The number one myth is that people believe they should get a business loan through a bank. If you believe this then you are like most business owners.
So why is it not the best option to obtain a business loan through a bank? Banks are actually less likely to provide small business financing, and the options they offer are limited.
When you make the choice to go through a bank you should be prepared for a lot of red tape. Banks will typically require full financial disclosure on your business along with updated quarterly or yearly financials throughout the length of the term. Normally banks will provide your business with 80-90% financing which forces you to provide 10-20% down. If you bank with them don’t be surprised if they require you to carry a minimum balance in your business bank account (checking or savings).
While here at Direct Capital we strive to provide you with the fastest financing process possible which is 100% online, banks do not. It takes a minimum of 1 to 2 weeks for approval and you would have to go through the process with face to face visits.
Not every bank deal has all of this red tape, but the larger your deal the more likely you will have these requirements.
If you are leasing or financing equipment it is important that you know banks do have tight restrictions on the age of the equipment you are financing. Very few banks will finance a private party sale and are unlikely to finance from auctions.
This applies to:
– Restaurant equipment financing
– Construction equipment leasing
– Computer equipment leasing
– Commercial vehicle equipment financing
– Auto shop equipment financing
– Fitness equipment leasing
– Machine tool financing
– Printing equipment leasing
– Medical equipment leasing
– Sign equipment financing
A bank will set up “outs” for themselves. These would be terms stating a borrowing business must keep certain debt levels, cash flow ratios or net income requirements. If at any point you breach those terms the bank can end the agreement.
Private lenders, like Direct Capital, tend to be more flexible and provide a simple financing process to make sure you receive the money you need within 1 day. The difference between the two is clear; Direct Capital is a finance company that cares about your business’s success, banks are focused on the bottom line. If you are ready to take the next step and finance with a company that cares then apply online!
When you are looking into financing options for your business there are some tips you should follow. We compiled a list of 5 tips to help you choose the right financer.