How to Get Small Business Loans When Disapproved by the SBA Program
November 29th, 2009 | 
Author: Many small business owners have been disappointed when their applications for small business loans were disapproved by banks under the Small Business Administration’s program for America’s Recovery Capital. According to an article written by Robb Mandelbaum in the August 12, 2009 edition of The New York Times Online, “the program is off to a slow start.” It seems that most banks are reluctant to approve applications for small business loans.
Mandelbaum reports that the Small Business Administration’s program has $255 million to give away, enough to give small businesses 10,000 loans reaching as much as $35,000 each. However, two months after the program was launched, there have only been 1,127 small business loans released, with a total of $36.8 million.
Sources are saying that banks are not very keen on participating in the Small Business Administration’s program because giving the small business loans would not be very profitable for them. Paul Merski,.chief economist of the trade association Independent Community Bankers of America, said, “There’s not a lot of profit motive in a $35,000 loan stretched over six years.” Bob Seiwert from the Center for Commercial Lending and Business Banking at the American Bankers Association reveals that, because of strict underwriting standards, servicing the small business loans becomes even more expensive.
The banks have also found more ways to restrict the approval of small business loans with the Congressional restrictions on loan eligibility. According to Congress, in order to qualify for the Small Business Administration loans, small businesses need to be both struggling and viable. That means the business should have had an “immediate financial hardship” such as a 20 percent decrease in revenue. However, the business must also be at least two years old with proof of positive cash flow in one of the previous two years. It should also submit a two year cash-flow projection proving that it will be able to afford loan payments.
Because of the Congressional restrictions, banks are more likely to approve small business loans from their existing clients. Merski said, “From a financial perspective, it really is a loan that makes sense for an existing customer. You’re not going to have to put out a lot of resources to do a very costly underwriting. You know the business.”
Those who are working in support of small businesses are very much disillusioned. An example is Alex Cooper who is a counselor at the Pima Community College Small Business Development Center in Tucson. He said he had assisted almost 30 small business owners with their loan applications but none of them had been approved. “It’s a disappointment. I thought the banks would be more interested in the community and try to help small businesses,” he said.
When the applications for small business loans are disapproved by banks under the Small Business Administration’s program for America’s Recovery Capital, small business owners still have another option. They can get the equivalent of small business loans from their credit card services.
Credit card services provide their clients with the ability to accept payments through credit cards or debit cards in person, online or through the phone. Clients who have established a certain minimum in average monthly credit card sales are qualified to apply for cash advances that are like small business loans. Payments are automatically deducted from future credit card sales.
If you are a small business owner, you do not have to go through the hassles of applying for small business loans with banks who are reluctant to participate in the Small Business Administration program. Get your trouble free small business loans from your credit card services instead.
Watch the video related to small business loans
Barack Obama spoke about small business loans in Toledo Ohio on October 13, 2008.
Help answer the question about small business loans
What percentage of the stimulus package has Congress set aside for small business loans?
and what are the conditions of those loans?
Did Bush during his term set aside a portion of his economic package to support small private business long term?
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You stand a greater chance of getting a government-guaranteed loan through the Small Business Administration http://www.sba.gov/financing than a government grant. Read the SBA Financing page to learn about criteria needed for borrowing
It is hard to find grants to start a business. Unlike the myths that some perpetuate, federal government and even private foundations hardly give grant money for a for-profit business. And yes, grants mean PAPERWORK – lots and lots of it, that is why a cottage industry of grant writers was born.
Nonetheless, you can go to the Catalog of Federal Domestic Assistance (CFDA) http://www.cfda.gov and Grants.gov http://www.grants.gov – these are two sites created by the federal government to provide transparency and information on grants. Browse through the listings and see if you can find any grant that would support a for-profit venture.
Even if you buy books on "how to get grants" or list that supposedly has information on grants — all of them are mere rehash of what CFDA has, albeit packaged differently. But still the info is the same – hardly any grants for starting a for profit business.
