Business Money Today: Destroying Common Misconceptions About Small Business Lending

DALLAS - May 16, 2013 - PRLog -- Month after month we get flooded with small business lending data.  These surveys and indexes tell us which size of banks or financial institutions are lending to small businesses and the size of loans they are approving.

But, if only a modest number of small businesses are actually getting business loans and that number is ticking up or down by some minuscule monthly margin, what does it really say to the other group of small businesses - those who are not getting approved? Does this data help them understand why they aren’t getting the funding they need to grow and prosper?

So, we decided to research our own internal data regarding which small businesses were getting funded and why – in hopes of better understanding the reasons that their counterparts were not.  And, we were truly surprised by the results:

Demystifying Business Loans

1. Credit history matters.  So they say.  However, we found, from our own data, that the vast majority of small business owners with subpar credit, that under 600 FICO, were applying for most of the loans – some 72% of all business loan requests.  But, some 50.73% of those requests were still getting approved.  A far greater amount then we would have thought. Thus, credit does matter but not as much as we were lead to believe.

2. Time in business is a key factor in commercial loan underwriting decisions. Maybe not. From our data, 72.01% of those businesses requesting business loans where in operations less than 1 year. But, while those in business the longest, 5 years or more had the single largest approval rate at 33.33%, those not yet in business (true start ups) were a close second with 24.64% and those in business less than 1 year (combined) received a whopping 40.58% approval rate. So, time in business does not really hold that much weight in underwriting as we once thought.

3. You have to have revenue (cash flow) to get approved. Not always correct. From our data, 74.07% of the businesses that applied for business financing had total annual revenues under $50,000.  And, only 16.05% of those businesses had annual revenues between $50,000 and $500,000. Yet, those businesses with revenues of less than $50,000 still had an impressive 39.13% approval rate – even higher then those businesses with more annual revenue. Amazing.

Lastly,

4. The purpose for the business loan requested matters as most lenders only approve secured loans – those that are secured by equipment, inventory or commercial real estate.  And, here, they were right. Based on our facts, of those small businesses seeking collateral backed loans, 67.97% received funding – a far greater approval rate then any other category of business loan.

The bottom line of our research is this: You really don’t know what a bank or small business lenders will approve regarding your business loan request unless you actually apply. Credit, cash flow, collateral, etc may seem overwhelming but it should never hold you or your business back – as our results show here. Nearly any businesses, even those with bumps on their records, can still get the financing they need to start or grow.

About Business Money Today
Business Money Today provides information and resources regarding all types of business financing options, providing better information to business owners allowing them to make better choices in their financing decisions; better choices that could mean the difference between financial freedom and business failure. Apply for your small business loan today - http://www.businessmoneytoday.com/

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