What do I do if I can’t get a business loan?

Many businesses are asking this same question. The problem is complex but can be answered as simply. Banks DO NOT have to lend to make money. They can sit on their deposits and shore up their resources to make more profits. Simple. They DON”T have to lend and they are not right now.

Recently,at the Obama speech in Tampa, Florida for the announcement of High Speed Rail stimulus funds being given to Florida, a business man asked why he couldn’t borrow directly from the SBA program and why he couldn’t get a loan to start a small business which would create 500 jobs. The question was:

‘Thank you. My name is Steve Gordon. I’m from Clearwater. And I manufacture — I own a small company, environmental company. I manufacture the Instant-Off water-saving device that fits on any faucet worldwide. I’m frustrated because I can create 500 jobs; I’ve gone to the banks, I can’t get a loan. And I speak for all businesses in the United States. (Applause.) We are tired of dealing with banks. And I don’t understand — and this is my question for you, is that I know you care, I know you’re trying. And I appreciate the pledge of $30 billion to small businesses. But lending it to the banks to lend to us is not the answer. It’s just not.

What I suggest, and the question is, why can’t you use the SBA just like you lent directly to Wall Street, you lent directly to the automakers, you lent directly to the banks — why can’t the government make small businesses available directly to us?’

The PRESIDENT: Well, this is a good question. Look, first of all, you should be aware that we have increased SBA loans during the course of this year by 70 percent in some cases. So some of the key programs for businesses like yours we have massively increased their lending. And by the way, we’ve waived some of the fees and red tape that are associated with you getting a loan from the SBA.

Now, it’s not enough. Just — I know you’re shaking your head here. I understand it’s not enough because you still want a loan. So — but you need to — I just want you to know, it’s not like we haven’t thought of why don’t we use the SBA. We have. The challenge that we’ve got is, is that even SBA loans are generally run not by the SBA; the SBA essentially works with local banks, community banks, neighborhood banks, to process the loan. And essentially the SBA underwrites the loan.

And so the SBA does not have the infrastructure to go all across the country in every region and process loans to small businesses directly because they don’t have enough people. Somebody yelled, “Why not?” The SBA doesn’t have the staff to do it.

Keep in mind, a small business loan of any sort, or a large business loan of any sort requires some sense of, all right, what’s the business plan, what are your projected earnings, et cetera, et cetera. And somebody has got to do that. Now, if the SBA were to suddenly take over that entire function we’d have to stand up a massive bureaucracy — a huge one. And we’d have to train all those people and it would take too long, and you’d be frustrated — why is it that this big government agency can’t seem to run anything?

So what we’ve decided to do instead is to take $30 billion that was repaid by the banks and make that available under criteria that will encourage small banks to give those loans to you. And if we do that effectively, we can potentially get that money out the door more quickly.

But I am absolutely sympathetic to what you’re saying because I’m hearing it everywhere I go. And I — that’s why I mentioned it last night in my speech. You’ve got a lot of small business owners who are ready to grow, ready to hire, but they just can’t get financing. So we’re going to use the SBA as one tool; this $30 billion is going to help. Ultimately, though, the vast majority of small businesses, their loans are going to come from the private sector. And we’ve got to get the private sector to think differently.

What happened here was that everybody was making loans without thinking of the risk at all. They were just sending out money out the door; that’s how a lot of overdevelopment happened here in Florida, it happened in Nevada, it happened in California — because people were just saying, you know what, we’re making money, we’re not going to ask a lot of questions. Suddenly the bottom falls out. And the pendulum has shifted too far in the other direction so that even if you’ve got a good business plan, you’ve got a good model and you’re making profits and a good product, now banks are reluctant to lend at all.

And what we’re trying to do is to encourage them to get that happy medium where they’re not taking such exorbitant risks that they threaten the entire system, but they’re also open to enough risk that America’s dynamic free enterprise system is actually able to work.

One role — one aspect of this is also getting regulators who oversee the banks — which aren’t under my supervision; these are independent bank regulators — getting them to at least take a closer look at their policies, because a lot of bankers will tell you they want to loan you the money but they’re worried about — they suffered all these losses because of some of the mortgage stuff going belly up. So what they’ll tell you is, I’ve got a bank regulator breathing down my neck making sure that I’m keeping my capital levels high enough. And we’re going to have to make some adjustments there. But that’s not something the administration can do directly. We can just encourage these independent regulators to take a closer look at it.

I’m confident you’re going to succeed, though. And you can give maybe Reggie Love here your business card so we can find out about your terrific business. (Applause.)

So what do you do? Working with a finance loan consultant can help you maneuver through the financial lending market. They can guide you to whether you will qualify, what entities you maybe able to qualify, and what information you will need to qualify. A good consultant should be able to direct you to those lenders as well. They will probably charge a consulting fee but it’s well worth it. But please be cautious of whose advise you listen to and what companies they refer you to. Having your credit shopped in this lending industry is an immediate killer to a loan opportunity.

SBA loans are a good source for a loan right now. The government is backing the loans at a higher % than normal and has cut out some of the fees. You would want to try and work with a SBA Preferred Lender not a certified lender. As they can actually approve the loan and cut out some red tape.

You may have to consider an accounts receivable loan for now. They are short term loans at a high cost. But that cost could be what saves your company why you restructure.

I work with a number of companies that are qualified to offer these loans and one states their program below:

Our unique funding sources have expanded credit criteria, so we can give businesses access to cash they may not be able to acquire through traditional sources.

For questions, advise, or more information you can contact Pamela Hewett at 813-835-1253 or post a comment or question to this blog.