How Private Lenders Are Saving Small Businesses

February 11, 2015: Whether you wan to start your own business or expand your already successful one, you are going to need capital. Like most business owners, you may turn to your favorite bank for small business financing. But after days of gathering documents and filling out forms and months of waiting, you get denied. You are not alone: This is a very common occurrence in today’s economy.

The Problem: Small Businesses Can’t Get Bank Financing

Why is it so hard to get bank financing? After the recession, banks are extremely cautious about who they loan money to. Their purse strings are pulled tight and it’s very hard to get them open. That’s the short of it, but here’s a more detailed explanation:

• The banks’ actions are under constant scrutiny—they are expected to follow the regulations provided to them from several government organizations. From the FDIC to the OCC to the Federal Reserve, banks have to make a lot of people happy, and finding small business owners that meet each of these individual requirements is very difficult.
• Even though larger banks seemingly have greater resources to fund small business loans, they still have to deny 80% of small businesses because they don’t meet all business loan requirements set forth by the government agencies funding the loans.
• While it might seem like the economy is recovering, the regulations put on banks are only getting more rigid. This is forcing many smaller community banks to sell to the larger players in the marketplace.
• Banks are not given a choice. The requirements are black and white and a small business either meets them or doesn’t. No exceptions.

The Solution: Private Lenders Are Taking the Reigns

Just because banks are making it almost impossible for small businesses to get loans, that doesn’t mean these entrepreneurs don’t need money. So private lenders are stepping in to save the day. Here are the facts:

• The number of small business owners needing capital is not decreasing, even though the number of rejections is increasing. This demand is growing the private lending sector like never before.
• Even though the costs associated with private lending is usually higher than the government-backed banks, their funding options are still very appealing due to their quick turnaround times and more lenient requirements.
• As a result of the growing demand, more online non-bank lenders are surfacing, like Lending Club, On Desk, LendUp, and more. While these are one option available to small business owners, their processes are all computer driven, meaning no exceptions can be made for a rejection and the experience is extremely impersonal.

So what is the best option for today’s entrepreneur? Unless they can meet the demanding guidelines for a bank loan, their best bet is to seek out a local private lender who has their best interest in mind. For Connecticut residents, this is Worth Avenue Capital. We promise to always be friendly and efficient, while doing our best to get you the money you need to succeed.