How to Get a Private Business Loan—And Why Main Street Banking Doesn’t Want You to Know These 7 Things

What is a Private Business Loan?

Are you a small business owner or just starting and looking for financing? You might have heard horror stories about how hard it is to apply for and get private loans, but what if I told you that the process could be hassle-free?

Getting funding from traditional banking institutions can be almost impossible. But you can continue your dreams of owning your own business. Private lenders offer much easier access to capital than going through a bank or credit union.

The 7 most essential aspects of private business loans, including how to apply for one and why traditional banks would rather you didn’t, will be covered in this article. With this knowledge, you’ll find securing your business’s funding easier.

A private business loan may be the best option if you need money for your company but want to avoid going via a bank.

These loans are typically used to finance business operations and expansion and can be secured or unsecured depending on the lender’s requirements and the borrower’s creditworthiness.

Private business loans can be an excellent option for business owners who don’t qualify for traditional bank financing or need funds quickly. While they typically have higher interest rates than loans from a bank, alternative lenders can provide the funds a business needs to get off the ground or expand.

Why take a private business loan? 

Quick approval, flexible repayment terms, and an excellent alternative to traditional banks make private loans a viable option for small business owners. You can use a private small business loan for various purposes, including starting a business, expanding an existing one, purchasing equipment or inventory, and more.

When a business owner needs money but doesn’t qualify for a regular bank loan, turning to a private lender can be a good option because of the favorable interest rates and repayment schedules offered by these institutions. Additionally, private lenders are often willing to work with borrowers with less-than-perfect credit histories.

How to Get a Private Business Loan?

Here are some suggestions to help you improve the odds of getting approval for a private business loan:

Determine your eligibility: Before applying for a private business loan, it is critical to determine if you are eligible. Factors such as credit score, income, and collateral will determine eligibility.

Research your options

Start by researching private lenders to find out which offer business loans. Look for lenders who specialize in working with small businesses and have a reputation for providing good customer service.

Once you have identified potential lenders, compare their terms and rates to find the best option for your needs. Make sure to read all of the fine print before signing any agreement. Gather the necessary documents

Prepare your financial information:

You should get your financial documents in order before applying for a loan. These documents should include your income statement, balance sheet, and cash flow statement, as well as your business plan and any other relevant documents.

Choose the right lender:

Once you have a list of potential lenders, compare their terms and rates to find the best option for your business. Consider factors such as interest rates, repayment terms, and the capital you need.

Submit your loan application:

Once you have chosen a lender, fill out and submit your loan application. Be sure to provide all the necessary information and documents, and be prepared to answer any questions the lender may have.

Negotiate the terms of your loan:

If you get a loan application approval, you may be able to negotiate the terms of your loan. The negotiable terms can include the interest rate, repayment schedule, and other terms important to your business.

Get your funding:

Once you agree to the loan terms, you can expect to receive your funding within hours, days or weeks. The distribution of funds will depend on the specific lender and the type of loan that you are getting.

7 Things that Main Street Banks Don’t Want You to Know About Private Lenders

Getting a private business loan can be challenging, but it is possible with the right approach. Here are seven things that a small business owner should know about getting a private business loan and why Main Street banking doesn’t want you to know them:

You don’t need perfect credit – #1

Many believe they need perfect credit to get a private business loan, but this is only sometimes the case. While good credit is always beneficial, many private lenders work with borrowers with less-than-perfect credit.

You don’t always need collateral – #2

Unlike traditional banks, many private lenders do not require collateral to approve a business loan. Not using collateral means you can get a loan without risking your personal assets.

Private lenders offer flexible repayment terms – #3

Private lenders often offer more flexible repayment terms than traditional banks. This flexibility means you can choose a repayment schedule that works best for your business cash flow and negotiate lower interest rates or other terms.

Private lenders are more likely to approve your loan – #4

Because private lenders have different criteria for loan approval, they are often more willing to approve loans for small businesses. The private lender’s underwriting criteria means you have better odds of getting a loan from a private lender than from a traditional bank.

