4 Problems With Getting a Small Business Loan from a Bank

Last Updated on June 7, 2017

If you’ve tried to go to a bank for a business loan, you’ve probably run into a host of problems getting your application approved, or even looked at! Of course, it’s no accident that getting a small business loan from banks is, for most applicants, frustrating and futile. Read on to find out the four reasons why, and how to avoid them!

how to get a small business loan from a bank problems

4 Problems With Getting a Small Business Loan from a Bank

  1. There’s hardly any profit for banks in it.It costs banks about as much money to underwrite and administer a $100,000 loan as it does a $2 million dollar loan. Then when you add the costs of evaluating collateral (since all bank loans are secured loans), then shifting resources away from small businesses borrowers and towards larger enterprises is, as far as banks are concerned, a no-brainer. On top of this, interest rates are at historical lows. Banks would rather pump capital into a condo development or big merger or acquisition than wait a decade to make $10,000 profit on a small business loan.
  2. Outstanding credit is a must.It’s widely understood that a credit score of around 680 is the minimum threshold for getting a small business loan from a bank. However, approximately 33% of all U.S. adults have a credit score below 601, and many others hover between 601 and 680. While all of these folks aren’t small business owners in need of a loan, those who tick both boxes shouldn’t bother wasting their time applying at their bank. Unless they can get the bank manager to personally push something through, it’s not going to happen.
  3. Revenue requirements are high.Most small business owners aren’t, as the old saying goes, rolling in dough. In fact, the majority generate about $50,000 a year in revenue. While banks should admire these men and women for working hard and sacrificing to experience their share of the American Dream, they take a somewhat less enthusiastic view. Basically, if a business isn’t generating a few hundred thousand a year in revenue — and has been around for a while — then a bank loan is almost certainly not in the cards. This is especially the case if we’re talking about SBA loans.
  4. The application is excessive.A typical small business bank loan applications makes doing taxes seem recreational. The documentation requirement is excessive, convoluted and complex. For example, applicants must submit a business plan, resumes for of all management and executive staff, a personal credit report, a business credit report, a (clear) criminal record report, financial statements, income tax returns, bank statements…and the list goes on. Then, if anything is missing or incomplete — or simply doesn’t fit the expectations of the loan officer or bank manager — the process comes to a grinding halt.

How to Get Easier, Faster Alternatives to Bank Loans 

At National, we don’t think that getting a small business loan should be an arduous, uphill battle. That’s why our small business loan application process is easy and efficient.

We don’t require excessive documents, and impaired or bad credit is not a deal-breaker. What’s more, instead of taking months to review a loan application, we get the job done within 24 hours — because we know that in the small business world, time is always of the essence.

To learn more, contact us today by calling (877) 482-3008. Because while running a country should be hard work, applying for and getting a small business loan should be streamlined and simple!

Start by filling out our 1-minute application, and we’ll help you find a loan option that’s right for your business. 

Learn More About Bank Loans vs. Alternative Lending Options in Your Free eBook

For more information on how to get business funding when banks say no, download our FREE eBook today:

National Business Capital & Services is the #1 FinTech marketplace offering small business loans and services. Harnessing the power of smart technology and even smarter people, we’ve streamlined the approval process to secure over $1 billion in financing for small business owners to date.

Our expert Business Financing Advisors work within our 75+ Lender Marketplace in real time to give you easy access to the best low-interest SBA loans, short and long-term loans and business lines of credit, as well as a full suite of revenue-driving business services.

We strengthen local communities one small business loan at a time. For every deal we fund, we donate 10 meals to Feeding America!


About the Author, Megan Capobianco

Megan is passionate about helping business owners along their journey - providing them with relevant content they can use in their day-to-day operations.

Disclaimer: The information and insights in this article are provided for informational purposes only, and do not constitute financial, legal, tax, business or personal advise from National Business Capital & Services and the author. Do no rely on this information as advice and please consult with your financial advisor, accountant and/or attorney before making any decisions. If you rely solely in this information it is at your own risk. The information is true and accurate to the best of our knowledge, but there maybe errors, omissions, or mistakes.