Why to Think Outside the Bank for Small Business Loans

By pitting a "good" lender against the "bad" banks, lenders inspired by a good cop versus bad cop mentality have realized that offering small business loans without banks can be a marketing success. "Thinking outside the bank" has become a battle cry for some lenders in their efforts to dramatize a new bank-less approach to business financing. Small businesses should not let the advertising hype get in the way, and the point that deserves particular emphasis is that no matter whether they obtain financial help from a bank or not, very few businesses can survive for long without adequate commercial loans.

While there are more examples than we have room to talk about in a short article such as this, small business owners usually have two major reasons to avoid banks for their business loans. First is the common occurrence of disliking banks because of prior problems and mistreatment, and there are more accounts of similar difficulties reported everyday. As one example, most commercial borrowers are aware that bailouts funded by taxpayers have not resulted in a normal level of small business financing.

For a second example, banks are failing at a rate that alarms most observers so logic dictates that small businesses should not book passage on a ship that is about to sink. Meanwhile, routine small business loans are not available from the remaining banks on a reliable basis. If their bank is not up to the fairly normal task of offering business financing to them when they need it, a prudent borrower must be prepared to take their business elsewhere.

The growing bank unpopularity has provided plenty of motivation for finding commercial loans while also eliminating banks. From the early origins of American history banks and bankers have proven to be unpopular, and Thomas Jefferson is one who had similar feelings when he said that "banking establishments are more dangerous than standing armies". The newest element in the desire to escape banking relationships is probably tied to the massive changes seen during the past ten to fifteen years.

Because of specific legal restrictions, banks cannot file for bankruptcy in the way that General Motors did but banks have still changed just as dramatically as if they had. Except in paid advertising, it has become even more rare for either businesses or individuals to speak positively about their bank, but many of us still have warm feelings about earlier banking days. Foreclosure notices and exorbitant credit card fees have become the contemporary bank images to replace one of giving away toasters.

But there can be an even darker side to how banks can operate when there are not adequate controls governing their financial transactions as evidenced by the problems created by derivatives trading. It has become more clear with each emerging report that a total financial disaster was only narrowly averted after banks were caught using an absurd amount of leverage with securities that they did not understand sufficiently. Perhaps Thomas Jefferson really did know what he was talking about when he observed how dangerous banks can be.

Steve Bush and AEX Commercial Financing Group are a consistent source of working capital help. Stephen has provided practical expert advice to small businesses for over 25 years and delivers business cash advance programs and small business financing services throughout the United States.