When Turning To Your Bank For Business Funding Goes Wrong
Small and medium-sized business (SMB) owners all over Canada have dreams of growing their businesses into larger enterprises. Even if the dreams aren’t about becoming the owners of major corporations, they all seek to grow their respective companies. We all know the saying “it takes money to make money”. That’s why so many entrepreneurs go to their banks in order to secure business loans.
The problem, however, is that securing a business loan is often harder than originally expected. Sadly, many applications are denied. What are the reasons why turning to your bank for business funding can go wrong?
You haven’t sufficiently prepared your company’s financial statements.
A bank’s loan officer is going to want to see just how well your business is performing. Are you earning enough money to repay the loan? This question needs to be answered in the positive in order for a bank to feel confident enough to loan you money. If your financial statements don’t reflect success – or if you haven’t prepared them properly – you’re not likely to get the loan you applied for.
“If you can, have an accounting professional prepare regular financial statements for your business,” recommends Faith Stewart on AllBusiness.com, “This is much better than simply printing reports from your accounting system. Having an accountant’s name on your financial statements lends to their reliability. Monthly or quarterly are great, but at least have professional statements prepared annually so they are ready whenever you need to apply for a loan.”
You have a poor cash flow.
In our last blog, we highlighted why cash flow is so important to your business. We stressed the fact that properly managing cash flow gives you a better handle on ROI and increases your company’s opportunities for growth. We also noted that a strong cash flow protects business relationships. They include the one you have with your bank. It will want to see that you are successfully earning more than you spend.
“Banks tend to favour SMBs that have a steady revenue stream and consistent cash flow coming in every month,” writes David Goldin on BizJournals.com, “SMBs that can’t demonstrate this consistency are denied loans significantly more often than not.”
You improperly filled out your application.
Did you cross every “t” and dot every “i”? Was anything missed on your application? The accuracy and the completion of the information you provide your bank is imperative to your application’s success. The savviest of loan officers go through business loan applications with fine tooth combs. It’s vital that you scour your application to ensure that it has been completed in full.
“Yep, even the application process can be an issue,” says Stewart, “First, consider the timing. Is your business fundable right now? If not, this may not be the best time to apply for a loan with a traditional lender. Try another funding option, like an alternative lender, while you work on fundability. Next, make sure that your business name, business address, and ownership status are all verifiable—lenders will check.”
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