4 Pain Points of Applying for a Traditional Small Business Loan

pile of paperwork

At some point, almost every small business will need access to capital. In fact, according to a Federal Reserve Small Business Credit Survey, almost 50 percent of surveyed small businesses applied for financing in 2015. Whether it’s to purchase additional inventory or equipment, fund day-to-day operations, or expand to a new location, easy and fast access to funds is a must. Unfortunately, the process of applying for a small business loan through banks and other traditional lenders can be a nightmare — riddled with paperwork and fine print. For instance, according to a previous Federal Reserve study, businesses surveyed spent 24 hours on average researching and applying for credit.

Here are four major pain points business owners often encounter when applying for a traditional small business loan:

  1. The Paperwork
    Applying for a loan may find you buried in paperwork. Banks and other traditional lenders can require vast amounts of documentation — things like bank statements, income tax returns, business credit reports, legal documents, business plans, or even your personal credit history. Getting that paperwork together just to start an application can take hours all by itself.

  2. Credit Score Minimums
    Many lenders require minimum personal and business credit scores to qualify for a loan. You’re probably familiar with FICO scores, which look at your personal credit history, but lenders may also look at your FICO SBSS score (Liquid Credit Small Business Scoring Service), which generally can be seen as the “counterpart” FICO score for a business. While business credit scores can be a useful way to evaluate a business’ creditworthiness, they may present hurdles for relatively new businesses. Inputs, such as credit history and credit source diversity, can hurt small businesses that oftentimes have limited histories and sources.

  3. Personal guarantees
    Even if you make it through a traditional lengthy application process, many lenders require personal guarantees on your business loan — making you personally liable if your business runs into trouble. Personal guarantees can mean your personal assets may be used as collateral if your business is unable to repay the loan — magnifying the impact of any troubles you may encounter with your business.

  4. Race Against Time
    You scrambled to do your part with hours of preparation and paperwork, but it still may take a while to actually get approved. Some traditional lenders can take up to seven business days to make an approval decision, and from there, it could be another thirty to sixty days to see the funds in your bank account. Together, these delays can have enormous impact on your business.

Learn more about Square Capital.

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Getting a traditional small-business loan can be a complicated process. However, with Square Capital, there’s no cumbersome paperwork or lengthy application, qualified sellers can get funds as soon as the next business day upon approval, repayment happens as a fixed percentage of your daily card sales, and the cost of the loan is a fixed dollar amount that never changes. We want to make getting access to the funds you need to grow your business as simple and easy as possible.

About Square Capital

Square Capital offers easy access to fast, flexible and simply-priced small business loans to help you grow your business. Learn more.

This communication is for informational purposes only and is not intended as financial or legal advice.

Square Capital, LLC is a wholly owned subsidiary of Square, Inc., d/b/a Square Capital of California, LLC in FL, GA, MT, and NY.All loans are issued by Celtic Bank, a Utah-Chartered Industrial Bank. Member FDIC, located in Salt Lake City,UT. Loans are not issued to borrowers in ND. The individual authorized to act on behalf of the business must be a U.S. citizen or permanent resident and at least 18 years old. Valid U.S. bank account and Social Security number or Individual Taxpayer Identification Number are required. Actual fee depends upon payment card processing history and loan amount. A minimum payment of 1/18th of the initial loan balance is required every 60 days and full loan repayment is required within 18 months. All loans are subject to credit approval.


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