It’s Not You, It’s the Big Banks… Well, and a Little Bit You
Startups are caught in a notorious Catch-22. Your business is starting out and needs financing to obtain the equipment required for it to grow. However, your business can’t grow without the financing it takes to get that equipment, and big banks want proof and a long track record of growth before financing your equipment lease.
It’s not you that makes big banks fearful of funding. Prior to the Great Recession in 2008, a river of financing for startups flowed freely. Post-Great Recession, big banks decreased the number of loans to startups and small businesses for a few reasons, including less demand for them, stricter financing regulations, and higher expenses associated with servicing the financing, which cut into bank profits.
As a result, startups can suffer through years of early growing pains that last longer than necessary while their owners work hard on two fronts: getting the startup off the ground and positioning it to be attractive to banks that can finance the equipment needed for next-stage growth.
Startups Often Fall Short in the Things Big Banks Want in a Financing Customer
If you’ve tried to finance equipment for your startup through traditional big bank channels and failed, you may or may not have been given the reason why. Chances are it’s because of one or more of the following:
- Bad credit history and poor credit score
- Weak or unstable cash flow
- Fewer than two to three years in business
- Limited collateral to back a loan should it go into default
- Absence of basic business documents, such as a business plan, financials and projections, credit reports, bank statements and tax returns, and copies of articles of incorporation, business license, contract, leases, etc.
- Factors out of your control, like market conditions, local competition, local, state or federal regulations, and economic trends
Financing and Leasing Options When Your Startup is More Than Meets the Big Bank’s Eye
The average loan amount for a startup is less than $500,000. For big banks, that amount is not worth their while. Fortunately, there are options for startups that need funding for leasing equipment, yet lack what’s most attractive to big banks. Micro loans, crowd sourcing, and such have cropped up as alternative financing sources to the big banks.
Also, startup owners can use these early years to improve their credit scores, prove financial stability and business leadership skills, build collateral, and get their business documentation in order – all of which are smart plays to ensure your company’s sustainability and longevity whether you intend on eventually financing equipment leases through big banks or not.
Seek out equipment financing providers, like Global Financing & Leasing Services, who work specifically with startup owners facing challenges with traditional financing. We’re a private company that doesn’t answer to and are not accountable for shareholders’ profits like big banks are. We were founded in 2009 to serve small- to mid-sized businesses and startups that are shut out of traditional financing markets due to the reasons listed above. We look at more than what’s on or not on the application. We look at YOU and match equipment financing options to match your goals. More importantly, equipment leasing options that will work for you, regardless of what credit tier you find yourself.
If you’re ready to explore equipment financing options that can help your business go from startup to enterprise faster, then we should talk. Or, learn more about why startups choose Global Financing & Leasing Services to finance equipment essential to their growth.