Need money for your business? Desperately need cash? Be careful. As per the WSJ, May 20, 2010, there’s new breed of con artists who “arrange” SBA loans. This sounds just like the home mortgage industry and their no verification loans. As the Journal points out, if you’re asked to fudge information, there’s something wrong and the penalties (jail) aren’t worth the risk. The article is on their site which you can access here. http://online.wsj.com/article/SB10001424052748703691804575254371613243034.html?mod=WSJ_hps_sections_smallbusiness.
Banks are taking a lot longer than ever to make decisions. They are tighter than ever on who they will lend money to. Businesses need cash more than ever. But be careful. Whether it’s the banks fault, the government’s fault or the economy’s fault, money is tighter than it has been in a long time. I’m sure many good loans are not being made because of the recent conditions.
A couple of years ago a client said to me that the banks weren’t being very creative with his loan. My reply was, “Banks aren’t in business to be creative, they’re in business to get paid back.” Banks look at things differently than entrepreneurs; they aren’t optimistic that the best possible alternative will always arise.
So what are the alternatives? Here are three:
- Asset based lenders offer working capital loans and equipment financing (leasing programs for tangible assets are also an option).
- Do your homework and preparation. Walking into a bank, throwing a couple years of tax returns on a banker’s desk and asking for money isn’t the best way (especially when they are inundated with loan inquiries). My clients’ best success has been when they’ve taken the time to put together a book that includes all the relevant business and personal financial information, a business plan, supporting documents, projections and more.
- Reassess your business idea, model or acquisition target. If nobody wants to finance your idea, maybe they’re telling you something (that it’s not all that viable).