In a recent article by Marc Prosser at fitsmallbusiness.com, his interview with Rohit Arora at Biz2Credit, revealed the financial institutions that are approving business finance. According to Mr. Arora’s findings, loans are approved as follows:
• Big Bank loans are approved: 17 – 19% of the time.
• Small Bank loans are approved: 44 – 51% of the time.
• Credit Unions: 43 – 50%
• Alternative Finance: 63 – 67% and
• Institutional Lenders: 57 – 68%
These numbers should, have business owners seeking their financing with alternative lenders, but there are more facts to consider.
• Big banks are usually making loans to big and well established companies
• Small banks are typically making smaller loans, which are backed by the SBA. But remember that SBA loans are notoriously difficult and time consuming to obtain.
• Credit unions, often finance small independent businesses, but their rates tend to be higher at the 6 – 12% range.
• Alternative lenders, provide the largest number of small business loans, with short terms, but they have very high rates, sometimes as high as 50%.
• Institutional lenders, like hedge funds or industrial banks, are making loans to multi-franchise business owners. And like credit unions, their rates are in the 10-20% range.
So, what option is a typical business owner going to choose when they need to secure financing? That’s where receivables financing companies like Universal Funding comes in.
Receivables financing companies do not facilitate loans in the traditional sense. The service they offer is invoice factoring, which is a financing solution that provides advances against open invoices in accounts receivable. Invoice factoring rates are usually in the 1%-6% range.
Taking the statistics provided, let’s compare rates and add invoice-factoring companies into the mix.
What this comparison visualizes is that factoring companies have high approval rates at a very low cost, which makes for an ideal financing option.
To get approved for financing at a low rate please contact Universal Funding at 800-405-6035.