Big banks decline far more small business loans than they approve. In fact, the average big bank declines 82% of the SBL applications

Back in the day when you needed funding for your small business you’d get in your car and head over to the big bank on the corner. Often, business owners knew their banker personally and would see them at church or the local restaurant. But the days of banks on every corner and personal relationships with your banker are long gone. Local community banks have been acquired by big international conglomerates and big bank lending to small businesses is at an all-time low. It’s hard to believe, but in 2020 about 82% of small business owners who apply for a big bank business loan, get rejected.

Although there is little difference in the underwriting costs for evaluating, verifying, and processing a small loan vs. a larger one, big banks increase their profits by focusing on larger loans to bigger businesses. It costs big banks just as much to underwrite a $1 million dollar loan as it does a $100,000 loan, therefore, banks can make far more focusing on larger loans. Although this makes sense, it’s still frustrating to the small business owner who is faced with the rejection.

The good news is as times have changed, so has small business lending. Today there are a variety of alternative lending options to assist with your funding needs.

Fin Tech Lenders: These lenders exist mostly online and have started emerging over the last few years. Their data-driven approach to business lending and their use of technology often make them good options for small businesses.

Peer-to-Peer (P2P) Lending: Peer-to-Peer business lending is relatively new but is quickly gaining popularity as an alternative form of lending. Peer-to-peer works by bringing together a borrower, an investor, and a partner bank through an online platform. This works by leveraging technology that uses publically available data, like social media, and combining it with more traditional lending criteria, like credit scores. These P2P platforms can then match borrowers with lenders who have compatible levels of risk and return.

Credit Unions: Often overlooked as sources for business loans, credit unions have become a serious player in small business lending. With a commitment to their community and their not-for-profit status, credit unions typically offer better rates and more attractive terms for small businesses. There are even credit unions specializing in SBA loans, which are designed specifically to meet the needs of small businesses.

The bottom line… THERE’S A BETTER WAY so stop approaching your small business lending as if it were 30 years ago. If you run a healthcare or biomedical related business in the DMV, NIHFCU Business Lending is your better way. Powered by NIH Federal Credit Union, we understand the needs of healthcare and biomedical businesses. If you think we could assist you with your business lending be sure to check us out.

If you don’t run a healthcare or biomedical related business and you’re sick of doing things the old fashioned way, reach out to me on LinkedIn and I’ll be happy to assist you.