It can feel like a battle talking about banks and small business loans, especially for startup businesses. But it’s not just bad luck; there are clear reasons why banks often say no to your loan application. In this post, we’ll dive into the common reasons behind these rejections and what you can do to turn that “no” into a “yes” using alternative financing.

Banks and Small Business Loans

Banks are known for their conservative lending practices, and this affects small businesses that don’t fit the traditional mold. Common reasons why banks reject loan applications include:

1. Lack of Collateral
   Banks often require significant assets as collateral for loans. Small businesses may not have the required assets, which makes them less attractive to traditional lenders.

2. Low Credit Score
   Banks typically rely on credit scores to evaluate your business’s risk level. If your score falls below their threshold, securing a loan becomes much more difficult.

3. Short Business History
   Banks prefer lending to businesses with a proven track record. If your business is relatively new, they may see you as too risky.

4. High Debt-to-Income Ratio
   A high debt load can signal to banks that your business may already be financially strained. Even with steady revenue, this can make it hard to qualify for additional loans.

What You Can Do About It

Just because you’ve been turned down by a bank doesn’t mean your business can’t secure the funding it needs. Here are some practical alternatives:

1. Merchant Cash Advances (MCA)
   With an MCA, you can receive a lump sum upfront based on future sales. It’s quicker to secure than a traditional loan and doesn’t require assets as collateral.

2. Invoice Financing
   If you have outstanding invoices, you can leverage them for immediate funding. Invoice financing can be a great way to access capital without waiting on customer payments.

3. Crowdfunding
   For businesses with a strong community following, crowdfunding can be an effective way to raise funds without traditional lenders.

4. Alternative Lenders like Even Funding
   Even Funding specializes in providing tailored financing solutions for small businesses, especially those struggling to secure loans through traditional channels. We understand that every business is unique, and we work with you to find the right solution.

Conclusion

While it can be frustrating with banks and small business loans, the truth is that there are many other funding options available. Alternative financing, like Merchant Cash Advances and invoice financing, can be a great fit for businesses facing challenges. At Even Funding, we’re here to help you navigate your funding options and secure the capital you need to grow.