When the American economy entered a period of recession in the late 2000s many people felt the financial squeeze.
Not only did people lose their homes, jobs, and retirement funds as a result of The Great Recession (the largest economic downturn in America since the Great Depression), those who had entertained entrepreneurial dreams up until that point suddenly found themselves severely lacking in small business lending options.
Although it’s been nearly a decade since the lowest point of the Great Recession, the small to medium sized business sector is still feeling the pinch. Banks remain reticent to provide commercial loans to these companies, and the result is large numbers of promising endeavors that find themselves without the financing it takes to grow and expand their market share.
Why Do Companies Need Small Business Lending?
Small to medium-sized businesses are typically looking for lending options for one of the following three reasons:
- Start Up Expenses – Starting a new business, or moving a formerly home-based business into the brick and mortar world, requires capital. Entrepreneurs need financing to pay for their premises, purchase new equipment, obtain furnishings for an office, or to market their new good or service to the world.
- Operational Expenses – Getting the doors open is just the first challenge for a new business. Once start-up costs are covered, more need for financing arises. Operational costs include covering payroll, paying vendor invoices, and covering costs like rent and utilities. Depending on the type of business, fluctuating cash flow issues could lead to a lack of working capital to meet these operational needs.
- Growth Expenses – Becoming a well-established business doesn’t mean the need for small business lending goes away. Successful entrepreneurs quickly turn their thoughts to expansion, whether it’s a bigger office, a second location, a new website, or adding additional staff members. Without access to adequate working capital it can be hard to grow fast enough to meet demand.
Why Business Are Rejected For Small Business Loans?
In addition to the after-effects of the Recession, small business loan applications are routinely rejected for the following reasons:
- Bad Credit or No Credit
- Lack of Collateral
- Weak Cash Flow
- Lack of Preparation
- Low Dollar Amount Loans
- Risk-Averse Banks
The Commercial Finance Group Is Your Small Business Loan Alternative
We understand the needs of small and medium-sized business owners. That’s why we offer unique options to help companies create their own working capital. Contact us to learn more about our asset-based loans, factoring, receivables financing and more.
