Why home-based businesses don’t usually qualify for small business financing options.

 

 

Many businesses start out at home. Though you don’t have to worry about the expense of leasing a location if you’re looking to exceed the current earnings from your business you may need to consider investing more money into the business. Now although you have consistent returns, clients, and bank statement balances most new businesses are missing one thing that lenders look for: “a track record”.

 

Lenders will not only look at your business financials but they will also look at the time in business and cash flow. If they can’t find adequate time in business or consistent deposits, it can make it very difficult to get a loan. Another reason a home-based business gets declined is they usually have less investment in the way of tangibles and so have a higher rate of closures. Business lenders want to know that if they decide to finance a business there’s little to no risk of that business going into default.

Leading Reasons that Prevent Business from Getting Business Financing

New Business:

 

Most lenders prefer to loan money to well-established businesses. This means that your business needs to be in business for at least one year to qualify for a small business loan and two years for bank loans.

 

Banks may encourage new business owners to apply but prefer working with a business that have a proven rate of success. Many companies do not get past their first year in business, that is why not many get approved so early. This is unfortunate since this time period is the one where a business loan can be most beneficial.

Sole Proprietors:

 

More than 50% of small business owners conduct their business as a sole proprietor. This can have a detrimental effect when seeking business financing. Lenders view sole proprietors as a high-risk because sole proprietors have a higher rate of default than other types of organizations.

Customer Concentration:

 

There are some banks that will consider businesses that have high buyer concentration as a high risk. The bank will reject your loan application if a single customer accounts for 20% or more of the business’s revenue. They determine that the loss of a single customer can upset the revenue of a business.

 

Alternate Source of Business Financing:

 

Bank loans or other forms of traditional lending are great but often unattainable to new or home-based businesses. The services we provide can ensure your business has the tools it needs to keep the gears turning. As mentioned above here are a few things we can help you overcome when looking for an alternate source of business financing:

  • Finding funding for your new business can be tough. Based on the time you’ve been in business it can prevent you from having access to capital. We can help you overcome this. We use a minimum of 6 months of banks to underwrite your business. Our approvals require minimal paperwork in comparison to banks who will want tax returns and much more qualifying paperwork.
  • The type of entity your business is under can matter to some but we find ways to overcome this as a determining factor. For example, a large amount of our small business clients conduct business as a sole prop.
  • Customer concentration is a serious factor when considering financing a business. Businesses that have developed great relationships with large customers can be considered for approval. In comparison to banks, we don’t consider a minimum for the amount of monthly deposits. Instead, we look at other factors of your business which increases your chances of approval.
  • Our industry financing is tailored to your businesses’ individual industry needs. We provide funding to retail, restaurant, contractors, construction, auto repair, franchised businesses, manufacturing, medical, trucking, customer service-based industries, and more.

We Offer You the Best Options

 

The financing we provide takes the performance of the business itself into consideration. We provide working capital from as little as $2,000 to as much as $1,000,000. Traditional banks may take up to two to three months before the money is available. However, we have the ability to fund businesses in as little as 24 hours. If you’re looking to get financing for your small business reach out today. We’ll provide you with some of the most competitive quotes. To get a quote you can fill out this basic form or call 800-791-0430.

 

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