Is It Difficult for Businesses to Secure Funding Nowadays?
At one time, getting a business loan was a straightforward yet often lengthy process. There were no extensive checks, with loans being given out to a wide number of businesses. However, these days securing a business loan has become much more difficult.
While the process of actually getting a loan is much faster, the acceptance rate with traditional lenders is a lot lower. Here, we’ll look at why business loans are much more difficult to get and the options available when traditional lenders turn you down.
Why are loans more difficult to get?
The chance of being accepted for traditional loans has declined massively in recent years. There are a few reasons behind this, including stricter lending requirements.
Banks and other traditional lenders now carry out credit checks and require a minimum a of three years’ worth of accounts. Businesses need to have a very good credit rating in order to be accepted, and even then, they may not get the funding they’ve requested.
The cost of starting up a business has also risen. This means start-ups require more funding to get off the ground than they once did. Traditional lenders are often reluctant to lend higher sums of money to start-ups. The loans smaller businesses are applicable for are also often secured against assets. This means businesses without much in the way of assets don’t always get the funding they require.
Many small businesses delay growth due to funding
Due to the pitfalls of traditional lending, a lot of small businesses are holding back their growth. It’s not just the fear of not getting accepted which is holding them back, it’s the potential issues it may cause with the direction of the business.
There’s a fear that taking on investment from a bank or personal investor, would cause them to lose control over where the business goes. So, many business owners are reluctant to rely on finance. This of course means that they’re unable to grow without additional funding.
The alternative options available
Although getting accepted for traditional funding is more difficult, the good news is there’s lots of alternative options.
As well as non-traditional business loan lenders, there’s also options such as a Merchant cash advance. This allows businesses to secure funding against future sales. Crowdfunding is another popular option, along with short term, unsecured business loans. It’s important for businesses to research the options open to them before choosing the best source of finance to fit their requirements.
While traditional lending has become more difficult for businesses to acquire, there’s plenty of alternative options available. It’s not hard to see why alternative funding has become a more popular option for those seeking finance for their start-up and small business.