Being Turned Down by Traditional or Conventional loans Doesn't Affect Alternative Business Start Up or Business Debt Financing Options

When most business owners or new entrepreneurs consider applying for a business loan, they head for their local bank.  Many factors determine whether or not they are approved for the loan.  In many cases, because traditional banks rely on the owner’s personal credit to guarantee the loan, the entrepreneur’s credit score is affected and in some cases, made worse.  In other cases, the owner/entrepreneur doesn’t have any collateral to secure the loan with, nor any capital for the sometimes necessary 10-20%.  In both scenarios, unless applied for using the business’ Federal Tax-ID, the loans are acquired under the owner’s personal credit as well as the business’.  Because most banks have similar lending criteria, someone who seeks a loan from several banks will most likely be denied credit at every attempt.

Because of this, a common reaction to alternative financing is the fear of being denied as well.  The difference between conventional loans and alternative business financing is that in most cases, alternative financing isn’t determined by the owner’s personal credit, physical assets, nor collateral.  Most importantly, the owner’s personal credit is not necessary for consideration. 

In most cases, the merits of the business, its strength in its field, past success, and financial plan are of the most important criteria for loan approval.  Alternative lenders assume a certain level of risk and therefore charge a higher interest rate and are more aggressive in collecting on their investment than traditional banks/financial institutions.  For business owners who have a solid business plan, and/or solid company performance, alternative financing can be the answer. For more information about using alternative financing for start up business financing or business debt financing, please contact us.