Does the following scenario sound familiar to you? You’ve gone to great lengths to start your business. It’s taken a lot of time, effort, energy and money, but you’ve finally pulled it off. Your long-time dream is now a reality! The next step is to secure some extra working capital to get your new venture off the ground.
The problem, however, is that your long-time bank doesn’t support your long-time dream. As far it is concerned, your business is “too new” to trust. As a result, you don’t get approved for a small business loan and you’re stuck wondering how exactly you’re going to advertise your new brand.
Banks require businesses to have some experience.
A bank loan officer needs to assure his/her institution that a borrower is capable of paying the money back. What history does your business have of generating strong revenue? How does it perform on a monthly basis sales-wise? Without being able to have these questions answered, a loan officer isn’t likely to approve a loan application. According to Annabelle Amery on Become.co, lenders usually look for a company to have a bare minimum of six months in business.
“The lenders heavily rely on bank statements, something a very new business will have few of leaving them with scraps of financial data that aren’t nearly enough evidence to prove their ‘financial-worthiness’,” she writes, “Once a lender has your financial data in hand, they’ll draw their attention to the last three-six months of bank statements, studying the stability of the business in terms of the monthly income and a positive bank balance.”
Banks consider start-ups to have credit histories that are too “thin”.
A bank loan officer also needs to see that you have a history of being able to make payments on time. A good credit history is vital in the loan application game. Without one, an applicant is likely to be denied. A brand new business has no credit history to speak of. Therefore, a loan officer will not approve a loan application based on the company’s credit profile being too “thin”.
“When a lender looks at your business as a potential borrower, they’re trying to predict what the business will do in the future based upon what it has done in the past,” explains Ty Kiisel on OnDeck.com, “If your business has a positive track record of borrowing, making regular payments, and repaying debt in a timely manner, then past credit behaviour tells a lender your business may be a better risk than an entity with a very short history or that is always late making payments.”
What is the best business funding alternative to a traditional bank loan?
Synergy Merchants’ unique merchant cash advance program enables all types of business owners to get their hands on much-needed extra working capital. Regardless of your credit history or length of time in business, you can be approved in less than 24 hours! For more information, please don’t hesitate to call us at 1-877-718-2026 or email us at email@example.com. You can also apply online for a free, no obligation quote!