Position Yourself to Get a Non-traditional Small Business Loan

In a world where traditional banks have cut back on their small business lending, small businesses have had to scramble, sometimes unsuccessfully, to raise working capital. To the shock of many small businesses, getting a small business loan from a traditional bank hasn’t been as easy as it may have been in the past. When this happens, the search for an alternative source of borrowing is on. This is where non-traditional lenders step up.


Many small businesses seeking more working capital are unaware that there are other borrowing options out there. Well, there are. Actually, there are many different options for borrowing the working capital they need. These non-traditional lenders do not conform to the same underwriting guidelines as a regular bank.


One example is a lender that will not consider the small business owner’s personal FICO score as a major factor in its underwriting process. This type of lender will focus more on the health of your small business. To do this, they look at your small business’s cash flow using your business bank statements. They also consider your annual revenue.

Here is how to position yourself to get a non-traditional loan based on your cash flow. We will discuss the minimum criteria and then the average criteria. First, the minimum criteria:

  • FICO = 500 or better.
  • Annual revenue = $100k or more.
  • Minimum monthly business bank balance = $1k/month for the last three months.

This type of loan may get you up to $35k in working capital.

Here is the criterion for an average loan that may get you up to $100k in working capital:

  • FICO = 620 or better.
  • Annual revenue = $150k or more.
  • Minimum monthly business bank balance = $3k/month for the last three months.


These are just ballpark figures to position you to get a non-traditional, business cash flow oriented working capital loan. If you meet, at the least, these requirements, though, you are well positioned to get some decent working capital funding.

For more information on small business loans, go to www.spcapitalfinancing.com or Google Specialized Capital Funding.






My Bank Tried Their Best

Your local bankers want to lend money to small businesses. They have entire departments that are committed to the development of small businesses. They strive to help your business. But often times, as much as they would like to help you… they can’t.

You walked into your local bank expecting to get the same loan to grow your business as you always did. Your business financials are the same, or better in some areas, as they always were. It was a sure thing. But a few days later, your bank called. Your loan had been declined! Why was it declined now?

Two possibilities are; your personal credit score has changed or the bank has tightened their lending standards.

Let’s look at the first one. Credit scores can fluctuate for a multitude of reasons. Some score changes are caused by having something negative pop up on your report unexpectedly. It could have been caused by leaving higher than usual balances on your credit cards at the end of the month. Maybe your business partner opened a new line of credit.

Sometimes, a drop of just a few points on your FICO is all it takes for a bank to not be able to get your loan through underwriting. It’s a good idea to use a reputable credit monitoring agency to keep an eye on your credit if you regularly take out loans to grow your business.

The second possibility is that the bank has tightened their lending standards for commercial loans. In their report “The July 2012 Senior Loan Officer Opinion Survey on Bank Lending Practices”, The Federal Reserve Board stated that some banks had “cited a less favorable or more uncertain economic outlook as the reason [for tightening their lending standards]”. Maybe your bank is one of these banks. Your business is doing well. You are in a position to grow but you are a victim of the economy.

What now?

Don’t stop trying! You can still get that loan.

Since the tightening of lending standards, many innovative nontraditional lenders have opened their doors. Many of these innovative lenders do not follow the same underwriting guidelines as traditional lenders. That is what makes these types of lenders innovative.

One lender, in particular, puts much less importance in the business owner’s personal credit score and more emphasis on recent and past performance of your business. They have constructed an underwriting model that will tell them if you are a risk or a good candidate for a commercial loan. Their model will also gauge how much they can lend you and at what terms. If your personal FICO is low, but your small business is performing, you can get a loan. This is innovation at its best!

Other nontraditional lenders may have other models and guidelines to evaluate whether your business is risky to lend to or not. The point is – if your bank tried their best but can’t help you, don’t give up. There are nontraditional lenders that can assist you in getting the working capital you need to grow your business.