Top reasons why you can get turned down for a small business loan
Being enthusiastic about your company’s future and being ready to apply for a business loan is the right way to go, but it just isn’t enough when it comes to being granted that loan. Loaners are very meticulous about whom they lend money to, and a series of requirements need to be fulfilled. Moreover, there are also plenty of things that make getting that business loan nearly impossible. Here are the top reasons why the answer might be no:
Your credit history is something that will be thoroughly examined upon submitting your application for receiving a business loan. Your credit history will show lender what kind of past you have regarding previous loans and how you paid them back (if you paid them back, that is). Depending on what kind of situation is found in your credit history, your chances of getting a loan can grow or drop considerably. If you have a history of failed payments and inability to come through with the terms of previous agreements, the lender will more likely be skeptical about loaning you more money.
No cash flow
Not having a good cash flow means that you don’t have enough money on hand to repay your debt. As you would imagine, this does not bode well with any lender, so they are a lot less willing to invest in a loan with your company under these circumstances. Since your business’ cash flow determines in a broad sense if you will be able to repay the debt or not, it’s one of the most important things that lenders look at when considering giving you money.
Lack of organization or perspective
Banks and lenders will be less likely to work with people that have no vision for the future. They are on the other hand more willing to loan money to companies that know exactly what they’ll do with that money and what the business will look like in a couple of years. If you ask for a loan with no plan, and nothing but your hand stretched out, it might remain empty. Also, the way you handle your business indicates the level of professionalism that is implied within your organization. Lenders will approve of organizes businesses and frown upon disorganized companies that look more like a hazard than a good investment on their part.
Another “popular” reason for which many business owners are rejected when they apply for a loan is the fact that they don’t demonstrate any sense of passion for what they want to do with the loan. Many people go in showing pretty much no emotion regarding their plans, which is a red flag for lenders. You are a lot more likely to score a substantial loan if you go in there and show just how passionate and determined you are to succeed and build something amazing with the money they give you.