Even SBA does NOT give out grants. From the SBA website http://www.sba.gov/expanding/grants.html
"The U.S. Small Business Administration does not offer grants to start or expand small businesses, although it does offer a wide variety of loan programs. (See http://www.sba.gov/financing for more information) While SBA does offer some grant programs, these are generally designed to expand and enhance organizations that provide small business management, technical, or financial assistance. These grants generally support non-profit organizations, intermediary lending institutions, and state and local governments."
Here is a listing of federal grants for small businesses. See if there is any available for individuals for starting a business — THERE'S NONE.
http://12.46.245.173/pls/portal30/CATALOG.BROWSE_BENEF_RPT.show
Most of the federal grants are given to specific target groups with specific requirements (e.g. minority business owners involved in transportation related contracts emanating from DOT – Grant#20.905 Disadvantaged Business Enterprises Short Term Lending Program
Grants are also often given to non profit groups or organizations involved in training or other similar activities (grant 59.043 Women's Business Ownership Assistance that are given to those who will create women's business center that will train women entrepreneurs
I suggest you read the following books to get ideas of how to finance your business:
Financing Your Small Business http://www.amazon.com/exec/obidos/ASIN/1572484500/powerhomebizguid
Small Business Financing: How and Where To Get It http://www.amazon.com/exec/obidos/ASIN/0808007386/powerhomebizguid
Financing the Small Business: A Complete Guide to Obtaining Bank Loans and All Other Types of Financing http://www.amazon.com/exec/obidos/ASIN/1580626815/powerhomebizguid
The SBA Loan Book http://www.amazon.com/exec/obidos/ASIN/158062202X/powerhomebizguid
Angel Capital : How to Raise Early-Stage Private Equity Financing http://www.amazon.com/exec/obidos/ASIN/0471690635/powerhomebizguid
Financing Your Small Business (Barron's Business Library Series) http://www.amazon.com/exec/obidos/ASIN/0764124897/powerhomebizguid
It was Mohammed Younus, the economist who put the word "microloan" on the map with the Grameen Bank in his native land of Bangladesh.
Here is his profile on the BBC website:
http://news.bbc.co.uk/2/hi/south_asia/6047234.stm
Business loans are a lot more complicated then mortgages. Take a business course at your local community college before you try this.
You might want to try a credit union. I don't think that there is a best bank for loans it has to do with credit.
It will depend on your personal credit even though it is for a business. The bank will evaluate the ability the company is able to pay back the loan and that is how they determine the amount to loan you. In this economic climate, you will not be able to get a loan without significant financial commitment from you such as cash and collateral.
he makes so much sense to help the country. why cant people just listen and purge clean out their ears from the ignorance
Word!
since u do not say what or where u are planning to do this it is a guess.
land loans are often separate from business loans.
working capital for 2yrs is a long shoot.
He rocks.
The rate would depend on a lot of factors. But because this is a made up business, let's say that everything the bank looks at (credit reports, financial statements, collateral, etc) is perfect. If the loan is secured by real estate the rate most likely will be fixed at about 7.25% with monthly principal and interest payments based on an amortization period up to 25 years. If the loan is secured by the company's assets, the rate would be closer to 7.75% and probably a variable rate based on the 5 or 10 year Treasury Bill plus a spread added to it. Monthly payments would still be principal and interest, but the term and the amortization period would be shorter than above – closer to 5 years.
Its sounds pretty complicated so Ill just post the link to the site i found
http://pittsburgh.bizjournals.com/pittsburgh/stories/2009/02/23/story11.html
hope that helps
Its nice to have a respectful exchange on this forum for a change
thank you barack
If in the USA, check out the Small Business Administration, they can be very helpful on a new business start up.
those who wondering what flag that is behind him its the Ohio state flag.
yes, that sounds like a good idea. What is your plan McCain? “OBAMA MIDDLE NAME IS HUSSEIN BE SCARED”
I Think it would be easier to get a personal loan and use the money for your business. A Business loan is not easy to get if you have little experience or starting a new business.
