3 Common Reasons Your Business Loan Was Rejected

Starting a business involves a lot of moving parts. For the best chances of success, a lot of research and planning typically goes into the first steps. If you’re looking into getting a business loan, you may be interested in improving your chances of approval, especially if you’ve already been unsuccessful. Here are some reasons your loan could have been rejected.

 

  1. You Don’t Have a Positive Cash-Flow

 

Cash-flow is a good indicator of how your business is doing. If you’re performing well, you likely have a certain amount of cash moving through your business within a specific amount of time. If your business is in debt, is unable to move plenty of product, or has high expenses, a bank may be concerned their loan won’t be repaid. If your loan was rejected, look for ways you can limit your expenses and increase your cash-flow.

 

  1. You Can’t Pledge Collateral

 

If your cash-flow is still under par, you’ve struggled to pay off loans in the past or you’re a small business that hasn’t been launched yet, you may be expected to offer collateral as part of the terms of your business loan. This can be difficult if you’re still in the very beginning stages of your business, but your potential lenders can assess which of your assets they would be willing to take as collateral. Oftentimes vehicles or other equipment can be put up as collateral, and the bank will collect them if you fail to pay. Real estate is another popular option, so it might be ideal to compile a strong business plan before risking the essential resources of your business.

 

  1. You Don’t Have a Good Credit History

 

Poor credit history could be an indication to lenders that you don’t have a decent grasp on your finances, and therefore may not be able to meet the financial demands of a business agreement. Finding ways to improve your credit score can prove to lenders that you know how to handle your own finances as well as those of a business, which can make them feel more comfortable and secure about lending money to you.

 

Applying for business loans can be stressful and rejections can be discouraging, but knowing the reasons why can help you improve your applications going forward. Looking at your business from an objective standpoint and finding the weaknesses, whether they’re your collateral, poor credit, or disappointing cash-flow, you can make the needed improvements to watch your business succeed.

SHARE IT: LinkedIn

Related Posts

Leave a Reply

You can use these tags: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>