One doesn’t need to go through the rigors of obtaining a bank business loan to understand that it can be really tiring, and even fruitless. Nevertheless, there are also good rewards in getting a bank loan approved. Small businesses who are tired of being rejected should not therefore write off bank loans entirely and keep trying. How to get business funding is no longer a puzzle, and bank loans are still an option.
The first and most relevant benefit is of low interest rates. This is a major attraction, as high interest isn’t something that small ventures would be comfortable with. They can thus save money, and stay relaxed as the payment process is set beforehand. Although it can take long, sometimes up to three months, a bank loan comes in many forms, including small loan, SBA loan, term loans and even a credit card.
Although seeking venture funding is hugely attractive, a small business has to give up a portion of stake. This is where bank loans score, as no stake is required. Moreover, banks do not interfere with management and operations. The only thing to be settled is the loan repayment. They tend to form a relationship, something a business can benefit from.
On the flip side, many factors make going for bank loans a not so attractive option. The very first hurdle is that of having excellent credit scores. After that, the loan paper work includes collaterals and guarantees. A bank will also undertake a thorough scrutiny of operations and results. More than that, a business may have to divulge information on their investors and profitability so as to be able to repay the loan.
Due to these and other factors, it is no surprise that less than a third of applicants are successful in obtaining a bank loan. The success rate has declined even further after the 2008-09 downturn. Big banks are thus more positive towards applicants with strong credit histories and scores and a healthy business.