Businesses Lending Tighter than Ever

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Businesses Lending Tighter than Ever

Posted On : Apr-14-2011 | seen (370) times | Article Word Count : 723 |

Lending restrictions make it difficult for companies with less than stellar credit to obtain loans. There are options, but you need to do your homework.

With lenders focusing more of their efforts on qualified businesses, many small companies with less than stellar credit are finding it increasingly difficult to obtain financing for expansion plans and equipment upgrades.
Even companies with A+ credit ratings and new startups with good credit histories are struggling to get loans, but for the companies with B+ and C+ credit ratings, the lending landscape is bleak, even as reports from the Federal Reserve purport to be seeing the opposite.

Sure, if you have outstanding credit, you can pretty much tap the major banks out there for infrastructure loans and even loans to fund expansions and research and development projects. But if you are a small business that, due to the downturn in the economy, found yourself having to push your credit limits to the margins just to keep the lights on the payroll flowing, you are very likely seeing a very different picture.

Although it paints a somewhat rosy picture for those companies with solid credit ratings the most recent Senior Loan Officer Opinion Survey makes clear that most banks aren't easing up on commercial lending; the majority are keeping the same stringent standards they've applied since the financial crisis unfolded.

And those that are doing more lending clearly think bigger is better, according to the report. Roughly 20% of large banks surveyed reported to have eased up on their credit standards for commercial and industrial loans to large and mid-sized companies. But what about the little guys? Roughly only 10% reported that they had eased standards for small businesses with $50 million or less in annual sales, including those with less than top-shelf credit ratings.

Essentially, credit is there, but you’ve got to have the lending history in place when you apply, otherwise, expect to be rejected or, at minimum, get his with pretty high interest rates. Lenders are lowering their risk by lending only to qualified businesses with the A+ ratings, which of course they are doing to protect themselves. They do not want another meltdown on their hands. During the mortgage crisis of course it was revealed that lending on a handshake and a wink was rampant, and look at the hot water the banks, not to mention the real estate sector, got into.

Traditional banks still have very tough guidelines to follow, thanks to legislation enacted by the Obama administration—legislation intended to help banks avoid going down the slippery path they’d just returned from. But overall, not that many new lending programs are designed to help the small business startup, which, lets face it, isnt’ going to come in with A+ credit because there simply isn’t enough borrowing history on its books. However, they do have programs if you have a great FICO score and have been in business for two years or more with financials showing revenue and profits.

Startups are having a particularly tough time getting financing, especially if the owner also has less than stellar personal credit. An entrepreneur with excellent credit, perhaps a FICO score of 735 or above, may be able to get a business loan green lighted, it will not come cheap: Loan and credit line approvals are shrinking while interest rates seem to be getting higher.

If you are a small company with a relatively low score, it’s absolutely crucial to get your financial house in order before shopping around for a loan. Small Business Administration loans continue to provide options for small-business financing, but there are guidelines to adhere to and you need to do your homework before applying.

Business owners should also be prepared to show a detailed accounting of how they will use the money if their loan is approved. And, of course it goes without saying that there are non-traditional lenders out there who are willing to help companies get their feet off the ground or make improvements or investments in an established business.

The more you have to show that your business is on solid footing, geared for growth and backed by a solidly written financial projection sheet, the better your chances will be of obtaining alternate sources of small business funding.

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<h1>Businesses Lending Tighter than Ever</h1> Author: <a href='http://www.articleseen.com/profile_Robert Charles.aspx'>Robert Charles</a> With lenders focusing more of their efforts on qualified businesses, many small companies with less than stellar credit are finding it increasingly difficult to obtain financing for expansion plans and equipment upgrades.
 Even companies with A+ credit ratings and new startups with good credit histories are struggling to get loans, but for the companies with B+ and C+ credit ratings, the lending landscape is bleak, even as reports from the Federal Reserve purport to be seeing the opposite.

Sure, if you have outstanding credit, you can pretty much tap the major banks out there for infrastructure loans and even loans to fund expansions and research and development projects.  But if you are a small business that, due to the downturn in the economy, found yourself having to push your credit limits to the margins just to keep the lights on the payroll flowing, you are very likely seeing a very different picture.

Although it paints a somewhat rosy picture for those companies with solid credit ratings the most recent Senior Loan Officer Opinion Survey makes clear that most banks aren't easing up on commercial lending; the majority are keeping the same stringent standards they've applied since the financial crisis unfolded.

And those that are doing more lending clearly think bigger is better, according to the report. Roughly 20% of large banks surveyed reported to have eased up on their credit standards for commercial and industrial loans to large and mid-sized companies.  But what about the little guys?  Roughly only 10% reported that they had eased standards for small businesses with $50 million or less in annual sales, including those with less than top-shelf credit ratings.

Essentially, credit is there, but you’ve got to have the lending history in place when you apply, otherwise, expect to be rejected or, at minimum, get his with pretty high interest rates. Lenders are lowering their risk by lending only to qualified businesses with the A+ ratings, which of course they are doing to protect themselves.  They do not want another meltdown on their hands.  During the mortgage crisis of course it was revealed that lending on a handshake and a wink was rampant, and look at the hot water the banks, not to mention the real estate sector, got into.

Traditional banks still have very tough guidelines to follow, thanks to legislation enacted by the Obama administration—legislation intended to help banks avoid going down the slippery path they’d just returned from.  But overall, not that many new lending programs are designed to help the small business startup, which, lets face it, isnt’ going to come in with A+ credit because there simply isn’t enough borrowing history on its books. However, they do have programs if you have a great FICO score and have been in business for two years or more with financials showing revenue and profits.

Startups are having a particularly tough time getting financing, especially if the owner also has less than stellar personal credit. An entrepreneur with excellent credit, perhaps a FICO score of 735 or above, may be able to get a business loan green lighted, it will not come cheap:  Loan and credit line approvals are shrinking while interest rates seem to be getting higher.

If you are a small company with a relatively low score, it’s absolutely crucial to get your financial house in order before shopping around for a loan. Small Business Administration loans continue to provide options for small-business financing, but there are guidelines to adhere to and you need to do your homework before applying.

Business owners should also be prepared to show a detailed accounting of how they will use the money if their loan is approved. And, of course it goes without saying that there are non-traditional lenders out there who are willing to help companies get their feet off the ground or make improvements or investments in an established business.

The more you have to show that your business is on solid footing, geared for growth and backed by a solidly written financial projection sheet, the better your chances will be of obtaining alternate sources of small business funding. About the Author: For more details please visit <a rel="nofollow" href="http://www.exponentialfinance.com/">www.exponentialfinance.com</a> Article Source: <a href='http://www.articleseen.com/Article_Businesses-Lending-Tighter-than-Ever_59280.aspx'> http://www.articleseen.com/Article_Businesses Lending Tighter than Ever_59280.aspx</a>

Article Source : http://www.articleseen.com/Article_Businesses Lending Tighter than Ever_59280.aspx

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For more details please visit www.exponentialfinance.com

Keywords : Asset & Collateral Based Heavy Equipment Financing, Construction Receivables Factoring and Working Capital, Business Cash Adv,

Category : Finance : Finance

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