You're in need of financing and you're considering a bank loan. You might not realize what bank loans entail, though. These loans are much more involved than many business owners realize, which is why lots of people choose nontraditional financing.
Minimum Loan Amounts
First, banks often make small business owners borrow large amounts of money. If you just need a few thousand dollars, banks won't help. You might have to borrow as much as $50,000 from a bank to even be considered. If you aren't ready to take on that type of commitment, a bank loan isn't right for you.
Credit Score Requirements
In a perfect world, everyone would have perfect credit scores. Unfortunately, life often gets in the way of that. You're not going to qualify for a bank loan unless you have a strong credit score, and the stronger, the better. Also, the higher your credit score is, the lower your interest payment will be.
Long Wait Times
Small business owners often need money quickly, which can be a serious problem for people who seek financing from banks. You can expect to wait one to two months to get your funds if you apply for financing from a bank. If you can't wait that long, a small business loan through a bank isn't a good option.
The idea of putting up collateral is a scary thought for a lot of business owners, but banks often require it. You might have to put up your business or your home. Then, if your business fails, you could lose everything. That is a bitter pill to swallow and something you can avoid by seeking another type of financing.
Most small business owners find that bank loans aren’t the right option. Instead, they go with nontraditional financing, such as factoring. It is easier to get the money, and it's easier to pay it back.