Why Banks Don't Lend to Startup Entrepreneurs

Why Banks Don't Lend to Startup Entrepreneurs

Commercial banks are not in the business of lending money to start-up entrepreneurs with only ideas.

The main business of banks is to provide loans based on assets (mainly real estate) and long-term cash flow.

When you go to the bank for a loan…

Here's how it goes

“I asked about the requirements for a loan”

“How much credit do you need?”_ Banker

“I need 10 million”

“Do you have a loan guarantee you want?”_ Banker

If the answer is yes. The banker continues to question you

"How long do you plan to pay off the loan you want?"

We expect you to answer that the loan will be repaid within 12 months (a year).

“The loan interest rate is 17%. You will pay us (11,700,000).”

The banker goes on to show you the figures of how you will pay for the loan you want.

“Every month you will pay the bank (975,000). Do you have a steady and sustainable way of making money so that you can pay us every month?”

When you answer that it is impossible, even if you have the collateral you want, he tells you that it is difficult for the bank to give you the loan you want.

Why would a bank refuse a loan with collateral?

A guarantee alone is not enough if you do not show how you will make the monthly payments.

The bank's business is to give you a loan when you have collateral and in addition to showing your regular income to get the loan you want.

That's why it would be easier for a salaried employee to get a loan from a bank than it would be for an entrepreneur.

If you are an entrepreneur and you are looking for a bank loan, you need to first have real assets and show a steady income to have reliable banks.

If you haven't already, there are other ways you can get money to run your business.


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