The recently released 2016 Small Business Credit Survey report by the Federal Reserve showed that the number of financing options for business owners has expanded in recent years. The survey, which collected data from around 10,000 firms across the US, revealed that obtaining financing is easier than ever due to the implementation of certain measures for helping small businesses.
Traditional Banking Still King
Traditional banking systems, of course, are still a major force. According to the National Small Business Association, about 31 percent of small businesses rely on bank loans for financing. However, many businesses are still having trouble securing loans from traditional banks, with their biggest challenges being the lack of access to credit, the possibility of their applications being rejected, and the difficulty of establishing a relationship with lenders. Because of this, some business owners have to resort to borrowing from family and friends or using their own personal money to finance expansion, capital, and other concerns.
While there is still a long way to go to make traditional lending accessible to the majority of small business owners, big banks and credit institutions are making an effort to offer loan products that are easier to obtain. Also, some of the country’s biggest banking institutions are trying to provide more support for small businesses that are owned by minority groups, women, and veterans.
Rise of Alternative Lending
Because of the strict application requirements of traditional financing systems, small businesses are looking at alternative means to get credit. These include online lending, small banks, and others. There are quite a lot of options for those who want to go for online lending, one of which is online loan marketplaces. As stated in an article by AAAcreditguide.com, one advantage of using an online loan marketplace is that it makes banks and lenders compete for the attention of borrowers instead of the other way around. Online lenders also have a higher approval rate than big banks and credit unions. Small banks are also a good option because they are usually more receptive to small business borrowers than larger banks. However, these banks and other alternative lenders are more likely to charge higher interest rates than big banks.
While the business lending situation is improving, you will still have to put in the necessary effort to improve your chances of securing a business loan. This often includes properly preparing the required documents and maintaining a good credit score.