to NOT apply for a commercial loan
you thought about obtaining a commercial/business loan?
into business for yourself does require a certain amount of
capital, and for some, that means taking out a business or
ďcommercial loanĒ to fund your new enterprise.
loans are given for the express purpose of operating your
business and they are a viable source of startup revenue for many
people. However, there are cases when commercial loans are just not
going to be worth the bother to go after:
You have no personal credit history or itís bad. Commercial loans are a bit risky anyway.
Banks have a tendency to shy away from taking risks on
people with shaky credit. When
it comes to commercial loans, banks have more opportunities than
they have cash. Of
course they are going to take the better risks.
You can threaten to pull your $2500 out of your checking account
and go elsewhere if they donít give you the loan.
it wonít matter. Banks
simply arenít going to chance risky loan paper.
If you cannot show how you will repay the loan, banks are not
going to become involved. You
must be able to at least show on paper how the loan will be repaid
and that means having a full set of financials and a business
plan. If your
business exists, you must be able to show that it is already
that you need the money to become profitable wonít do either.
Banks will take the position that if you are already losing
money, making the current business bigger will only mean that you
will lose more money.
If you do not have some of your own money in the business, banks
arenít going to be convinced that you believe the business is
going to be successful either.
Banks almost never give out 100% financing and therefore,
that means that if you donít come up with at least 20-25% of the
cash you need, they arenít going to consider giving you a
commercial loan. Banks
want you to be at risk of loss too since it probably means that
you are going to work harder at it and not give up as easily.
If you do not have experience running a business, you probably
arenít going to get a commercial loan.
Banks know that experience means that you would make fewer
mistakes and mistakes in business cost money and add to risk of
loss. They believe
they are better off giving commercial loans to existing businesses
and experienced entrepreneurs.
If you do not have collateral to secure a commercial loan, chances
are that you are not going to get one.
Banks want to know that they will at least get part of
their money back if you fail.
If you do not have collateral to secure a commercial loan
with, you will probably need a cosigner who will put the
If you have income tax issues, you will not get your loan and that
is especially true with the Small Business Administration.
The IRS can come collecting anytime and they take your
collateral and your profits in payment of taxes.
Banks wonít risk that.