All About Small Business Finances And SBA Bank Loans

Starting and running a small business without having some form of credit is nearly impossible. Many small businesses do not make it simply because they’re under-capitalized. One month where sales and expenses budgets cannot be met could signal the end for business that could otherwise have succeeded. Others find themselves unable to grow their operations owing to insufficient access to the necessary funds. The answer may appear to be simple: get a loan and grow your business. However, getting a small business loan isn’t always easy, which is tough for small businesses leading the lean startup life. 

Getting Bank Loans 

Since the recession, the FIDC has ensured that small businesses who apply for loans are subjected to very close scrutiny. The Dodd-Frank act of 2010 has effectively limited the possible sources of funding for small business. Many analysts feel that in doing so, economic recovery was slowed. Whether this is true or not, small businesses in need of additional capital often find themselves unable to secure conventional bank loans. 

But is a conventional loan best for your business? The convoluted application process takes a great deal of time and effort and few loans are granted. In addition, repayment terms are highly inflexible. Small businesses are increasingly turning towards alternative lenders in order to get the business finance they need quickly, successfully and under less onerous repayment terms than banks allow. 

The SBA 7A Loan Program 

Getting the Small Business Administration (SBA) to guarantee all or part of a bank loan might sound like a great idea in theory, but the program has been widely criticized for its limitations. Once again the application process is complex and lengthy and not all businesses can afford to wait up to three months to get finance approved — if it’s approved at all. 

Then too, the SBA isn’t actually offering the finance itself. The small business entrepreneur still has to work through a conventional bank and banks remain reluctant to supply credit to small businesses. By 2011 a Gallup survey found that although 88% of businesses had access to credit, only 29% were lending from banks despite the SBA program. 

What Banks Don’t Always Take Into Account 

The main problem with getting small business bank loans is that banks want to see guarantees that you’ll be able to pay back the money. That’s fair enough, but instead of looking at how good your business’ chances of success are, they look at financial history. That makes things difficult for a newer business that doesn’t have the track record banks are looking for. 

Remember, most banks aren’t investors, they’re lenders. If the business or its owners don’t have the kind of credit history and other financial signals that they’re looking for, they won’t issue the business loan. Nowadays, financiers can use algorithms to project business income, but banks don’t use these tools when deciding whether you’ll get a loan. 

Other Financing Options Besides Basic Banks

Getting finance fast, especially startup business loans, can be crucial to the survival and growth of small businesses, especially startup business loans. Since the banking sector isn’t making things easy for them, small business owners are increasingly turning to alternative sources of finance that offer them faster turnaround time, rate their creditworthiness based on the business itself and offer plans with flexible repayment options. The makes the loan seem like a more reasonable investment and risk.  

Merchant Cash Advances 

Businesses that handle a volume of over $5000 in monthly credit card transactions often choose the merchant cash advance as a source of funding that offers them easy repayments. A funding company advances cash to the lender at a pre-arranged fixed cost, allowing the lender to have a clear picture of the extent of the commitment in advance. 

Repayments are calculated as a portion of credit card sales and are deducted automatically from the lender’s account. Thus, if the business is experiencing an unexpected quiet period, the repayment is lower without the lender falling into arrears with repayments. Obviously, this form of financing would not be available to a brand new business, but as little as three months of transaction history can secure your business this type of financing. 

Business Cash Advances 

This model is similar to the merchant cash advance, but repayment is handled through pre-determined daily deductions from the business bank account. Once again, the lender knows the exact cost of the credit in advance and need not make allowance for large monthly repayments that would impact heavily on cash flow. 

Unsecured Lines Of Credit 

One of the most difficult obstacles to overcome in obtaining a small business loan from banks is the requirement for collateral. By working through agencies, lenders can obtain an unsecured line of credit that does not require asset collateral. A maximum credit limit is set, and the business is able to use as much or as little of the line of credit as it needs to at any given time. Interest is only levied on the amount of credit actually used. A minimum monthly repayment value is agreed in advance. Unsecured lines of credit is a type of financing that is particularly helpful to businesses that need credit to cover shorter-term expenses. 

