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  • Writer's pictureCalla Norman

Top 6 Obstacles to Getting Small Business Loans - and How to Overcome Them

Updated: Aug 25, 2021

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Looking for more information on small business loans? Check out Honeycomb's Ultimate Guide to Getting a Small Business Loan

There comes a time for most small businesses where they need to grow to the next level, and they need capital to go with it. While some are able to channel their revenue into growth or rely on personal financing or equity investors, small business loans are some of the most common ways that business owners look to get funding.

But what happens when you look into a small business loan and come up against a roadblock? What if your credit is low, your business is too young, or banks won’t fund loans for businesses in your industry?

If you’ve been having issues getting a loan from a bank, you’re not alone. Last year, only 13.6% of small business loan applications were approved by big banks. Read on to learn about 6 obstacles that small business owners often face when trying to get loans and alternatives to traditional funding that can overcome these challenges.

Here's a rundown of the obstacles many small business owners face when trying to get funded:

1. Your business is too young

One of the largest issues that businesses starting out face is finding the funding they need. However, when working with traditional financing, start-up small businesses often run into the same problem: they’re too young of a business!

Many traditional financiers such as banks or small business loans want you to have been in business for at least two years before applying. This makes sense because it allows you to prove to them that you’ve been able to successfully and sustainably run your business.

But, what happens when you’re a new small business owner, and you need capital to get started? Well, good luck with getting a small business loan through a bank.

This is why alternative methods of funding, such as crowdfunding, could be a good fit for getting funding for your small business. Crowdfunding is great for small businesses just starting out because you can fund at any stage of your business journey, as long as you have a solid plan for your business and know how to communicate it.

2. You don’t have any collateral

This goes hand-in-hand with the previous obstacle because if you’re a new small business owner, chances are you may not have collateral - such as a commercial property to offer up as a guarantee if you default on your loan. Some business owners who need collateral might put up their own personal property, but this is risky.

Honeycomb Credit crowdfunded loans don’t require collateral or any kind of guarantee, although they are recommended especially for campaigns that might have a bit of risk attached. A guarantee would be good to lower your interest rate, but totally not needed.

3. You don’t have enough capital already invested

In the same vein as not having collateral to put up for your loan, many traditional sources of financing want you to have invested some of your own capital into your growth. They want you to show that you have “skin in the game” but can still take on debt.

While having some of your own capital invested in the business might be a good idea before looking for funding - whether traditional small business loans or crowdfunded - Honeycomb doesn’t require it in order to run a campaign.

4. You work in a risky industry

Small business loans for “risky” businesses such as restaurants and consumer packaged goods have historically been hard to access, because of lenders’ perception of the failure rate for these businesses. However, the idea that restaurants are riskier than other industries is actually a myth, and failure rates for small businesses are actually pretty similar across the board.

Still, stigma against certain industries persists, and it can be difficult for certain kinds of small businesses to get funding from traditional financial institutions.

In industries like restaurants that are considered risky (especially in the wake of the 2020 coronavirus pandemic), getting a small business loan from a traditional financial institution might be nearly impossible.

Honeycomb helps small businesses across many different industries, and we have a proven track record with restaurants as an alternative source of funding that can help restaurateurs access capital and also strengthen customer relationships at the same time.

5. Your credit is low

Traditional sources of funding can be pretty picky when it comes to your credit score, and often a low or non-existent credit score can make or break your chances of getting a small business loan.

Of course, if you’re a startup small business, you probably haven’t had time to build up credit! Now, what are you supposed to do?

While building up credit is important, and we do take credit into consideration, it’s not a dealbreaker for Honeycomb crowdfunded loans. We take a much broader range of credit scores than most traditional banks.

Another way that you can overcome this obstacle is by taking steps to improve your credit. One easy way of doing this is by taking out a business credit card, or trade credit with your suppliers.

6. The small business loan process is taking forever to get back to you

It can take months for a bank or a small business association to process your loan application. If you’re trying to grow your business, or you need working capital now, that’s not the time that you have!

Honeycomb crowdfunded loans can be much faster than a traditional small business loan. It only takes a few days after sending in an application to find out if you’re approved and from there a couple of weeks to start forming a plan for your crowdfunding campaign.

The SEC requires crowdfunding campaigns to be live for at least 21 days, but you can start accessing your funds once you’ve hit your minimum goal, even if it’s before your campaign closes.

Grow with your neighbors, not a Wall Street bank

Crowdfunded loans from Honeycomb allow you to overcome the obstacles that many small business owners face when trying to get funding. Not only can you get funding faster and without giving up collateral or being in business for years before getting a loan, but you can also improve your relationship with your customers in the process!

Learn more about Honeycomb crowdfunded loans at

And sign up below for more information!


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