“This week’s Ask Manny question comes from James.”

Question:

I applied for a loan at my bank and they turned me down. I still need to borrow some money to expand my business. Where else can I get the money I need?

 

Answer:

Many people think that a bank is the only place where you can get a loan. But as a small business, you have many more resources available to you. In fact, as a small business, a bank is probably the LAST place you want to try to get a loan. Banks have strict regulations that they must follow to ensure they remain solvent. But unfortunately, while these rules help to ensure the continued strength of our economy, they also in turn make it difficult for small businesses to fit within the box that is required to obtain a loan.

Now, I know what you’re thinking: What about SBA Loans? The SBA (Small Business Administration) does not provide direct loans – they only act as a partial guarantor to a loan that you obtain from a bank. You still have to go through the normal qualification process of the bank to get the loan. It’s just that, when it comes time to check the box on who’s guaranteeing the loan, the bank can state that the Federal Government is providing some partial guarantee. And the SBA won’t guarantee all loans from just anyone. All that to say, it can still be difficult even with the SBA involved.

So where can you turn to? The first place I tell clients to look at is their local CDFI. CDFI, which stands for Community Development Financial Institution, is a private (often non-profit) organization whose mission is to help local communities grow the strength of their economy. This is done primarily through helping the small businesses in that community to grow. How do they do this? By providing resources, education, consulting, and… you guessed it … loans.

CDFI’s typically do a lot of lending to small businesses. They provide the funds so these businesses can grow. One of the benefits is that, along with the capital, they will typically also provide other resources to the business that can help ensure its success, like free classes on accounting, legal clinics, consultants, etc. Because they are not banks, they do not have to follow the same strict regulations that banks must follow. And because their mission is to specifically help small businesses, their underwriting criteria is often much more relaxed. In fact, even if you have bad credit and no collateral, you may still be able to obtain a loan through your local CDFI because… that’s their mission!

To find your local CDFI, search the directory on the CDFI Coalition website (cdfi.org) or do a quick web search for “local CDFI”.

There are other lending options available to you as a small business owner, by the way. If you want to learn what other options are available, or just want to contact a professional business money manager, reach out to us! Our full-time CFO staff is standing by to help you navigate the nuances of business growth, including accessing the cash you need and spending it wisely. Schedule your free consultation at www.cfoservicesgroup.com .

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