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Small Business Bank Loans Vs Private Lenders

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.