Access Financing, Become Bankable, Lender Compliance, High Default Risk

Unfortunately, it is a fact that ninety-nine percent of small businesses are viewed by the banks as being a high risk of default. When we talk about “Small Businesses” we are specifically referring to those businesses that are under one million dollars in gross annual revenue and that have nineteen or fewer employees.

There was a test run of ten thousand businesses that each met the following criteria to see how many were actually bankable, meaning that they met all the underwriting guidelines to qualify for a bank line of credit or a business working capital SBA loan.

We tested ten thousand small businesses that all met the following criteria:

1. The entity type was an LLC (Limited LIability Company).
2. The entity was in good standing with their Secretary of State,
3. They had been in business for more than one year,
4. They had less than one million in gross revenue,
5. They had a physical business location as per the USPS,
6. They had nineteen or less employees (Typical small businesses).
7. They were from random industries and from all 50 States.

The bankable criteria they were tested against was:

1. Did they have at least three or more reporting business credit tradelines?
2. Did they have traditional business credit scores of 70 or higher?
3. Did they have all of their Lender Compliance items completed?

For just that very simple bankable testing criteria, out of 10,000 tested only 62 passed (0.6%). There are 35 million small businesses in the USA, you do that math.

For a small business to truly be bankable and not be viewed as a high risk of default there are about a total of twenty filters that could have been applied, but for the purpose of this test there were only the above three filters which were applied. And with only those three becoming bankable filters applied the results showed that less than one percent met or exceeded that small set of bankable criteria.

Most small business owners have not been educated on what becoming bankable is.

Therefore they do not know what steps to take to become bankable. The result of that is being declined for conventional bank loans or SBA loans and therefore being resigned to the many alternative small business lending products that are readily available.

In small business lending the high risk of default “alternative” business lending products are mostly very high interest rates, very short-term repayment periods and very small amounts with most capping out at one hundred thousand dollars or less. In business they are coined “Alternative Non Bank Loans”, if they were personal loans they would be coined “Sub-Prime”. Each year there are multiple billions in these Non Bank seen as High Risk of Default loans made to small business owners.

Businesses that are automatically categorized as a high risk of default are sole proprietorship businesses, home based businesses, businesses with free email accounts, businesses who list cell phone numbers as their primary communication, businesses who do not have a website, businesses with two-star social media ratings or poor better business bureau ratings. Business lenders are using whatever online, financial and credit data that is available to attempt to lower their risk of business loan defaults. Our system shows small businesses how to be viewed as a low risk of default.