3 REASONS WHY BANKS HAVE LESS FOCUS ON LENDING TO SMALL BUSINESSES WITH BAD CREDIT:
- It costs bank the same to underwrite, book, and monitor a $100,000 small business loan as it does a $10,000,000 large business loan. The economies of scale are simply much better when banks focus on larger transactions.
- Bank loan officers have big loan goals to meet. They don't want to "waste their time" chasing small loans the won't put a dent in their annual production goals.
- Lack of collateral. Due to heightened regulations since the recent economic recession, most banks are required to avoid unsecured lending and most small businesses do not have sufficient collateral to offer.
How can we help?
Alternative lenders are any non-bank lenders. Many of these lenders can be found online. They help fund small businesses that traditional banks will not and they include companies like OnDeck and Kabbage. Thiese companies don't have branches and staff to pay for and they aren't bound by the same strict regulations as banks. The interest cost through these lenders can be reasonable as long as you make on time payments.
We have selected OnDeck and Kabbage as preferred lenders to help our clients that don't qualify under the typical banking models. Our goal is to get your business to a bankable position in the near future. This is merely a short-term strategy.