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Need a Bank Loan for Your Small Business? Don’t Bank On It!

Updated: Apr 8, 2022

The Landscape of Small Business Lending Suggests Banks are Less Interested in Lending to Small Business Owners

By Thomas W. Tramaglini, BRP Onesta

About Thomas Tramaglini

Since the Great Recession of 2008, banks have continually made it harder for small businesses to borrow money. If you are a small business owner and have applied for an SBA, USDA or bank loan, you will agree that the banks will ask you for everything including your 3rd grade report card. Most small business owners do not have the time and in many cases the expertise to have adequate P&Ls or an accurate up to date Balance Sheet.

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However, regardless of the business entity or industry, many businesses need to borrow money. In fact, according to NerdWallet, 29% of all small businesses fail because they run out of capital.1 Inherent in the same dataset, 57% of small businesses sought loans for their businesses of denominations of less than $100,000. “Most small businesses that apply for financing aren’t asking for much…20% [of small businesses] sought less than $25,000 and only 8% sought more than a million.”1

So What?

At the core of small business lending are banks and alternative lenders. However, according to Anna Serio2 of the combination or PPP and EIDL funding and small business loans have more than doubled since 2019 to cover all types of business needs, including operating costs, payroll, investments, or to pay down other debt.

The Small Business Credit Survey (2021) 3 found the following regarding small business owners:

42% applied to large banks for loans

43% applied to small banks for loans

20% applied to online lenders for loans

27% applied at other alternative lenders, credit unions or CDFIs.

However, while banks were more popular for loans, they were the hardest to get before March 1, 2020 and are harder to get approved for after March 1, 2020.

Merchant Cash Advances and Equipment Lending

The Federal Reserve Small Business Credit Survey (2021) also suggests that 87% of small business owners were able to get auto or equ