If you want to irritate a small business owner, ask him/her what it takes to get a loan to expand or start a small business. Be prepared to get an earful.
Many entrepreneurs and small business owners have what it takes to get a loan, but they don't know it. And they don't find out, because most of them never get a foot in the door with a lender.
As an executive in a non-bank lending institution, I see many entrepreneurs who have been turned-down for loans-primarily by big banks. Again and again, I hear the same complaints....about paperwork, about being treated like a nuisance, about mistrust, about the loan being too small.
The advent of non-bank lending institutions, whose only business is making loans, has opened new doors for entrepreneurs. Many of these complaints are turning into compliments. In fact, non-bank lenders have returned to the days when lending was more personal. Here are some myths about lending, and their realities.
Myth 1: You will be inundated with forms even before starting the process.
Reality: More and more lenders understand the importance of offering personalized, one-to-one service. As a result, some non-bank lenders will ask to see your business plan and hear your vision before you even start on the paperwork. In fact, if your plan sounds impressive, some of us will even do the paperwork for you!
Myth 2: Lenders will do what's best for them, not what's best for me.
Reality: Some lenders, particularly non-bank lenders, will look through your financial records with you to discover hidden assets or values that you may not be aware of. This takes time. And it may not result in a closed loan for the lender. Therefore, most banks choose not to invest time in this process.
Myth 3: It's nearly impossible for women to get loans for start-ups.
Reality: Non-bank lending institutions are very receptive to new business concepts and ideas. Anyone with a strong background in the business, with proven knowledge, and with a business plan has a good chance of getting a loan, even for a start-up.
Myth 4: Non-bank lenders are just like banks, offering loans tied to savings and checking accounts, mortgages, and other bank services in which they can change fees.
Reality: Non-bank lenders specialize in lending. Period. Their sole purpose is to find a way to help people get their business going. And growing! There is no loan officer "cross selling" for fee income as there is with banks.
Myth 5: Non-bank lenders charge exorbitant interest rates.
Reality: The interest rates charged by non-bank lenders are competitive with those charged by banks. In fact, since non-bank lenders offer long-term loans with no pre-payment penalties, their loans require smaller monthly payments- which in turn eases cash flow demands.
Myth 6: Non-bank lenders will penalize me if I pay my loan off early.
Reality: Most non-bank lenders offer long-term loans with no prepayment penalty. All SBA loans have no "pre-payment penalty."
The bottom line .... is that because non-bank lenders are structured differently than banks, they offer long-term loans with no pre-payment penalty. A smaller payment stretched out over time makes it easier on cash flow. Too few entrepreneurs and small business owners understand this fact. As a result, many are giving-up on their dreams because they can't find a way to finance them. Don't deny yourself the opportunity of a lifetime.
Penn Ritter is a founder and Executive Vice President of Business Lenders.
