Whenever we think about getting a sizeable loan to fund our business, we often think about approaching a bank. Of course, for many of us this is largely a futile endeavor, which is why business to business loans are becoming more “mainstream.”
Why Banks Are Not Ideal for Small and Medium-Sized Businesses
Big banks only approve 21.6% of small business loan applications, and simple math tells us that this means virtually 4 out of 5 loan applications from small businesses are denied. Big banks don’t really like to grant loans to small businesses because they take up too much of their time, it’s hard to automate them, and costly to underwrite.
But what about small community banks? It’s true that they are more reliable “small business-friendly” compared to big banks, which is why half of all business loans are provided by community banks. The problem is that many community banks are getting out of the business as a result of new regulatory restrictions. A report from the Federal Reserve Bank of Richmond revealed that the number of community banks dropped by a whopping 41% from 2007 to 2013.
B2B Lending Options
The scarcity of lenders has left small business owners no choice but to use their personal credit cards to get cash advances, but this is a dangerous move. Credit cards often don’t have transparent pricing, and the rates for cash advances are rather exorbitant.
But with business to business loans, small business owners now have another option. These B2B lenders may have different procedures, but they all have something in common. They can loan small amounts to businesses that are too risky or new for banks and traditional lenders to consider lending to.
Advantages of B2B Lending
As many small business owners are discovering, B2B lending offers several distinct advantages.
- It’s very easy. You don’t need to jump through as many hoops as you would when you apply to a bank for a loan. In fact, you only need to go online. You find a platform that offers B2B lending, apply for a loan by sending your personal and work info as well as the amount you need, and then you also include your deposit info.
Once you’ve completed the application, you immediately get funding offers from a number of lenders willing to provide the financing. You can check out each lender’s term and then pick the most suitable one for your situation. Once you’ve done this, you immediately get your money in your bank account.
- It takes very little time. Not only are you spared the effort of having to go from one bank to another, but you’re also exempted from wasting too much time looking for a loan. B2B loans only take a few minutes to complete. It’s easy enough that you can get the money you need in a day or even less when you get B2B loans.
Of course, the amount may not be all that much, as some may limit you to just $1,000 or $2,500 per transaction. The rates can be rather high as well. But for some entrepreneurs, business to business loans are better than using credit cards and it’s certainly better than wasting weeks applying for a bank loan only to be rejected in the end.