Banks Reject 60% of Small Business Loans

The federal government doled out $30 billion dollars to small community banks to help small business get the credit they need. According to the Wall Street Journal, Instead of loaning the money to mainstreet, the banks repaid their TARP obligations. Only 4 billion or 13% of the money went to small business. Crumbs in my opinion. The cake went to the banks to clear their books. This whole program was very disingenuous. It has become harder and harder for small businesses to get the credit they need.

A recent study conducted by Pepperdine University found that 60% of small business loan applications were rejected. Such high rejection rates leave small businesses in a quandary about where to get funds to buy equipment, to expand, or fulfill their obligations.

One alternative might be merchant cash advance. Merchant cash advance or merchant capital advance have progressed in recent years and offer a viable alternative to banks. Merchant cash advance offers a type of “loan” against future sales. Traditionally this was done through a merchant’s credit card processing receipts. There other options available through cash sales and using the ACH networks. In most cases, merchant cash advances are more costly than a bank loan but the good news is that the merchant cash advance or merchant capital advance rates have come down in recent years.

It is time to put all the cards on the table and see what is really in the market. Small businesses can no longer rely on their banks. If a business needs a cash infusion to purchase equipment, make repairs or to stock up on inventory for the holiday season, a merchant cash advance may be a possible solution. If the banks are not lending, then small business need to find other options to get the funds that they need.

Some businesses have relied on their banks for years for credit. Even merchants with great credit are finding it difficult to get the loans when they need it. It always seems the banks are ready to loan money when the merchants don’t need it and when they do need the loan the banks refuse to loan. Business owners need an alternative to turn to in this every happens.

The problem in the US economy is right now the average bank is leveraged 17 times. This is much better than several years ago when the average bank was leveraged 55 times. What does this mean? Banks are reluctant to loan money because don’t want to or are not allowed to leverage themselves anymore.

This is where the private lender comes in. The private lender is filling that gap. Now, merchant cash advances are becoming more common ways to finance a business. This is why it is imperative that all business owners learn about merchant cash advance because someday, they may need it.