How Three Companies Receive Loans without a Bank

From The Wall Street Journal:

"Small businesses on the hunt for working capital have seen some of the financing solutions of recent years all but shut down. Aggressive lenders...have pulled back in an uncertain credit environment, and options like home-equity loans have largely dried up as well.

"And while experts say traditional bank lending to small businesses hasn't gone away, companies now typically have to show bankers a strong balance sheet and lots of assets for the lender to take on as collateral."

The article provides a list of other financing options using three real-life case studies:

Credit-Union Matchmaker Company: 10-year-old company with five employees is creating a new product that involves a long and pricey process. The company needs $10,000 for inventory and new product marketing.

The company didn't want to provide the required collateral to a bank. Instead, the company went with a $10,000 five-year term loan with a 12.99% interest rate through a social finance company. No collateral needed and the interest rates are lower than credit card rates and higher than an asset-secured loan interest rate.

e&s international enterprises inc. is a 130-person company that manufactures and distributes electronics and other goods. profits fell in 2008 as a new line of flat screen tvs didn't do as well as expected, so its credit line from five banks was in danger especially since it needed to maintain $20 million in profit and other financial ratios. it needed financing to cover electronic imports.

The company sought out an asset-based credit line, which meant securing the loan with accounts receivables and inventory. Though it means more paperwork and reports, the credit limit is lower and the interest rate higher than what the company had with the previous credit line service.

Start-up Asphalt Recovery Technology LLC recycles used asphalt of roof shingles. To get equipment and hire more employees, the company needed an estimated $2.5 million. The company's bank turned them down mainly because they were a start up.

The company qualified for a seven-year loan for $800K with a 7.75% fixed rate from a local government-funded nonprofit that lends money to boost economic development in the area.

Start-ups have a harder time getting loans even from non-bank lenders. However, government agencies exist to help with loans that boost the economy. Like the article says, you have other options for loans besides banks.