Evan Vitale

Accounting Professional

Evan Vitale – 2016 Might Be Good For Small Business Lending

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By Evan Vitale

How are things looking in terms of small business lending in 2016?

Well, believe-it-or-not, jumps in the interest rates might also mean good news for businesses who want to seek out bank loans in the upcoming year.

You see, banks only make money when they lend money and with higher rates, banks might be more interested in ramping up their small business lending portfolio.

According to the Biz2Credit Small Business Lending Index, the percent of loans applications approved by big banks reach 22.8%, which is the highest since the recession. The recent interest rate hike makes lending to small businesses more attractive for larger banks. The Biz2Credit Small Business Lending Index believes the loan approval percentage next year could go above 25%. Remember, higher rates means more profit for lenders.

But what about other types of lending opportunities?

Institutional investors look good. During November 2015, institutional investors approved 62.4% of all loan requests.

However, alternative lenders, smaller banks and credit unions are granting loans at decreasing rates. In fact, small banks, which usually generate a large number of Small Business Association (SBA) loans, are now approving less than half of the loan applications received. In 2014, they approved more than 50% of loan applications received.

According to Forbes, community banks are struggling to compete, so many business borrowers continue to look to other sources for funding. In addition, big banks on institutional investors, which are making loans possible via an online marketplace lending platform, are able to make quicker decisions at more attractive rates and terms for business borrowers.

Some other interesting notes from Biz2Credit:

  • Almost half of all loan applications are made via mobile units.
  • Smaller banks and credit unions haven’t kept up with technological innovations and, thus, miss out on loan deals since their application process takes longer.
  • Many times, credit unions want a borrower to come to the branch office and become a member.

Evan Vitale – Why Banks Reject Your Loan Request

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By Evan Vitale

Securing a bank loan for your business can be a difficult chore and, unfortunately, it’s like you almost know you’re going to get rejected the minute you walk in the door.

Don’t feel bad. Most small businesses can’t get a traditional loan from a traditional lending institution.

However, the answer to your bank loan request is always going to be “no” until you ask.

If rejection comes, dust yourself off and ask the bank for feedback on why your loan application was rejected. Usually, they will be forthcoming on the reason(s) for rejection and you can use this information to improve your chances the next time you approach your bank.

However, there are many reasons why your loan request was rejected. Here are some of them:

  • For a start-up business, the business idea wasn’t credible and too risky for the lender.
  • For an established business, applying for business expansion sometimes raises concerns that you will not be able to handle the extra strain on your business debts (even if you are turning a profit). This usually means you didn’t do a good job of presenting a plan on how you were going to be able to afford to pay back the loan.
  • Not enough collateral if things go bad.
  • Lack of personal commitment by you. In other words, how much of your own money have you invested into your business. Sweat equity doesn’t work.
  • Lack of a credible business plan and financial projections.
  • Not understanding a “good” loan purpose. The purpose of the loan request should be very specific and not general.
  • Not being able to talk the talk. You should be confident in asking for the loan and in your ability to pay it back. If you’re unsure, then the bank is going to be unsure as well.

Get your ducks in a row before you present your loan request to the bank. And, as always, you’ll be able to gain great advice by talking to your accountant, lawyer and, yes, even with your banker before you apply for a business loan.