The finance world has changed and the small business owner is now woefully underserved when it comes to finding small business loans or adequate financing for his or her business.
Need proof? Walk into your banker and inquire about a loan for, let’s say, $75,000 and you’re likely to walk out with your tail between your legs. More and more these days, it seems banks only lend when you can prove you don’t need the money!
But let’s not blame the banks. Due to regulations, audits and necessary reserves on hand requirements, many times it is not prudent for them to make small-ticket loans. If you qualify, you have a better chance to get a loan for $500,000!
The same holds true for commercial real estate lending. Small balance loans up to $5,000,000 are seriously underserved by lenders, for many of the same reasons as working capital loans.
When I was a boy, my father owned two small grocery stores. It wasn’t unusual for me to accompany him to the bank down the block, where he would occasionally ask the branch manager for a short-term loan. I remember being in the bank for all of 15 minutes after which time my father would sign a paper for $15 or $20 thousand dollars. “The funds will be in your account right after lunch, Mr. Casanta,” the branch manager would say. Nice. That’s how small business gets done, right?
So, what has changed? I assume my father’s credit was as good as his reputation around town, but more importantly, his relationship with the banker was even better. When my father explained WHY he needed the money, it went a long way toward him getting the money.
Today, algorithms and strict parameters have taken the place of discovering the WHY. As such, banks aren’t able to factor in the subjectives: how will this money benefit the business? is it a bridge until inventory is sold? will it cover seasonal payroll? will it contribute to businesses growth and subsequently the bottom line? These are important questions, the answers to which show business savvy, growth, and a road to profits for your business and the bank.
But if you don’t fit squarely into that neatly designed box created by those parameters, standards, and algorithms, you’re finito, morto … dead.
One of our commitments at Cardinal Business Financing is to clearly explain (and sometimes argue) the “why” on behalf of our small business clients. We are dedicated to helping business owners who need a cheerleader for their “why”. The guy or gal who has a ding on his or her credit, who went through a rough time but is still able to run a profitable business and keep staff on the payroll. Taking time to understand the “why’s” is what makes America and our economy tick. Our “why” at Cardinal Business Financing is our commitment to small business.
If you need someone to help make your “why” heard and understood, then contact us today.