Business Loans - 7 Reasons Not To Use A Bank
Below is a MRR and PLR article in category Finance -> subcategory Loans.
Why You Might Reconsider a Bank for Your Business Loan
As a small business owner seeking a loan, you might instinctively consider a traditional bank. However, there are compelling reasons to explore alternatives, even if you qualify for a bank loan. Here's why non-bank funding might be a better fit.
1. High Minimum Loan Amounts
Banks typically set a minimum loan amount of $250,000 for commercial real estate, which can be excessive if you need only $100,000. This can force you to borrow more than necessary. Instead, consider lenders offering lower minimums, often with better terms and service.
2. Commitment Fees
It's common for banks to charge an upfront "commitment fee" just to process your application, treating it as a favor to you. Look for lenders who provide excellent service without these unnecessary fees.
3. Restrictions on Cash Use
Banks often impose strict limitations on how you can use funds from a commercial real estate loan, making them unsuitable if you need cash flexibility. Non-traditional lenders may offer up to $1 million with no such restrictions.
4. Detailed Business Plans Required
Banks demand detailed business plans before approving loans. Creating these can be time-consuming and costly, often adding thousands of dollars to your expenses. Seek lenders who do not require exhaustive business plans.
5. Tax Return Requirements
Banks generally require tax returns, and some even request access to your IRS records via Form 4506. If this is a concern, find lenders who don’t impose these conditions.
6. Cross-Collateralization Demands
Banks often ask for additional personal assets as collateral, even when your business property is sufficient. This can limit your personal financial freedom. Many alternative lenders do not require such cross-collateralization.
7. Income Verification
For those with erratic or difficult-to-document incomes, banks demand stringent income verification, which can be a hurdle. Non-traditional lenders may offer a "Stated Income" approach, bypassing this requirement.
In conclusion, exploring non-bank lending options can provide flexibility, better terms, and a more accommodating process suited to the needs of small businesses.
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