If you need money for your small business then there is always the dilemma – should I get a bank loan, or should I get some private lenders involved. Of course it always depends on what kind of business you running, but I would much rather be dealing with the bank then with the private lender – why? Because you know what to expect.

A bank will have a cut and dry lending agreement with a set interest rate and lending policy that is basic and simple. Also with a bank you won’t feel quite as bad about it if you mess up and fail with your small business, and end up not being able to make the payments on the loan.

With a private lender it becomes a personal matter where your character is very important and you are no longer just a number in some database somewhere. Also, the lender is not just a number in a database – they are living – breathing – speaking – human beings and they also like the fact that they are not just a number. This brings all sorts of different pressures upon you – you feel like you must succeed with your small business or you will be letting down a lot of people and causing a ripple effect that is very negative. In some ways maybe getting a private lender is better because then you feel even that much more pressure to succeed and this may be what it takes for you to make it in business.

Also, a private lender will likely sue in the case of a failure. The will want some restitution to be made whole. Always a concern. Private lender will often take risks that banks would never take, so that has to be taken into consideration as well. If a bank approves a small or large business loan they will have done their homework, see your business idea as viable, and they will insist on some from of security on the note.

Getting financed for a bad credit loan is a little more difficult than it was 5 years ago. Lenders, banks, and private for profit lenders are much more conservative when it comes to approving personal loans to Americans – especially when the borrowers have any kind of bad credit dings on their credit history.

The lenders who have a direct data connection with the 3 main credit bureaus will use their software to find out exactly how your credit rating stacks up against their lending criteria. The banks can set their software to so that you are approved based on varying degrees of credit worthiness. Since the great recession of 2008 to present time (early 2010 at the time of this writing) most banks have adjusted their lending data and software applications to accept less and less applicants. This is bad news for borrowers who have bad credit ratings, or LOW FICO scores. There are a few options though.

If you really want to get approved for a loan in 2010 and you have a very bad credit rating, you will need a co-borrower, and not to be confused with a co-signer – these are two entirely different terms and mean two entirely different things. A co-signer is just backing you up as someone will be responsible to pay back the loan if you default on the payments. It’s a simple trust matter. A co-borrower is actually on the application and their bank account numbers are attached to the loan – meaning that if you don’t make a payment, the funds will be paid from the co-borrower’s account(s). Basically, you and the co-borrower have taken out the loan together.

If you really want to get approved for a bad credit loan you have to give the lender an air-tight, solid form of security. Nothing less will do in these days of skittish bankers and lending institutions. I’m not seeing this change in 2010 and on to 2015. The banks have learned some hard lessons at the community level because of their direct attachment to the huge failing banks in the United States.

If you want to get approved for a bad credit loan in the near future, you will have to find a local community bank and make sure you have 100% security for the loan. This can be very difficult if you have a seriously damaged credit rating, or you are unemployed. Without a job you are not likely to get approved at all, or even “looked at” by a loan officer. They can’t approve any kind of loan unless you can prove a stable employment history. If you have been employed steady with the same employer for over 5 years, and you have lived in the same address for over 5 years, you have a better chance of getting approved. It used to be the magic number for lenders was two years employment with the same employer, and two years living at the same address – that has all changed now – and I would have to say this is a change for the better.

The fact is that the lender is NOT helping you out when they approve a loan you can’t really pay back. They are doing nobody a service (you or them) when they approve high risk persona loans. They need to tighten their belts now to try and get back on track. The lenders if today and into the next decade are going to be much more conservative. Even if they try and charge crazy high interest rates (APR), they are still going to lose if they approve extreme high risk financing. If the borrower (perhaps you) default on their payments soon after getting the loan, and skip town, the bank is still out even if they charge extremely high APR. The banks used to think that they would recoup all loses if they just over-charged all of the other borrowers on the books at high APR. That presumption is no longer valid. Most conventional lenders can’t take that chance any more, no matter how high the interest rates are on the note.

Where this all goes in 2010 and beyond is any-body’s guess, but my guess is that getting credit when you have bad credit is going to get tougher and tougher and tougher. If you have been bankrupt due to a divorce, a bad business decision, or simple over-extension of your personal finances, you will have to find a good friend or family member to act as a co-borrower. This is likely going to be the case for some time.

