In today’s economic climate, small businesses are finding it harder to reliably secure loans from banks. This comes as a result of changes in lending practices that swept across the US Banking industry at the start of the 2008 Great Recession.
The fact that small businesses are often seen by big banks as risky long-term investments, or are perceived as lacking uniformity and transparency in their reporting standards do these businesses no favors. The reliance of small businesses on community banks is also being threatened by the Dodd—Frank Wall Street Reform and Consumer Protection Act. Since being signed into law, we’ve witnessed a reduction in the overall number of community banks and their small business offerings.
Progressive online lenders, like Currency, pave the way for small businesses to secure the loans they need to thrive. These lenders are quickly superseding the historical precedent and lending function that big banks and community banks fulfilled historically because of their increased willingness to provide those loans, and their ability to locate the best lending options through proprietary technology.
SMALL BUSINESS LOANS FALLING IN ABSOLUTE & RELATIVE TERMS
- Small business loans are down 21% since 2007
- Banking Industry is increasingly uninterested in Small Business
So how can small businesses secure loans and feel confident about the transaction? As we’ve seen from the statistics above, the answer no longer lies solely in big banks, or even community banks. Nowadays, small businesses seem to find the funding they require from alternative lenders and financiers – especially from online platforms.
ALTERNATIVE LENDERS ARE INCREASINGLY BRIDGING THE SMALL BUSINESS CREDIT GAP
- Small business lenders are the most likely to extend credit to small businesses in large part because they use alternative data sets, principally on cash flow and business fundamentals, to better understand the creditworthiness of the small business borrower.
Based on data suggesting a large shift in who is most likely to provide capital to small businesses, it is clear that the future of small businesses lies with the further development of these online lending platforms. Currency will allow your business to take the first step into this new, modern realm of lending that is both designed to meet the needs of small businesses and willing to take on the challenges associated with the complexities of that lending process.
The quick-start method to getting a loan involves tapping into and understanding these new financiers. Currency comprehensive and innovative lending technologies and platforms stand at the forefront of these solutions.
GETTING OVER LENDING BARRIERS USING CURRENCY CAPITAL
The technology offered by alternative lending platforms addresses the current structural barriers to lending. Notably, Currency simplifies the structural barriers of the small-business lending and financing process by deconstructing costs. Consider Currency API and its impact on the loan process.
Currency API accelerates funding by instantly matching your credit profile with over 30 lenders interested in funding small businesses. The matching process is tailored to the needs of your business, based on the information provided to Currency when you sign up.
The process is quick and easy if you have the necessary information at hand.
Here is a list of what you’ll need to get started:
1. Your business bank statements for the 3 months: Lenders require this to so they can verify that you have a business bank account and that you have the required cash flows to service the loan you’re applying for.
2. Income tax returns (up to the last 3 years): Signed income tax returns are required by most lenders. In certain circumstances, lenders like Currency will consider business owners with as little as one year in business. In these cases, personal income taxes may also be needed.
3. Financial Statements (Profit & Loss, Cash Flow, and Balance Sheet): Current financial statements help lenders understand your business trends quickly. You’ll likely not need these when you apply but may be asked to answer questions about income, expenses, profits, assets, equity, etc. that these documents can help to answer. Rule of thumb is have financial statements for the last 2-3 months when seeking financing.
4. Any current loan documents or lease agreements: If you currently have a lease or a loan then you’ll want to disclose this soon after submitting your application. Having the details handy will make the process smoother.
5. Your personal financial information: If your business is very small or only a few years old, you should expect to provide personal financial information including your credit score. In these circumstances, most lenders will require the owner to be a personal guarantor of the businesses loan.
6. Ownership information: At some point in the process you’ll need to disclose your businesses Tax ID number, and information about the owners and anyone legally affiliated with the business. Have each partner’s full name, address, SS#, and possibly ID # (such as a driver’s license, passport or ID card) will help you save time when you’re finally ready to apply for funding.
7. Business Licenses: Having a copy of your business license ready as well as your corporate seal and proof of a checking account can help expedite the process as well.
8. A business plan: Be prepared to explain to the lender what you plan to do with the capital you are requesting. It’s doubtful that you’ll be asked to provide a detailed plan, but spending the time to outline how you’ll use the funds and the milestones you need to achieve in order to meet your goals and objectives is a great exercise for any business. It also shows lenders that you’re serious about your business and that you have a clear vision of what you’re doing.
For small businesses, alternative online lending platforms are swiftly outpacing banks when it comes to offering loans. The technology incorporated into the software and lending systems is what allows these online lending platforms to deal with the variable needs of small businesses efficiently and capitalize on the vacuum left by banks in the wake of the Great Recession.
Online institutions like Currency are giving small businesses instant, easy access to 40+ lenders and nearly immediate feedback regarding the kinds of loans available for their unique credit profile.
If you want to quickly understand what kind of funding is available to your business, quickly organize the eight items listed above and give Currency a call. Currency’s API is a great way to find out quickly what’s out there.
If you have any questions regarding equipment financing costs, don’t hesitate to reach out to our Funding Specialists at Currency. We’re always available for a call at 877-358-4595, and would love to answer your questions and guide you toward the best financing option for your business.