Although U.S. small business borrowing has risen to the highest on record according to the Thomson Reuters/PayNet Small Business Lending Index*, there can be numerous obstacles facing small business owners seeking access to capital. These obstacles often lead entrepreneurs to seek alternative funding, even if it could cost them more in the long run. Two of the biggest obstacles small business owners can face are getting traditional funding from banks and building business credit. Thankfully, small business advocates have come up with actionable solutions to these problems to help entrepreneurs get funding and loans. Here’s how you can use these solutions to benefit your small business:

How Your Business Credit Can Affect Your Access to Capital

Business credit – impacting it, monitoring it and making sure it accurately reflects your business – can impact your ability to get traditional funding. One of the reasons many small business owners may be denied loans from banks is because they either have no established business credit or poor business credit. After the 2008 recession, banks are more hesitant to lend to people or businesses who can’t show evidence that they’re reliable or that they’ll be able to pay back their loans. If you apply for a small business loan, most banks will pull your business credit report and evaluate how much of a risk making a loan to your business will be to them. This is where small businesses can run into trouble, and where having good business credit can come into play. You may think that having good personal credit will help you get around this obstacle, but that’s not always the case and could compromise your personal assets if you have to use them as a guarantee. On the whole, your business credit and your personal credit should be kept separate. Building and monitoring your business credit file before applying for a bank loan could increase your chances of actually getting the loan.

A Way to Find Traditional Funding

Besides business credit, another obstacle entrepreneurs can face is working with the banks themselves. Different banks are more likely than others to loan to small businesses, so finding these banks and applying for loans with them can be crucial to getting funded. However, banks can claim to do more for small business owners than their numbers suggest, and a great deal of time can be wasted applying to these institutions. A search tool put out by Entrepreneur® and MultiFunding aims to change that, the same way Zillow changed the housing market for homeowners.

The Entrepreneur Bank Search can help small business owners discover local banks that are focused on small business lending. This tool can not only save business owners time narrowing down their lending options overall, but it also intends to help them locate branches with a history of serving small businesses. And it can help owners discover community banks, which have been known to be kind to small businesses. Since Entrepreneur is involved, owners can even browse the latest news and guides on small-business loans. The bank search is based on data from MultiFunding.com, an advisory firm that analyzes data from the FDIC.

This way to search for traditional funding may not only weed out the banks that aren’t likely to give loans, but it may even encourage said banks to offer more loans to small businesses in order to compete with others.

This tool could revolutionize access to traditional funding for small businesses and increase access to capital for businesses that wouldn’t benefit as much as others from alternative funding. To learn more about how Bank Search works, visit its about page.

Photo Credit: Images Money, Flickr

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By | 2017-09-14T11:21:11+00:00 May 8th, 2015|