December is a very busy month of the year for most businesses. However, there are…
Halloween arrives today! It’s the day when scary costumes and decorations are the norm. For small business owners, securing a business loan can be scary, no matter what day it is. Despite their best efforts, many find themselves faced with a frustrating and discouraging two-letter word: No. Rejection is always disheartening. This is why it is crucial to understand the various reasons behind a bank’s decision to deny a business loan.
Poor credit history.
Banks rely heavily on credit scores to assess a borrower’s creditworthiness. Do you have a limited personal or business credit history? Is your credit history marred by late payments and defaults? If so, having your business loan application denied is likely. It is essential to build and maintain a strong credit profile in order to successfully secure a loan from a bank.
According to Business Link, “there are several ways to improve credit scores for business owners who were initially rejected by a bank due to bad credit. Planning a proper payment schedule on any loans or credit cards and using an appropriate number of credit cards can help change a low score into a high one. Ensuring that your name and address are exactly the same with all your credit cards can also improve your score.”
Insufficient business plans.
Banks want to know how you intend to use the loan funds and how it will benefit your business. Is your business plan vague or incomplete? Does it lack a clear strategy? If so, it can lead to loan rejection. A well-structured business plan that outlines your goals, financial projections and repayment strategy can make a significant difference in your loan application’s success.
“Not all lenders require a business plan, but the ones that do want to see a clear and detailed outline of how you’ll use the loan, how it will benefit your business and if your business has the potential to earn the revenue necessary to repay the loan,” reports Kristina Byas on Bankrate.com, “Creating a well-thought-out business plan that demonstrates your vision, strategy, goals and financial potential can get you closer to loan approval.”
Most traditional banks require collateral to secure a business loan. Collateral serves as a safety net for the bank in case the borrower defaults on the loan. Are you able to provide sufficient collateral? Do you have assets with questionable value? If so, you may find your loan application rejected. It’s essential to assess the bank’s collateral requirements. Alternatively, if collateral is an issue, you’ll need to explore lenders that offer unsecured loans.
“Using collateral can help a bank feel safer in approving a loan,” informs Business Link, “It may not be ideal to put personal property (collateral mortgage only) up against a business, but it can help banks feel better in what they view as a possibly risky investment. With proper planning in repayments and expenditures, the risk to the collateral is minimized.”
Synergy Merchants’ unique merchant cash advance program enables all types of business owners to get their hands on much-needed funding. Your credit history doesn’t come into play. We don’t need to see a business plan and collateral isn’t necessary! To top it all off, we can provide you with a quick infusion of cash in less than 24 hours!