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3 Top Hurdles Associated With Business Loan Applications

If you’re a small business owner who has gone to the bank to secure a loan, it is possible that you met with disappointment. While many entrepreneurs successfully secure funding for their businesses in the traditional way, there are many others who do not. Why are some business owners successful while others have trouble?

Here are three top hurdles associated with business loan applications:

1. Having a low credit score.

Easily at the top of the list of hurdles is a poor credit score. If you’ve had issues repaying loans or paying off credit card debt in the past, this issue is bound to come back to haunt you. Banks scrutinize both personal and business credit scores. Having a less-than-stellar history can lead to outright denial of your business loan application. If you do happen to successfully secure a loan, you will likely be forced to pay higher interest rates on the balance.

“Banks want to ensure that you have a long-established record of paying back your debts on time (most banks require a transaction history of a minimum of two years) before they will approve a loan,” affirms credit risk management company, Cedar Rose, “If your business has a bad credit history due to poor cash management and not paying back debts, then the bank is not likely to trust your ability to pay back your loan and will, therefore, reject your loan application.”

2. Having no collateral.

What can you put on the line? What do you own that a bank can snatch up from you in the event you can’t pay them back? It sounds daunting, doesn’t it? But, without collateral, a business loan can be hard to secure. Collateral can take the form of real estate, equipment or inventory. It’s pretty important to assess what you can realistically offer as collateral to give yourself a better chance of getting your loan application approved.

“Those that are less creditworthy and those that want to qualify for better rates can sometimes get an asset-based loan,” explains Factoring Companies Canada, “In these cases, a business asset such as real estate or equipment is used to secure the loan….Look beyond physical assets. For instance, receivables factoring and receivables financing can provide you with cash based on your unpaid invoices.”

3. Having little experience.

Start-up businesses often need the most help to generate high levels of success. However, such new brands have the hardest times getting banks to trust them. As you can imagine, banks prefer lending to individuals who have proven track records of success. If you’re new to the business world, you may wish to consider partnering with someone who has industry experience. Alternatively, you can seek mentorship from seasoned entrepreneurs.

“Most traditional lenders only offer loans to SMEs that have been in business for at least two years,” informs Factoring Companies Canada, “Businesses younger than this are often considered too risky…Unfortunately, the only way to deal with insufficient operating history denials is to apply after you’ve met the minimum threshold. However, you may have luck applying for alternative funding options.”

At Synergy Merchants, we offer small business owners a unique merchant cash advance program. It enables them to get their hands on much-needed funding regardless of their credit scores, collateral or length of time in business. To learn all about it, please don’t hesitate to call us at 1-877-718-2026 or email us at You can also apply online for a free, no obligation quote!

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