Mergers and Acquisitions, Small business

A New Alternative for Small Business Loans

Sure, some entrepreneurs want to raise venture capital or angel funding. But for most Total Service Providers (TSPs), a simple small business loan can go a long way to building out -- or accelerating -- the company.

The problem: Applications for 80 percent of small business loans are rejected, according to estimates from the U.S. Small Business Administration.

"If you have a bankable business idea backed by good credit and sound financial planning, you shouldn’t have to go begging to borrow," according to Maria Contreras-Sweet, an SBA administrator.

SBA Administrator Maria Contreras-Sweet
SBA Administrator Maria Contreras-Sweet

Instead of pointing to flashy R&D funding, Sweet sees a big need for the basics: term loans, equipment financing, lines of credit, invoice financing, and real estate loans to help small businesses hire and grow.

But how can entrepreneurs overcome that 80 percent rejection rate?

Here Comes Online Matchmaking: LINC

Contreras-Sweet's answer involves online matchmaking -- pairing lenders with prospective borrowers. Toward that end, the SBA now promotes LINC (Leveraging Information and Networks to access Capital) -- a matchmaking service that helps entrepreneurs get a date with a lender.

You start by filling out a 20-question online form. Once completed, the form is distributed to participating SBA lenders in the entrepreneur's county, as well as financial institutions with a statewide or national reach. If LINC doesn’t produce a match within 48 hours, you'll be directed to your local SBA adviser for additional help with your loan application.

The SBA has been rolling out LINC in two phases.

  • In February 2015, the association begin connecting small business owners with nonprofit lenders that offer free financial advice and specialize in microlending, smaller loans (the Community Advantage program), and real estate financing (the 504 program).
  • In Phase 2, starting around now, the SBA plans to add more traditional banks that offer an even wider array of financial products.

If you've given LINC a try, please let me know how the process turned out.

Joe Panettieri

Joe Panettieri is co-founder & editorial director of MSSP Alert and ChannelE2E, the two leading news & analysis sites for managed service providers in the cybersecurity market.