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Note from Editors:

The author discussed how small firms can access alternative to grow their businesses, especially when banks and other financing institutions do not approve their credit/loan applications. He enumerated six alternative financing schemes – how each works, the best fit businesses and the downsides.


by David Nilssen

The economy is improving. Consumer confidence, although still volatile, has returned to pre-recession levels and confidence has rebounded to near-record highs. A majority of small business owners anticipate revenue and profit increases in 2015. So, why isn’t small business access to credit improving accordingly?

The relationship between credit and growth is particularly significant for small businesses. The NSBA survey reveals that 47 percent of the businesses denied credit were forced to delay business expansion. Twenty percent of small business owners relied on credit cards and business earnings to finance their credit needs. Other businesses delayed hiring.

It confounds me that in a year of record lending by the Small Business Administration, entrepreneurs still struggle to get the financing they need even when all indicators point to the opportunity for growth. In a positive move, the SBA recently launched the LINC program, an online matchmaking service that helps connect creditworthy small business borrowers with interested . You start by filling out a simple online form to answer 20 questions. Your completed form is sent out to LINC’s network of local, statewide and national lenders, and potentially puts you on a fast track to consideration and approval.

Why Isn’t Access to Credit for Small Business Improving in 2015?

Entrepreneurs still struggle to get the financing they need even when all indicators point to the opportunity for growth (Credit to

But if you are denied traditional bank financing, don’t give up! Follow the lead of many of your fellow entrepreneurs, who are finding funds through well-established financing alternatives. In fact, my own company, Guidant Financial, created a tool for entrepreneurs to pre-qualify online for traditional and nonstandard forms of small business financing. Here’s a look at some of the most common:

Online Lenders

How it works: Online lenders are a fast-growing presence in the small business lending landscape. The applicant fills out an online application that typically takes less time than a traditional bank application, and the online lender processes the applications much more quickly — sometimes in a matter of hours. These lenders typically use one of three models: a balance sheet model with a risk algorithm that includes nontraditional data; a “lender-agnostic” marketplace model that connects you with a variety of lenders; or a peer-to-peer funding platform.

Best candidates: Businesses with good current cash flow or other solid business performance indicators, even if the owner has a lower credit score or lack of collateral.

Downside: Be aware that these loans can come with higher fees or shorter repayment terms than traditional bank loans — and generally aren’t meant for startups. Also, online small business lending is still largely unregulated. Borrowers should be sure to check the bona fides of any online lender they approach.


Why Isn't Access to Credit for Small Business Improving in 2015-

Higher fees or shorter repayment terms than traditional bank loans.(credit to


Unsecured Credit

How it works: Lenders offer revolving lines of credit with no collateral required, based on the entrepreneur’s personal credit history. The borrower has the flexibility to draw against the funds as required, pay back and then draw again as needed.

Best candidates: Entrepreneurs with excellent credit scores and credit history.

Downside(s): Fees and interest rates can be high, and the owner is required to provide a personal guarantee.



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Curated from Why Isn’t Access to Credit for Small Business Improving in 2015?
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