Paragon Blog

Commercial Lending and Small Businesses: What You Need to Know

Memphis, TN - September 21, 2016

Small businesses rely heavily on financing to grow and fund their business, and in today’s world, with a decline in commercial lending to small businesses, it’s becoming harder and harder for them to receive that funding.
Financing a small business is expensive, and most people don’t have the extra money to finance their own company, so loans are a necessity. According to the 2015 Year-End Economic Report published by the National Small Business Association, 27 percent of small businesses were not able to receive the funding they needed. This lack of support prevented their business from growing, forcing them to close or lay-off employees.
Luckily, there is some good news for those smaller businesses. Whether it is a short-term loan or an SBA loan, there are now other ways to receive funding.
The U.S. Small Business Administration offers a variety of loan programs for small businesses. One of the most popular types is the SBA 7(a) Loan Program. This program provides financial help for businesses with special requirements, such as operating for profit, falling under the SBA’s description of small and have reasonable invested equity. It offers low interest rates and long repayment terms; however, the approval rate tends to be lower, so excellent credit is needed.
Another popular program is the SBA 504 Loan Program, which is used for financing real estate or other major fixed assets. While these loan programs are beneficial, one of the downsides to an SBA loan is that the approval rates are much lower, and it takes a longer time to receive the loan.
If a business needs a loan quickly, short-term loans can be purchased. Due to higher approval rates, these loans have become more popular among small businesses. They allow businesses to take advantage of opportunities and quickly overcome obstacles. Short-term loans are beneficial if your inventory is only discounted for a brief time or if you’re waiting for clients to pay. Also, these short-term loans can be seen in your bank account within days.
In March of 2016, big banks only approved 23 percent of funding requests, while smaller banks approved 48.7 percent. At Paragon Bank, we work with small, local businesses to find the best loan options for them. Contact us today at 901.273.2900 to find out how we can assist you.

This blog post was originally published on the Memphis Chamber Small Business Council Big Ideas blog. 

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