Many small business owners have a hard time getting money for their businesses, which isn't unusual. It's not as easy to get a business loan from the bank for small businesses like stores, restaurants, and garages.
This doesn't mean that getting a business loan is impossible. It all comes down to where one looks for a loan. Approaching your local bank and going to a private funder or lender are the two most common ways for businesses to get money.
A small business loan from a bank
Banks look at applications for small business loans from their point of view, and their criteria help them figure out what they think. But unfortunately, when we talk about criteria, there are a lot of them, and they are all rigid and non-flexible.
Banks usually look for high credit scores, like 700 or more, to open a new account. If a business is applying for a loan from a bank and doesn't have good credit, the bank will not give it the money. People who have bad credit can't get business loans from a bank. This is because banks and credit scores don't work well together:
This doesn't mean that banks don't follow many other rules and take them just as seriously. Because banks have been around for a long time, they have developed a set of rules that they follow. These rules are the same for all banks.
As most people know, banks aren't very interested in financing small business loans. They say there are many reasons why this is the case, but one of the main ones is that the bank sees small businesses as risky investments.
Small business loans and private funds
Things are very different with a private lender from when a business owner goes to a bank. Private lenders have a completely different set of rules for giving out cash advances to business owners.
As private lenders mostly give out MCAs (Merchant Cash Advances), these rules are easy to follow. MCA loans are also unsecured, so they don't need high scores to get one, and they don't require a lot of money. As a result, it's easy to get this kind of money.
On the other hand, small business owners don't always see MCAs as friendly. They have a good reason for this. First, the interest rates are higher than with traditional bank loans, and most business owners want low-interest rates, so this is not good for them.
However, the point of MCAs isn't to compete with bank financing because they're both in very different fields of work. As long as they are financings for businesses, they are very different from each other. The process, requirements, features, and other things about the funding are all very different.
With an MCA loan, how to get small business loans doesn't matter. Private lenders don't give money to small businesses a few times because they don't want them. As a result, most businesses get the money they need to run their business.
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