Private lenders can meet your funding needs faster – #5

Private lenders, like Sunwise Capital, often have a faster approval process than traditional banks, which means you can get your funding faster. The ability to approve your loan quickly and fund in hours can be crucial for businesses that need cash quickly to take advantage of a business opportunity or to cover an unexpected expense.

Private lenders offer more personalized services – #6

Private lenders often provide more personalized services than traditional banks. Personal service means you can work directly with a lender to discuss your needs. You can get answers to any questions you may have about funding both now and in the future with a knowledgeable funding specialist.

Private lenders can provide access to more capital – #7

Because private lenders are not subject to the same regulations as traditional banks, they can often provide access to more capital. Main street banking doesn’t want you to know this because it means that you may get a larger loan or more funding than you would be able to get from a traditional bank.

Getting a private business loan is a good option for small businesses looking for funding. By working with a private lender, you can get the small business financing you need quickly and easily, with flexible repayment terms and personalized service.

Nonbank lenders

Businesses looking for financing can seek out nonbank lenders. These lenders are not subject to the same regulations as traditional banks, so they can often offer more flexible terms and faster approval times. 

Additionally, nonbank lenders may be willing to work with borrowers with less-than-perfect credit or needing larger loans than traditional banks would approve.

Alternative lenders

Alternative lenders are another financing option for businesses looking for a private loan. The alternative lender offers a variety of loan products, including short-term loans, merchant cash advances, and invoice factoring. 

Alternative lenders often have more flexible terms than traditional banks and may be willing to work with borrowers with less-than-perfect credit. Additionally, alternative lenders can provide access to more capital than traditional banks.

Online lender

Online lenders are similar to alternative lenders and provide another option for businesses looking for money. These lenders offer a variety of loan products, including short-term loans, merchant cash advances, and invoice factoring. Online lenders often have more flexible terms than traditional banks and may be willing to work with borrowers with less-than-perfect or even bad credit. Additionally, online lenders can access more capital than a traditional lender or bank.

Traditional lenders

Finally, traditional lenders are a well-known option for businesses looking for financing. These lenders offer a variety of loan products, including term loans, business line of credit, and SBA loans. 

Traditional lenders often have more stringent requirements than alternative or online lenders, but they may be willing to work with business owners and entrepreneurs with less-than-perfect credit. 

Additionally, traditional lenders can provide access to more capital than alternative or online lenders.

Rates

Competitive interest rates

Private lenders often offer competitive interest rates that can be lower than those offered by traditional banks. Additionally, private lenders may be willing to negotiate the loan terms, including the interest rate and repayment schedule.

Flexible repayment terms

Private lenders offer more flexible repayment terms and payment options than traditional banks, which means you can work with a lender to find a repayment plan that works best for your business.

Personalized service

Finally, private lenders often provide personalized services that can benefit small businesses. Private lenders may work with you to find a financing solution that meets your needs and provide advice on the best use of the funds.

Approval rate

Private lenders typically have higher approval rates than traditional banks, so getting approved for a loan is more manageable. Additionally, private lenders may be willing to work with borrowers with less-than-perfect credit.

Speed

Private lenders often offer faster approval times than traditional banks, so you can quickly get the funds you need. Additionally, private lenders may be able to provide access to more capital.

Factor rate

Private lenders typically charge a factor rate instead of an interest rate. The factor rate is the total cost of borrowing, including fees and interest, expressed as a single percentage, making it easier to compare loan products from different lenders.

Collateral

Private lenders may require collateral for some loan products. Collateral is an asset that the lender will use to secure the loan in case you cannot repay it. Real estate, automobiles, and machinery are all examples of standard collateral.

Loans and Funding Programs

Private business loans and funding sources

Private lenders offer a variety of loan products and funding sources that can help businesses meet their financial needs. These include short-term loans, merchant cash advances, invoice factoring, lines of credit, and SBA loans. Additionally, private lenders may be able to provide access to more capital than traditional banks.

Equity funding

Private lenders may also offer equity funding, a type of financing that involves selling a portion of the company’s ownership in exchange for capital. Equity funding can be an attractive option for businesses that cannot secure traditional financing.

