants have poor credit ratings or are unable provide collateral. Banks can decline small business loan applications for a variety of reasons. Banks are not required to fund applicants who choose not to. Many small businesses are left with no other options.