Just like you shouldn’t go to the grocery store when you’re hungry, you shouldn’t be searching for a loan when you’re desperate.
That’s what banking lender Michael Van Nieuwenhoven said at the credit card processing and funding panel at the New Jersey Restaurant and Hospitality Expo at the Meadowlands Exposition Center on Thursday.
“Put yourself in a position where you have some time,” he said – otherwise, you’re at risk of agreeing to a source of funding with an exorbitant interest rate or unfair stipulations.
Van Nieuwenhoven is the vice president of sales and operations at Credibility Capital, a Newark-based small business lender that offers loans between $10,000 and $350,000.
Lenders like Credibility Capital fill a hole in the market for small businesses, he said, who big banks won’t work with because their time is better spent on higher-value loans.
Approaching an institution for a loan is important, too, for the institution itself.
“The problem is the majority of the small businesses — 92 percent of the businesses in the U.S. are micro-businesses, over 100,000 businesses in New Jersey are Latino businesses, and the majority are restaurants, people come on Friday expecting to get funding by next week,” said Luiz DeLaHoz, vice president of community business development at BCB Community Bank. “Banks, we don’t like short prizes.”
Vice President of Business Development at credit card processor EVO Payments Greg Renfroe was also on the panel, which was moderated by Janet Davis, chief executive officer of caterer Jade American Grill in Cherry Hill.
The most important thing for small businesses, DeLaHoz said, is to develop a relationship with their banker.
“The person will make a decision, not just a customer service rep or a cashier. It’s someone who is willing to present your case and get your loan approved,” he said.
In some cases, even if they aren’t able to give you the money, they’re willing to pass you along to someone who can.
“If you make good connections, even if they can’t offer you what you need, they’ll do everything they can to make sure they get you what you need because that just good customer service,” Van Nieuwenhoven said.
Depending on the amount of money a small restaurant owner wants, whether it’s $1,000 for new equipment or $100,000 for a new location, there are different financing options available.
While community banks and lenders like Credibility Capital are appropriate when seeking larger sums, credit cards and merchant cash advances are available more quickly and might be right for business owners seeking $1,000 to $2,500.
“But if you need to renovate the entire restaurant, you need to find other alternatives [to credit]. You can’t fix a long term problem with a short term solution,” said DeLaHoz.
According to Van Nieuwenhoven , a decent rate for a business loan is below 16 percent without collateral and in the single digits with collateral. Funding vehicles through credit card processors will be upwards of 20 percent, according to Renfroes.