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It’s not uncommon for histories and legacies to be separated by an event, which basically puts everything before that moment in one bucket, and everything after in another bucket.
For example, football fans of a certain vintage may remember that once upon a time, the AFL and NFL were two different leagues. But they came together in 1970 and played in the inaugural Super Bowl.
Or the technophiles out there may have 1989 forever etched in their hearts and minds; not because they’re Taylor Swift fans, but because that’s when the World Wide Web was born – and changed everything.
The reason we bring up these transformative events in history is because in 2008, something of a similar magnitude happened in the business lending marketplace – though not in a positive way. That’s when the economic nightmare that would later be called the Great Recession erupted, and it’s also when banks decided that approving loans for many small businesses applicants would be less likely than winning the lottery.
Below, we highlight the 3 most common reasons why small business owners have had (and continue to have) their bank loan whacked with the REJECTED stamp:
Not Having Excellent Credit
Prior to the Great Recession, while banks weren’t doling out business loans like proverbial hotcakes (although some of them were coming close!), they were nevertheless approving many applicants who had good credit – which makes sense.
These days, banks are taking a very careful and narrow view of good credit, and want exceptional or near-perfect credit. Applicants who don’t score very high (both business credit and personal credit) are often being turned away.
Not Having a Lengthy Credit History
Almost everyone — from the government, to the Chambers of Commerce, to college professors, and the list goes on — are extolling the virtues of small businesses, and encouraging entrepreneurs to turn their dreams into reality; and create jobs and economic activity in the process.
However, while banks will typically only consider funding for businesses that have been operational for at least two years; though some banks want longer.
This leaves millions of startup owners and entrepreneurs on the outside looking in. They don’t have a long enough credit history, and banks are often telling them to “come back later”.
Not Having Collateral (or Enough Collateral)
Two things are relevant to note here: 1) all banks demand collateral before they’ll even consider approving a loan, and 2) many banks are notorious for under-valuing collateral.
Simply put: business owners who either don’t have enough collateral, or don’t want to pledge excessive assets, will not have their bank loan application approved. Similarly, business owners who can’t wait months for banks to finish their evaluation process are out of luck as well.
Remember: it costs banks just as much to underwrite a $200,000 business loan as it does a $2 million dollar loan; and they generate much more profit on the latter. As such, small businesses have no leverage to speed up the process.
The Bottom Line
Despite the steady stream of bank loan rejections, believe it or not but something good came out of the Great Recession, too: it created disruption in the lending marketplace, and paved the way for companies like Mulligan Funding to fill a critical gap.
We’ve provided small businesses across the country with access to the financing they need to succeed and grow. Unlike banks, bad credit isn’t deal-breaker, and we only need to see a few months of credit history – not a few years. What’s more, we don’t require collateral of any kind, and our approval process from beginning to end is measured in days – not months!
Call Mulligan Funding at 855-326-3564 to discuss your financing options today!
The information shared is intended to be used for informational purposes only and you should independently research and verify.
Note: Prior to January 23, 2020, Mulligan Funding operated solely as a direct lender, originating all of its own loans and Merchant Cash Advance contracts. From that date onwards, the majority of funding offered by Mulligan Funding will be by Loans originated by FinWise Bank, a Utah-chartered Bank, pursuant to a Loan Program conducted jointly by Mulligan Funding and FinWise Bank.