This might be the reason your business loan application was rejected
Starting a business can be hard, especially if you lack the funding. The only hope to pick up your business is to get a loan from banks or investors. The only thing that is more frustrating than developing a new business is getting your business loan application rejected!
These might be some of the reasons you lost your business loan application
You have a low credit score. Lenders will not approve your loan application if you have a poor credit score. A bad credit score is caused by late loan payments or unpaid loans. Lenders will not risk giving you a loan if you haven’t settled all your debts. You cannot venture into a new business with such a credit history. Lenders check your credit report to estimate how much money you can handle and check how you pay off your loans. A high credit score guarantees a loan approval while a low score results in a minimal or no loan.
How long have you be in business? Lenders do not approve loans for people who have been in business for a short while. This is because the financial information may not be enough for them to estimate the amount of money your business is worth. Lenders are cautious because they lack enough information on the income and credit to estimate the amount of money you can pay them back.
You do not have collateral or it’s not enough. Most lenders like to have collateral to secure the loans. In case you do not pay your loan back, they will use the collateral to replace it. You cannot get a secured loan if you do not own assets in your business.
You run a risky business. Some business fields like restaurants and gambling companies are considered risky because they have a high chance of failure. Most lenders stay away from businesses with high chances of low income and profits.
Your business has inadequate cash flow. Besides your credit history, cash flow is one of the most important aspect lenders consider before they approve a loan application. Lenders need to know that you have enough money to run your business and pay for the loan at the same time. If your profits and income are not enough to cover all your finances and responsibilities, and still have enough for the loan payment you may have a hard time finding a lender to approve your loan
Your paperwork is incomplete. It’s shockingly more common to lose a loan application over a poor application form. If you do not fill the form correctly, provide the needed backup information, or don’t complete all the gaps on the form, the lender is left with no other choice than to reject your application. If you want your business loan to go through, hire a professional to help with the application process
A weak business plan will cost you a lot. If you present a poorly written business plan to investors or lenders, your chances of getting a business loan will be very low. If you want a loan approval, do market research and create a business plan with clear goals. In a sense, your business plan represents your knowledge and expertise.
Re-visit your loan application to see where you went wrong. This will help you make wiser decisions before applying for a business loan in future.