The reason being the new businesses often fail. It's might be easier to get a personal loan.
Even if you apply for a business loan you will need to personally guarantee the loan, therefore why go through all the red tape of applying for a business loan?
Another benefit to taking out a personal loan is that when your business makes a profit you can repay the loan to yourself tax free. Rather than than taking that money as profit from the business.
Hope this helps
I'm not sure if this is the same person you saw on the Daily Show, however I think it's Grameen Bank, whose founder won the Nobel Peace Price. Attached to the Bank is the Grameen Foundation. The bank makes microloans to deserving persons to start or fund small businesses in developing countries. Check out the website of the Foundation to donate much needed funds:
I would say you that many banks would only lead you around £10,000 pounds or $14,000 to start your business and you will need:
-Strong business plan
-Produce projected profits
-Have a good idea, product or service
I would consider getting an enterpruneur to finance the business.
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There is a non-profit organization called Prison Entrepreneurship Program which is described as "a Houston-based nonprofit organization that leverages the skills of senior business executives to constructively redirect these talents and equip inmates and former inmates with entrepreneurial training—enabling them to productively re-enter society."
http://prisonentrepreneurship.org/
As for small business loans, felons typically find it hard to get one, even SBA. SBA adopts a "cautious" approach to lending to felons and oftentimes bases its decision on how serious the crime committed was and whether there is strong likelihood that the offense will be repeated again.
SBA.gov is a great source…..what out for scam artists posing as sanctioed govyt lenders though. Also…it takes time, plan on more time than you'd imagine
This may not be exactly what you are looking for, but, I think you are taking over an established business, as in, someone in your family or all of you are taking over legal ownership of the restaurant…you could go to a regular bank in your area and get a small business loan using your restaurant as collateral. With solid cash flow statements, I can't see why you would be turned down. Local banks are always looking to partner with local businesses because it makes them look good and builds their credibility in the community.
So, before you get adventurous, start by looking to see which banks are listed in your local chamber of commerce directory. Those folks would be the ones looking to support local businesses. When you get a local banking contact, invite that person to your restaurant for lunch…or join the chamber of commerce and host a chamber event, like a happy hour if your serve drinks or offer chamber members coupons.
In my opinion, when it comes to banking, relationship building in your local business community is more effective than fishing around for companies offering programs who don't really understand the true value of your business.
Many of the National banks and some community banks have small business loan programs. When getting a loan here are things the bank looks for:
A business plan detailing the product/service,, customer,location, and financial analysis.
Your business experience and how well you understand this industry. Can you make this business work. Do you have personnel on your staff to supplement your lack of skills.
Credit history which demonstrates your ability to handle credit. Your personal credit score needs to be well above average.
What collateral do you have and how can you guarantee the loan in case of problems.
Terms – How much, How long and For what? Can the what be reposed in case of problems?
Your equity. They like to see you putting up more than 25% of what you need.
You could try the SBA Microloan Program where you can get up to $35K. http://www.sba.gov/services/financialassistance/basics/sbarole/LOANPROG_MICRO.html .
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Dual citizenship has nothing to do with getting a business loan.
There are SBA lenders (banks) that deal with small business loans. You will need to put up some collateral, generally your house or other personal asset.
Interest rates vary. Go in an talk with an SBA officer, they can explain it all to you.
Getting your business loan through credit card services, as you mentioned above, is only one way of getting a business loan. My wife and I had a different experience and I would like to share it with you and readers……….it may help someone out as it did us!
My wife and I have our own business. And we are on the verge of expanding but we didn’t know how we were going to fund our expenses. We tried investors, but during the recession, we could not find anyone who wanted to invest in our business. So we decided to look at unsecured business loans and business cash advances.
We were a bit leery at first, but now after going through the application process, we are ready with our business finances. And just in time for the holidays for our business has increased tremendously due to the holiday rush.