If you are operating a serious business, you may need a financial hand now and then. The most common way to get through a financial crisis is to borrow a business loan. What if you tried applying for a loan but it got rejected? Here are some reasons why the loan you applied did not go through
You have a poor credit score. Most lenders do not give out loans to individuals with a bad credit report. When you don’t pay your loans on time, credit cards keep track on this information and put it on your credit report. This report is used by lending services to check on your loan progress and how you handle your payments. If you are not able to manage loans, many companies will see you as unreliable and reject your application for fear of not paying their loans back and on time.
You may have not been in business long enough. If you have just started your business, you will find it hard to get any loans from lenders. With a new business company lenders don’t have enough information on your credit score and they cannot predict your loan payment habits. You will have to create a good credit score to be able to receive business loans. If you are in serious need of the funds, research thoroughly for lenders with less strict lays.
Your business does not have adequate cash flow. Lenders want to ensure that you have enough income and resources capable of paying back the loan on time. If your rent, inventory, payroll and other expenses surpass your profits, there is minimal chance of receiving business loans. Taking care of your invoice, cutting on expenses and create a savings account will resolve your cash flow and increase your chances of getting the loan.
Most lenders like to acquire collateral to secure their business loans. Lacking an asset like property or a vehicle may cause rejection of your applications. If you don’t own assets that could be considered as collateral, apply for an unsecured loan
Lenders will not give you a loan if you have not cleared your debts. If your company has debts, they will find out by checking your credit report. Your chance s of getting a loan decrease when you have too many commitments to your income. To get a loan approval, ensure you pay all your loans and keep a clean credit record.
If your business plan is weak, investors and lenders will not consider funding your business. To get a loan approval, conduct extensive research and create a business pan with a good mission statement and clear goals. If you demonstrate knowledge, research and good visions, you increase your likelihood to get a business loan. Invest in a business lawyer who can take care of your legal documents, resume, bank statements, tax returns and financial statements.
Your loan application is for all the wrong reasons. Lenders will not qualify your loan if you are looking to buy office luxuries rather than using it to invest in your business. They want to ensure you will use the loan to create an income flow which you will use to pay them back.