Obstacles to Small Business Owners in Obtaining Conventional Bank Financing

Obstacles to Small Business Owners in Obtaining Conventional Bank Financing

October 28, 2013: During the month of October, both The Hartford Business Journal and Business New Haven combined to publish three articles that focus on the difficulties that small businesses are experiencing in terms of obtaining conventional bank financing. It is no surprise that these two well known publications who are advocates for Connecticut small businesses have made this issue “front and center” with the banking and finance industries.

In one of the articles, it states that the banks are reaching out to outside professionals including accounting firms to generate potential new commercial loan leads yet the referrals that these outside professionals make to the banks typically do not reap the financing that the small business is seeking. In that same article, it also states that banks are budgeting thousands of dollars for both print ads and highway billboards in which they claim that they are seeking to make loans to small businesses. More often than not; however; small businesses who respond to these advertisements are being rejected for their loan request.

In a separate article in one of the publications, a well known bank consultant who is a personal friend of mine states that the bank regulators have taken the banks to the “woodshed” in terms of their commercial loan underwriting standards. As a result of the tightening of these credit underwriting standards, numerous credit worthy small businesses no longer meet the criteria in obtaining a conventional bank loan and are forced to seek alternative sources of capital to satisfy their working capital needs.

As the bank regulators continue to place undue pressure on all of the banks, this negative trend for small business lending amongst the banks will continue to linger for the next several years.

Lastly; a recent study was conducted by an outside research firm whose sole mission was to determine the average turnaround time that it now takes for a bank to close a commercial loan for a small business versus what it took to close a loan five years ago. The research firm discovered through its study that a commercial loan that took three weeks to close for a small business five years ago, now takes approximately three months to close. What a difference! Which begs the question…..? For the select small businesses that do in fact qualify for bank financing who used to be able to obtain the capital within a few weeks and now cannot obtain the capital for several months….what is the cost in “real dollars” to those businesses for the delay in closing the loan?

My company continues to close commercial loan transactions for those small businesses who are having difficulty obtaining conventional bank financing and we expect to remain a very active advocate and asset for all small businesses for the long term.

WAC specializes in arranging debt financing for both small businesses and real estate developers/investors and also handles bank workouts for those same clients. You can learn more about WAC by taking a look at their website and you tube video at worthavenuecapital.com and by contacting its principal, Michael M. Ciaburri at worthavenuecapital@gmail.com or (203)605-4082. WAC maintains offices in both Guilford and Westport, Connecticut.