The entire lending apparatus is currently being changed so that is more difficult to get an reasonable installment loan over time, and with a high FICO score on your record. I believe we are going to see a complete overhaul of the personal lending apparatus in the next 20 years. The credit bureaus are going to be revamping their software applications and they will be talking to the lender’s computers in a different way. Borrowing money is going to be completely different in the future. It will likely be more akin to the Canadian banking system, whereby the borrower has to a very solid low-risk borrower before any monies are dispursed. The United States will no longer be able to play high risk casino style games in their borrowing practices.

Even if there is no regulation from the State and Federal level, the big and small banks are going to have to incorporate their own in-house regulations (lending value points) to protect themselves and their shareholders from future financial ruin.

A more blunt way to put it is that the banks have to smarten up and the borrowers have to smarten up – and quickly, or we will see more financial bubbles growing and bursting at a more rapid pace.

$200,000 Commercial Loans

At CLF we are seeing more traffic here from business owners needing a $200,000 loan (or more) to get themselves through the recsession, and sometimes to take advantage of a depressed assets that are up for grabs, for cheap – either way, it’s no simple matter finding a $200,000 loan in today’s economy.

More often than not, business owners need much more than two hundred thousand dollars – they need a million, or 5 just to keep the doors open, employees paid, creditors paid, leases, paid, and banks paid. Commercial loans that are applied for an approved by conventional banks don’t seem to readily available for approval sake, so most all commercial loans are being sought after with private lenders. Many times private money is what keeps businesses afloat. Banks often move much too slow and there are too many stings attached.

In commercial real estate for instance, private money is often what is required to leap on time sensitive opportunities, whereas the banks spent allot of time securing themselves, or just allot of time saying no, or making the deal virtually risk free. The way the banks work these days is this; they take a risk with other people’s money, and if they lose, THEY don’t lose. If they win, they take the credit, and the profit. Even when they see a good solid commercial investment with a very high chance for success, they won’t approve the the loan without complete security.

I remember asking when I was young, “if I had the assets for collateral then I wouldn’t need the loan would I”. The same old Catch-22 plays for a 5000 dollar loan, a 10000 dollar loan, or even a 200000 dollar loan. One thing for sure with a 200K loan, you won’t likely get the loan fast. Because of the size of most commercial loans, it’s a slow process borrowing big sums of money. It’s sort of a constant fight and you have to be constantly be proving your companies worth and viability. It CAN be an advantage to sometimes hire a “money man” and all he does is raise funds. Often these “money men” are venture capitalist to the core, and were born for the job. Some are ex-bankers who have the connections and are in the know when it comes to raising money.

You can raise $200,000 dollars is a variety of ways. If you have some sort of security the banks can get their dirty hands on, then you can get the loan with them. If you have share holders and share structure you can dilute your shares (maybe) and sell more shares to new investors. This is usually a real piece of work, and it’s expensive paying for the lawyer bills required to get an offering statement written that sufficiently covers every-one’s rears (so to speak). One thing for sure though – there are no gaurantees saying that a $200,000 commercial loan will even solve your problem(s) – but it surely can’t hurt.

So from my own experience with commercial loans, I would suggest looking for a money guy who will take a slice the pie in a finders fee. If your small business is a good risk and has a great chance for success, then the broker will have an easier time finding you the 200K. These brokers work with venture capitalists, and have a lists of wealthy investors who want to invest in “for sure deals”, and they do it for profit – sometimes huge profit of course. But like I said, your commercial enterprise will have to have some realistic estimates showing future profits. You need to have an offering made so these private investors can see your claims in writing. They need to have something to hold you and/or your company and existing stake holders on for security. The offering and business plan has to based on facts and solid market research, or forget it. This commercial loan may take awhile to get, like I said, and I’m sure you can see that you won’t get your loan overnight.

Not to give up hope in anyway, you just need to get some help. Help in the way of some smart money movers with a list of possible investors, and some good research people (maybe a market research firm) to help you convince lenders to take stake in your dream and lend you the 200k. Best of luck.