Lately, there have been many articles written about how it has become more difficult for small businesses to obtain commercial loans and how banks simply are not lending. Nothing could be further from the truth.
Yes, it is true that some business owners are having a difficult time obtaining loans. But it is also true that right now there are more banks participating in the Small Business Administration’s loan programs than ever before. The biggest difference between perception and reality is a change in how banks are making decisions – a process we should all get used to as the new normal.
The new normal in business lending is nothing more than common sense. Just like individuals with low credit scores, mountains of debt, and low-paying jobs should never have been given the large mortgages they were able to receive before the housing bubble burst, business owners with poor credit scores and no business history should not receive large loans they may not be able to repay. Although it would be much easier for a startup business to get its feet off the ground with a bank loan, prior to just a few years ago, that was not the way it was done. Traditionally, startups have been financed through the owner’s savings or venture capital. Bank loans came later. This makes sense. After all, if you are not willing to risk your money on your business, why should the bank?
There are many banks, both small and large, that are making loans. Yes, they can afford to be more selective about the businesses they choose to finance. This simply means that if you want a commercial loan, you need to present a well-run business to the bank. You need to demonstrate a level of expertise in your business and show your banker that your business has potential. This is something I discussed in an interview with SCORE Chicago. You can watch the video
here.
Banks understand that helping small businesses succeed helps everyone. We are here for you. But business owners need to do their part too.