Obtaining Small Business Loans New York From Alternative Sources

small business loans New York

Small businesses have been the engine driving the industrial growth and expansion of the United States. In New York, the situation is even more attractive where more than 3 million people constituting as much as 50 percent of the entire workforce, are employed by small businesses of whatever nature. While firms with less than hundred employees already have the largest share of small business employment, there is also more increase in job creation in that area. For instance, in 2015 employment in the small business sector accounted for 2 percent of employment increase in the city of New York. Small businesses have had a remarkable success in the same city, making up an astonishing 99 percent of all of the businesses in New York. In short one website even described New York as the fifth most entrepreneurial city in the entire United States.

The factors that resulted in the declaration includes the number and size of small business loans new york, that is loans that were received by small businesses in the city of new york, especially those that were backed by the small business administration. The other factors had to with the amount of venture capital funding received by the businesses within the city, as well as the rate at which small businesses are growing in the city. In addition, to all of the above, the city of New York was ranked third in the cities with the highest number of patents, with its small businesses producing as much as 13 times of the total patients in the city.

Difficulties in Business Loans

In spite of the growth of small businesses in New York over the last couple of decades, there is currently an increasing difficulty for firms to get small business loans New York in order to ensure the continued survival of businesses in the city. The difficulty associated with obtaining business funding actually came to its peak during the economic recession of 2008, in which small businesses were severely hit. During the period small firms had a sharp decline in revenue and even had to lay off several of their workers, all in a bid to stay afloat. But even though the recession has come to an end, banks still remain wary of lending to small businesses. In a somewhat ironic manner, small business loans New York has dropped by around 20 percent while loans to the larger firms have experienced an upward surge of 7 percent. Moreover governmental regulations—both federal and state—have made it increasingly difficult for banks to issue commercial loans to small businesses.

Meanwhile, small businesses in New York and elsewhere often fall short of bank requirements for loans such as those having to with collateral, cash flow, business plan, and credit performance history. As a result, it is quite difficult for a small business to obtain loans from banks—except those loans that are banked by the small business administration. Loans that are backed by the SBA are those which the government provides a guarantee for. What usually happens is that firms in the city seeking small business loans New York apply to a commercial bank which underwrites the loan and sends it to the SBA for approval. If the loan is approved by the small business administration, then the government guarantees some percentage of the loan that can be as high as 90 in order to minimize the risks that the banks face in issuing the loan to the business in the first place. If the business is unable to redeem the loan for whatever reason then the government pays back the agreed percentage to the bank. Suffice it to say that the SBA loan scheme has enabled more and more small business to obtain business funding in the form of small business loans New York. But it also has pointed out that this has not been sufficient to tackle the problem of lack of crucial business funding to small businesses.

For instance, more than 50 percent of loan applications made by small business owners to commercial banks end up being rejected for reasons that have been enumerated. In another research it was shown that 40 or so percent of small business owners did not bother even going to banks for loans; instead, they have chosen to resort to the fast-rising band of alternative finance providers. These lenders all seek to remove the hassles in the process of obtaining small business loans New York. For instance, most alternative lenders provide business funding that can be obtained in a matter of weeks or even a few business days, in sharp contrast to what obtains in commercial bank loans which could take as much as 6 months to process. Such platforms such as online lending and merchant cash advance also provide loans that are unsecured, thereby removing the much-dreaded issue of collateral which small businesses, in most of the cases are unable to provide.

Read More: Fast Small Business Loans for Emerging Businesses

The problem of credit score has also been partially circumvented in alternative lending platforms such as merchant cash advance. Although online lenders also provide quick loans as merchant cash advance it is in the area of credit score requirement that merchant cash advance providers prove superior. For instance, online lenders require a good credit score and cash flow statement in order to provide funding to a small business, a merchant cash advance provider, on the other hand, does not require a good score. And as for cash flow, what the merchant cash advance provider looks out for before deciding on whether or not to issue the small business loans New York, requested by a firm in the city of New York is monthly revenue of at least $5000. While this figure could be lesser or more depending on the individual merchant cash advance provider, it is the often the minimum requirement. Alternative lenders also make the process of obtaining a loan much easier because they require less documentation. In addition, all such complex issues that emanate from commercial bank loans are also avoided with funds from merchant cash advance, for instance. Before taking a more detailed look at merchant cash advance we shall examine some other popular sources of small business loans in the city of New York, that is, small business loans New York.

Trade Credit

The idea of a trade credit is not particular to the city of New York,; rather it is a form a business credit that small business owners in every part of the country have taken advantage of for several years. In its very simple form, a trade credit is a credit granted to traders as well as manufacturers of gods by the company which is responsible for supplying them with raw materials. Trade credit enables a business to purchase raw materials and withhold payments for those items until the period of time they were given for paying up has elapsed. For instance, a business could a trade credit of about 60 days during which it makes sales or continues with its production before having to pay for the raw materials it purchased. Of course a trade credit does not provide cash to small businesses as is the case with most other sources of small business loans New York; rather it helps facilitate purchase and enables the business to have cash on hand to meet up with other business commitments pending when sales start to come before it can comfortably pay for its supplies.

Online Business Lending

Online business lending is another great source of small business finance. A small business owner that seeks a loan usually does so because it does not qualify for a conventional bank loan and is in dire need of cash to inject into the business. Loans provided by online lenders can be in direct or indirect form. In the direct loan, an investor in the online platform provides the loan that is requested by the business. But in the indirect method, the platform obtains the loan as a purchase from partnering depository institutions, and then resells such loans to the loan seekers. Although online lending has often lived up to expectation by providing quick loans to small businesses there are certain concerns with obtaining small business loans New York through online platforms. For instance, because online business lending is still at the developmental stage it is possible that an online goes out of business suddenly, leaving its customers in much distress. In addition, interest rate associated with online lending is much higher than those of most other sources.

Merchant Cash Advance

A merchant cash advance is arguably one of the most popular sources of business funding among small business owners. Merchant cash advance is unique because it is not a loan, speaking from the technical and legal perspective. In a merchant cash advance, a business sells a portion of its future business receivables in exchange for a lump sum of cash that can be obtained almost immediately. As a source of alternative finance, a merchant cash advance is unsecured, increasing the risk that the lender bears in issuing the advance, and also increasing justifiably the cost of the advance. However, an MCA loan does not attract interest; rather the loan is amount is multiplied by a certain factor of say 1.2 to give the total amount payable. The business after obtaining the small business loans New York from the merchant vendors commits the agreed portion of its daily sales to pay the loan until it is completed.

Read More: As 2018 Begins, Lots of Small Business Loan Options are Open to Entrepreneurs


Merchant cash advance rose to become a popular choice among businesses because of the ease and speed with an advance could be obtained. As a result of its impact on small businesses in New York, the mca industry in the city has witnessed quite an unprecedented growth, especially now that bank lending is almost nonexistent for small businesses. Al in all, merchant cash advance providers continues to prove that they are equal to the task of providing loans to small businesses.

Leave a Reply

Your email address will not be published. Required fields are marked *