Why Do Banks Say No to Startup Loans?
Why Do Banks Say No to Startup Loans? It is very difficult to get a loan from a commercial bank for business startup. New businesses lack two of the four C’s of Credit (collateral, capital, capacity, character) that bankers want: • Collateral – Cash to contribute to the business, and • Capacity – A track record to show that the business has the capacity to generate enough money to pay back the loan. Banks are pretty creative when it comes to reasons for saying no to a startup loan. These are typical responses by banks to a young couple who were seeking a loan to start a professional practice. Answer: Typical Bank Responses to Startup Loan Requests: • Just Because. Banks will often say simply, “We don’t give loans to startups.” • 100% Collateral. One bank said it would give an $80,000 loan at 8% interest if the borrowers would have their co-signer put $80,000 in the bank (at 5% interest). When the borrowe
