Have You Had A Loan Application Denied By Your Bank?

Long before the coronavirus pandemic was making it hard to run a small business in Canada, owners of such companies often sought ways to grow their brands. In many cases, their plans required some extra working capital. So off to their banks they would go with the hopes of securing small business loans.

The unfortunate reality, for most business owners however, is that a denial is more likely than an approval. Have you had this experience? What factors led your loan application to being denied?

Do you have limited cash flow?

Many people refer to a company’s cash flow as its “lifeblood”. “Cash flow” refers to the money that comes in and out of a business. Do you have any problems playing your employees, ordering new inventory or maintaining your place of business? You need money for all of the above. But if money is hard to come by for your business, it will be tough for banks to trust that you can pay back their loans.

“Cash flow – a measure of how much cash you have on hand to pay back a loan – is usually the first thing lenders look at when gauging the health of your business,” alerts Simone Johnson on BusinessNewsDaily.com, “Insufficient cash flow is a flaw that most lenders can’t afford to overlook. Therefore, it’s the first thing you should consider to determine if you can afford a loan.”

Do you have a lack of collateral?

What do you own that you can put on the line in the event you’re unable to pay back your loan? To a bank, losing out on the decision to lend money to a business owner is not acceptable. They need assurance that, in their worst-case scenario, they can take ownership of some form of valuable property. If you have no collateral, don’t expect to get your loan approved.

“Collateral is personal or business property ranging from real estate to equipment,” explains Susan Ward on TheBalanceSMB.com, “If you use your personal property as collateral for a loan and later default, you risk losing it because it can be sold to repay your debt to the lender.”

Have you prepared a solid business plan?

What do you plan on doing with the loan you receive? What are your plans for generating the money you’ll need to pay the bank back? How long do you think it will take to turn the profits you anticipate? There are examples of some questions a loan officer is bound to ask you. If you’re unprepared to answer them, your chances of getting your loan application approved are slim.

According to Johnson, “it isn’t uncommon for very small businesses not to have a formal business plan – or any plan at all – but you’ll still need to put in the time and work to develop a comprehensive business plan before ever walking into a lender’s office.”

Is there a viable business funding alternative to bank loans?

Synergy Merchants’ unique merchant cash advance program can get you the extra working capital you need without having to jump through the loopholes often presented by banks. Learn all about it by calling us at 1-877-718-2026 or emailing us at info@synergymerchants.com. You can also apply online for a free, no obligation quote!