If you want to open your own small business these days (called a start-up) don’t waste your time applying for loans from a bank or credit union! My wife started up hers, we used our own funds to get it going, but they say not to do this, but were else are you going to get the funds?
It took us months to start up our business, my wife designed the products, I created the web site, we manufactured the product, made our own labels, built our own laboratory, and we did it all. Now we are marketing our line with newspaper ads, cold sales calling, letters to possible accounts, web site positioning and on and on. We are doing everything possible that we can do, with very limited funds.
Unfortunately, it does take time for our brand name to be known, it takes time before you have a good position with your ranking on a search engine. Meanwhile, we still need to buy more ingredients for our future products, we still have to advertise, we still need to pay the credit card bills, and we still must somehow live.
Wow, to get America going again, banks (or credit unions) still fall deaf eared to new entrepreneur‘
In our case, we don’t have a lot of equity in our home yet to use it as collateral, we don’t have a huge bank account, and we are far from being wealthy. They always say, it takes money to make money, and how true. If you are rich, absolutely no problem with getting a loan. If you are a big corporation, no problem, come and get it. If you are just a regular guy, girl or family, good luck! You will NEVER get a loan as a start-up! (We are still considered a start-up because we don’t have enough cash-flow history).
We basically ruined our own credit by trying to get a small business loan through several different avenues. Each try, it was a different excuse why not to help you. I had a credit score of 820, and now I am afraid to know what it is (it could be as much as -15 points with each full credit look).
If you are a start-up, forget it! We worked hard on a really great business plan. In fact, we spent weeks writing it. We came up with all the other documents needed, but of course as the business doesn’t yet generate any cash flow, we projected the data as per instructions from the SBA. We did it right, and did not cut any corners.
(Note: the SBA does not give out loans. They only act as an insurance policy to big banks).
We followed all the information from the SBA web site, and compiled more info from other sources. We studied all this information and came up with a really great business plan. However, it was meaningless to the banks. Their major concern is only cash flow and collateral, with about a hundred of other smaller concerns.
Their true criteria for your loan success are that you must be already successful in every way!
(And really, how can this be, if you are just starting out? And if you are so successful, why would you even need a loan?)
From what we have read, 95% of every new business fails within 5 years, many because of lack of financing and available funds. Many people get in a deep hole using their own personal credit and funds to finance their own business. Then when they need more (like in our case) nothing is really available to them.
With millions still out of work, ambitious people are tired of sitting around waiting for something to happen, so they have an idea, work on it and begin to see a way out of a hole. They seek a possible way to support their family. But these days, don’t think banks are going to help you if you are a small, just starting out business.
They will come up with more excuses not to give you a loan then you can shake a stick!
(And they can drag out the process for weeks and weeks.)
If our Government really wants to help out the little guy, or get the country going again, then they have to change the way this process works. Apparently, underwriters have lost their heart, they have lost their soul, and it’s only a matter of numbers to them. Gone is any human element in this process. This was not the way it was in the past, but it is the way it is now and the future.