So you're a small business owner and you need a business loan

to further the objectives of your company. Where do you turn?

When it comes to a business loan or commercial real estate

loan, there are many good reasons NOT to turn to a traditional

bank. Here are some of the most important reasons. Many small

business owners, will find most of these points directly

applicable to them.

"THE BANK TURNED ME DOWN"

Of course the biggest reason most small businesses go looking

for alternative sources of commercial real estate loans is

because they have been declined by the banks. Small businesses

are often forced to look for other sources of funding because

the banks will not provide it. This is not even listed below,

since there are many positive reasons to prefer non-bank

funding, EVEN IF YOU CAN get an approval from a bank.

REASON 1 - The minimum loan amount available from banks is too

high

In many cases banks will not offer a commercial real estate

loan for less than $250,000. So if you only need $100,000 you

will be pushed to borrow more than you actually need. Or if

your property will not support a $250,000 loan you are out of

luck with the banks.

The solution is to look for an alternative funding source that

can provide a lower minimum amount. Some commercial financing

services will go as low as $100,000, and will often give you

better terms and much better service than the traditional

banks.

REASON 2 - Many traditional banks will charge you an up-front

"commitment fee" just to examine and process your application

Banks usually think they are doing you a favor by processing

your application, so they will often make YOU pay for their

attempts to win your business.

The solution is to find other established and credible lenders

who are eager to offer you better service without charging you

a fee for processing your application.

REASON 3 - Most traditional banks will severely limit the

amount of cash you can get from a commercial real estate loan.

Banks usually have very narrow rules about where you can use

the cash derived from a commercial real estate loan. If you

need a cash injection for your business, or want to use the

proceeds from a commercial mortgage as a down payment for

another property, most banks will not be interested in that

type of loan.

Look for a lender who does not restrict your use of the cash

derived from commercial real estate loans. Some services, (see

links below) can provide commercial loans that give you up to

$1 million in cash to use however you want.

REASON 4 - Most traditional banks require detailed business

plans before approving a commercial real estate loan.

Many small businesses have business plans, but they are usually

not sufficiently detailed to satisfy the banks. As a result,

applying for a commercial real estate loan from a bank can turn

into a very time consuming and expensive process. Creating the

type of business plan that is adequate for the banks will

usually cost thousands of dollars.

Find a lender who does not require business plans as part of

their underwriting process for a commercial loan.

REASON 5 - Many traditional banks require tax returns for a

commercial real estate loan.

If you are either unable or unwilling to provide tax returns

for your business, many banks will not give you a commercial

real estate loan. Even some of those banks that do not request

tax returns will ask borrowers to sign IRS Form 4506, which

authorizes the lender to obtain tax returns directly from the

IRS.

When looking for alternative sources of funding make sure they

do not require either of these conditions (tax returns or

access to your IRS records).

REASON 6 - Most banks will require cross collateralization of

personal property.

Even though there is sufficient collateral in your business

property to secure a commercial real estate loan, many banks

will require you to provide additional security by putting up

personal assets. Business people have become so used to banks

doing this that they just assume it is a necessity.

But the truth is, over-collateralization like this can restrict

your personal freedom to dispose of your personal assets as you

see fit. And fortunately, there are non-traditional lenders who

do not require cross collateralization at all.

REASON 7 - Most banks require income verification.

Many small business people and self-employed borrowers have

incomes that are erratic and difficult to document. There are

many legitimate reasons for this, but traditional banks

generally do not care. Very few of them will provide commercial

real estate loans without complete income verification.

An alternative used by some non-traditional lending sources is

to use the "Stated Income" approach. Look for a lender who uses

the Stated Income approach and does not require income

verification.