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Have you had a business loan application denied by your bank? If so, you’re not alone. In our last blog, we listed some reasons why your bank may not have loaned your business the money it requested. They included having an inadequate cash flow, not completing the application properly and lacking collateral. In today’s blog, we will continue to help you figure out why your business loan application was denied.
You have too much existing debt.
Do you already owe the bank money? Are there super high credit card balances you have yet to pay off? A bank’s loan officer is sure to check into your outstanding debts. If you have many, he/she is not likely to loan you any more money. On Forbes.com, Kiah Treece explains that lenders prefer an applicant’s debt utilization rate to be under 30%.
“If you’re trying to get a business loan but your business is denied because of a high debt utilization rate, take time to pay down outstanding balances before reapplying for a loan,” she advises, “Businesses with a utilization rate close to zero should start accessing their current lines of credit and establishing a strong repayment history before reapplying for a loan.”
You have a poor credit score.
Perhaps, the most obvious of reasons that a business loan application is denied is a poor credit score. If you have a history of being able to repay your debts, your credit score is certain to be low. This will inhibit you from borrowing money from a bank. It’s important to understand your credit score and how to improve it before approaching a lender. On Entrepreneur.com, John Rampton reveals that 45% of entrepreneurs weren’t even aware they had credit scores.
He cites a Small Business American Dream Gap Report that also reveals that 72% of business owners didn’t know where to find information regarding their credit scores. “Being aware of your credit score prior to applying for a loan will inform you if you have poor, or no, credit at all,” writes Rampton, “If so, you can be certain that your loan application will be denied because you’re too much of a risk.”
You are in a risky industry.
Again, banks want to ensure that the business owners they lend money to will be able to repay their loans. In some cases, they consider the industries of their applicants to determine the likelihood of being paid back. Treece reveals that restaurants, agriculture and construction are some industries that are considered risky.
“While you can’t change industries to satisfy lender requirements, you can change lenders,” she notes, “There are a number of alternative lenders that cater to riskier industries and offer types of financing better suited to those industries. That said, these lenders may require collateral or charge higher rates and fees to make up for the additional risk.”
A merchant cash advance is an ideal funding alternative!
With Synergy Merchants’ unique merchant cash advance program, you can get your hands on business funding very easily. Regardless of your credit history or industry, you can be approved in less than 24 hours! For more information, please don’t hesitate to call Synergy Merchants at 1-877-718-2026 or email us at firstname.lastname@example.org. You can also apply online for a free, no obligation quote!