Why you may never get a business startup loan
Have you ever wondered why that lender or bank said No when you asked them for a loan for your startup business? Well, after reading this article you will perfectly know.
Many newbie entrepreneurs find this loan one of the most essential ways to finance their startup business. Nevertheless, it is not a walk in the park when it comes to obtaining this kind of loans. But why is that so? You may ask.
Reasons why Most Lenders Find it Hard to Give you this Loan
Every well-established business you see today started from where you are now. You have taken a bold step that will lead you to the ten thousand miles in your business. But why will most lenders not view your startup business vision in your perspective?
- They look at the assets – most lenders know that most startup businesses don’t have assets. They need to see the products and services that you have that they can easily turn into cash in case the loan has defaulted.
- They need collateral – unless you use your personal assets or have a stable co-signer, the bank may not grant you any business startup loan. They know that most startup entrepreneurs have little or no collateral at all.
- They want to see your capacity – every bank wants to see that your business has the capacity to easily settle the loan within the stipulated time frame. If you don’t have a track record, they will not consider you.
- They look for your character – your character in dealing with debts matters a lot. This is where having a clean credit rating plays a major role in getting your loan.
Now you can ensure the above four are in check before turning to your lender for that business startup loan.
Top 5 Reasons Why you May Never Qualify for any Startup Loan
So basically the bank will look for your capital, collateral, capacity, and character. They may find it hard to trust you especially if you lack one of them. However, there are other common barriers that will always make you be turned away by these banks and lenders.
Having no business plan
Every bank/lender wants to deal with a futuristic and visionary entrepreneur. The only way you can show you have a vision for your business in the next 10 years is having a business plan.
Poor credit rating
This can crash or build you. The lender uses this to base your honesty, integrity, and general character when you are dealing with loans. Ensure your credit history and score is above 680; be paying your loans on time.
Having an apathetic attitude
There many entrepreneurs who want business startup loans. That means you have to present yourself as the best candidate for this loan. Explain in detail how you will use the loan.
Limited or poor cash flow
They want to see how you will repay this money using the profits from your business. Your business must be healthy before going for a loan.
You must put yourself together with well-filed business papers. You should not say you forgot the Balance Sheet or any other document when it is asked out for.
Getting a business startup loan is not an easy task but if only you can improve on the above and seek professional advice, they will not deny you next time. Don’t give up, give it one more shot!