Small business owners while starting up their ventures might not have sufficient exposure to the lending environment, which could cause them to make certain assumptions about lenders. More often than not, such assumptions turn out to be false and can impact borrowing ability negatively.
Here are some facts that will help small business entrepreneurs to remain guarded against those assumptions.
- Banks put their benefits ahead of the borrowers – No matter how friendly a bank seems to a small business owner, the reality is that it will keep its interests over and above those of borrowers. Thus, certain products would be pitched to the borrowers even if they are not the right ones for the business.
- Banks do not connect with the borrowers – The process of the loan application to approval is mostly undertaken using computer algorithms that do not take into account any specific circumstances related to a borrower. Moreover, disbursement decisions are taken by officials at the headquarters, who are dependent on limited information about a business case. Thus, there are higher chances that approval does not get through even if there are brighter chances of a business succeeding.
- Bank officials are not fit to give credit advise – Most bankers lack even the basic knowledge about how credit scores work, hence, it is not wise to reach out to them in a case of doubt. It is advisable that business owners should seek help only from a qualified credit score expert.
- Bank loan officers can move out anytime – A business owner should not depend on a loan officer solely as a better opportunity or underperformance can force a loan officer out of the bank job. It is important to continuously communicate and interact with multiple officials in a bank to avoid running into a problem if someone leaves.
- Bank’s rejection does not mean end of the road- Lastly, small business owners should stop thinking that they have no alternative other than giving up their business idea if their loan applications are rejected by a bank. Many alternative lending platforms have emerged to help fund a business even if they have a low credit score.