Short-term loans

Short-term loans are financing that can provide businesses with quick access to capital. The term loan typically has shorter repayment terms than traditional ones and may be easier to qualify for the term loans. You can use short-term loans for various purposes, including working capital, equipment purchases, and inventory funding.

Conventional loans

Conventional loans are financing provided by traditional banks and other financial institutions. These loans typically have longer repayment terms and may require collateral. Additionally, conventional loans may be more challenging to qualify for than private financing.

SBA loans

The Small Business Administration (SBA) offers a variety of SBA loan products (SBA express loan) that can help businesses access capital. Small Business Association loans typically have lower interest rates and longer repayment terms than conventional loans. Additionally, the SBA can provide access to more money than traditional lenders. You will need credit approval from the SBA lender to make this a viable loan option. 

Bank loan

Bank loans are financing provided by traditional banks and other financial institutions. These loans typically have longer repayment terms and may require collateral. Additionally, bank loans may be more challenging to qualify for than private financing.

Equipment loans

Business owners can use equipment loans as a type of financing to purchase equipment for a business. These loans typically have shorter repayment terms than traditional ones and may be easier to qualify for since the equipment provides security. Additionally, equipment loans may provide access to more capital than conventional lenders.

Personal loans

We discourage using personal loans to finance businesses. Personal loans are a financing strategy where individuals or family members provide you with capital. These loans typically have shorter repayment terms than traditional ones and may be easier to qualify for than a traditional bank loan. 

Additionally, personal loans may provide access to more capital than traditional lenders. The caveat is that you are personally responsible if you can’t pay or have a loan default, and the negative implications can be devastating. However, the bank will also require a personal guarantee.

Loan agreement

A loan agreement specifies the terms and conditions of a loan and is a legally enforceable contract. It should include the loan amount, repayment schedule, interest rate, and any associated fees. Loan agreements are essential for lenders and borrowers to ensure that all parties understand their rights and responsibilities.

FAQs

Why do banks refuse business loans?

Small business loans can be difficult because banks and credit unions are often reluctant to take on the risk of lending to small businesses. Banks typically check credit scores, financial statements, and other documents before giving a business loan. A business loan is often available to those with a minimum credit score of 640, though this number varies from lender to lender. If your credit score is lower than this, you may need to provide additional collateral or a co-signer to secure the loan.

What are the requirements for a private business loan?

Private company loans have more lenient standards than traditional bank loans, although most still want evidence of income or business revenue, financial accounts, and collateral. Private lenders may also require additional documents such as tax returns and bank statements. Additionally, some lenders may require that you have a minimum credit score or that you have been in business for some time.

Why are small business loans so hard to get?

Small business loans can be challenging to obtain because banks are often reluctant to take on the risk of lending to small businesses. Banks typically check credit scores, financial statements, and other documents before giving a business loan. The minimum credit score required to secure a business loan varies from lender to lender but is often around 640. If your credit score is lower than this, you may need to provide additional collateral or a co-signer to secure the loan.

What do banks check before giving a business loan?

Banks typically check credit scores, financial statements, and other documents before giving a business loan. A business loan’s minimum personal credit score is usually around 640, but this can vary depending on the lender. If your credit score is lower than this, you may need to provide additional collateral or a co-signer to secure the loan. Suppose the bank still won’t give you a loan. Consider other financing options such as private lenders, crowdfunding platforms, or government grants. 

What is the minimum personal credit score for a business loan?

As long as you meet the minimum credit score requirement, you may be able to get a business loan from a traditional bank. However, if your credit score is lower than this, you may need to consider other financing options, such as private lenders, crowdfunding platforms, or government grants. 

Additionally, some lenders may require that you have a minimum credit score or that you have been in business for some time. The merchant cash advance is the most forgiving loan option relative to the time in business and credit. 

What do you do when the bank doesn’t give you a loan?

If the bank doesn’t give you a loan, you may consider other financing options such as private lenders, crowdfunding platforms, or government grants. Additionally, some lenders may require that you have a minimum credit score or that you have been in business for some time. You can also look into alternative financing options such as invoice factoring, merchant cash advances, and online loans.