If none of these financial methods work, you can always bootstrap your costs if you need to buy low cost items like domain names and websites.

Final Words About Fiscal Fitness And Funding Finances

Obtaining small business finance through a bank is still very difficult in the United States and several other countries. Many small businesses are turning to other sources of finance that offer them easy and quick access to funds based on their business health and future outlook rather than the personal creditworthiness of the business owner. When investigating funding options, small business entrepreneurs would be well-advised to discuss various options with funding specialists in order to determine what kind of funding would be most suitable for their business rather than relying on the traditional bank loan. Keep these tips in mind when seeking SBA loans and SMB financing to maximize your fiscal fitness and frugal finances.


I hope you enjoyed this article about what you and your company need to know about small business finances and funding.

Interested in reading more articles about fiscal fitness and funding? 

Read My Blog Posts: 

- How To Stay Financially Fit In Expanding Economies

- Top 12 Tips To Improve Frugal Finances

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Loan Leverage: US vs UK Bridge Loans

Most of us need a loan at some point in our lives, especially if we are property owners and own multiple properties. Getting a loan varies for businesses and property owners when it comes to the origin country of the lender. This is especially true for bridging loans, also known as bridge loans. Is there a difference between UK bridge loans and US bridge loans? Yes there is loan seekers! 

Almost everyone in the United Kingdom uses bridging loans, which are used for a variety of purposes, including individuals, companies, property developers, investors, and builders. There are requirements to establish your plans, security, and financial history in order to receive the loan in the first place. In contrast, bridge loans in the United States are generally utilized to acquire a house while you still have a home or property. 

Bridging Loans In The UK 

In the United Kingdom, a bridging loan is a short-term financial solution that covers the gap between two events. It is generally paid back in one year and has interest rates and other costs that must be added on top of the loan. 

There are several lenders and brokers who give bridging loans, and they are employed for a variety of reasons. Some of their purposes include: 

● Property development 

● Business use 

● Renovations 

In the United Kingdom, a bridging loan has the following characteristics: 

● Quick and easy process 

● Can be beneficial in terms of funding a project and finishing it. 

● Short term (paid back quickly) 

● Many lenders and brokers are available, such as Finbri, to meet your requirements. 

Applying In The UK 

There are a few things that you'll need to get approved for if you apply for a bridging loan in the United Kingdom. 

● Security 

High-value assets will be taken into account by bridging lenders. The lender's major concern is that the borrower keeps paying back the loan on time, since they keep this guarantee until the debt is paid off. The bridge lender takes back the security if the loan isn't repaid, instead of having to repay it later. 

● Exit Strategy 

Exit strategies determine how the bridge loan will be paid back. The property's sale is generally the exit strategy, and the proceeds from the sale are used to repay the loan. The lender will want to see the strategy and decide whether it is viable. 

● Documents 

During the application procedure, you may be asked to submit a variety of documents. You must produce proof of purchasing it first and a strategy for the property, among other things. 

Bridging Loans In The USA 

A bridge loan in the United States is a short-term loan that covers the gap between when a new house sells and when it receives its mortgage. 

In the United States, bridge loans are primarily used to sell a property rather than for other reasons. Similar to a bridging loan in the United Kingdom, additional costs and bridge lending rates are added to the overall cost of borrowing. 

A bridge loan in the United States has the following characteristics: 

● It allows buyers to buy a new house while their existing one is on the market 

● Quick and easy process 

● Purchase with no restrictions. 

Applying In The USA 

Lenders in the United States need to examine your credit history and financial history when considering a bridge loan. Because you'll be selling an existing home, the security you need is already in place. 

The plan is that a new house is purchased, the old one sold, and therefore the loan is repaid with the proceeds of the property sale. 

It's a lot easier than borrowing in the United Kingdom; nevertheless, you'll need to demonstrate that your ideas are viable and that you will be able to pay back the loan.