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Where to turn when the bank declines your small business loan

Craft beer business, Bonfire Brewing finds online marketplace to bridge the funding gap


When Matt Wirtz and Andy Jessen met as roommates, they had no idea they’d ultimately become business partners.

The first inkling came when Wirtz received a home brew kit for his birthday. After some experimentation, the two were hooked – even building an all-grain system in their garage to get beer on tap in their house.  

It wasn’t long before Wirtz and Jessen realized they had a real business on their hands. Jessen’s wife Amanda, a marketing/design professional by trade, fashioned a logo and packaging for the suds and Bonfire Brewing was officially on its way.

Soon enough, the business was growing so quickly it was tough to keep up with demand. Jessen knew they’d need to invest in more tanks. When he did the math, he realized if he added two 80 barrel fermenters, the operation could increase production from 3,000 to 7,000 barrels a year.

Unsurprisingly, the 80 tanks came with a hefty price tag. Jessen coudn't pay cash and didn't want to tap his investors for this particular ask.

Jessen realized it was time to look for a small business loan. So, he started the process the way most new small business owners do: He went to the bank

Without batting an eye, the bank turned him away  – an experience that is unfortunately common among small business owners.

According to Biz2Credit’s March 2016 index, big banks approve only about 23 percent of funding requests, and small banks approve about 48.7 percent, leaving the rest of the young businesses to fend for themselves in search of capital.

Getting rejected by the bank is especially frustrating when you consider that small business borrowers spend almost 25 hours on paperwork for bank loans and approach multiple banks throughout the application process.

Why would banks turn away a healthy, growing business like Bonfire Brewing?

The simple answer is that small business loans are less profitable for banks, even though the banks incur the same transaction cost regardless of the loan amount. That means lenders are less likely to make small dollar loans ( less than $1 million) to small businesses that need capital to grow.

In fact, more than 60 percent of small businesses seek loans of less than $100,000, and all of those customers are underserved by banks.

That’s what led a new crop of online lenders to bridge the gap by providing funds to small businesses that don’t qualify for a bank loan.

It may sound simple, but when small business owners like Jessen start their loan search online, they often find a confusing and overwhelming landscape, with so many options they can’t make sense of the details or the bigger picture.

Every company is different – there is no one-size-fits-all loan product for small businesses. On top of that, different lenders depict loan prices and terms inconsistently, making it challenging to compare offers.

When it came time to search for a loan online, Jessen needed a way to confidently sort through the noise, compare options and select the best loan to purchase his new equipment.

That’s when he came across Fundera.

He filled out one application, was presented with the options he qualified for, and was quickly connected with one of the equipment lenders on Fundera’s marketplace. Once he received funding, Jessen’s loan payments came out to about $5,000 per quarter. To cover the cost of the new equipment, Bonfire only needed to brew 10 extra barrels a month. The loan allowed them to up their production capacity from 250 to 583 barrels per month – an investment that paid for itself and then some.

Bonfire Brewing’s story is a great reminder that sometimes:

It takes money to make money

There are great solutions beyond what banks have to offer. To date, Fundera has helped more than 4,000 small business owners like Jessen and Wirtz secure roughly $350 million in financing.

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Shira Almeleh

Shira Almeleh is the communications manager at Fundera, an online marketplace for small business loans. She works with members of the media, bloggers, and organizations to spread the word about Fundera and help educate small business owners about their financing options.

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