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  • Writer's pictureCalla Norman

How to Get a Small Business Loan when the SBA says “No.”

“It took them four weeks to tell me ‘no,’ but it took Honeycomb two days to say ‘yes’”

Darren Carter, owner of Carter’s BBQ in Cleveland, was looking to expand his mom-and-pop barbecue side hustle into a barbecue trailer so he could go on the road. However, when he wrote up his business plan and applied for a bank loan, he experienced months of run-around only to eventually be rejected.

Darren felt disappointed by his experience trying to get an SBA loan, and he’s not alone.

Honeycomb offers a solution to this problem by letting your customers show their approval of you by lending you money for your business’s next steps.

Find out more by joining our small business owner newsletter!

Why are small businesses not getting traditional loans?

Small business funding from traditional lenders like banks has been on the decline for quite some time now. 46% of small businesses report getting less than they applied for, and 22% weren’t able to access funding at all. This number dips even further when you consider loans approved for Black-owned businesses or other minority-owned businesses.

This is because many small business owners face obstacles to funding through traditional sources. Many banks require businesses to have been operating for at least two years, and they often expect to take collateral as part of the loan.

Banks also might not lend to businesses located in certain areas, or in industries that they deem too risky. They don’t necessarily look at a business’s standing in the community or anything other than their bottom line.

What does the SBA look at when approving or rejecting loans?

Most lenders, like banks, will use what’s called the “5 C’s of Credit” to evaluate a loan: Capacity, Collateral, Capital, Character, and Conditions.

Capacity is the ability of the business to meet the loan payments if the bank approves the loan. Collateral includes the assets (personal or business) that the business owner will have to give up if they default on the loan.

Capital is the amount of money they’re looking to borrow. Many small businesses might not be looking to borrow the amount that banks want to lend (and receive a return on). As community banks disappear and are replaced by larger banks, the loans they’re willing to give out become more risk-averse and much, much larger and usually to much, much larger businesses. If you’re a business looking to raise only about $30,000, a bank might not think it’s worth their time.

Character includes both personal and financial history, but banks usually place more emphasis on the financial side of things. At Honeycomb, we look at the numbers, yes, but we also listen to your story to get a better understanding of whether you might be a good fit for a crowdfunding campaign.

Finally, Conditions are how the market that you’re in looks. An example of the shortfallings of this “C” can be seen in the events of the pandemic. Funding for small businesses, restaurants especially, plummeted because banks had no clear idea of what the market was going to look like!

What does Honeycomb do differently?

At Honeycomb we perform due diligence much like a bank does, but we also know a business is about more than just numbers. This is why we’re able to offer businesses like Carter’s BBQ the opportunity to crowdfund a loan from their community!

We look at the whole picture when looking at your loan application

Because we know that a small business is so much more than the numbers on the page. If your small business has been put down by the SBA or a bank loan, you’re not out of options. See if crowdfunding a small business loan from your circle of family, friends, and customers is right for you by filling out the form below!


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