Why business loan requests get declined
In order for your business to grow, you need to finance that growth, either through your earnings or through external sources. It’s not uncommon to be denied financing – particularly by traditional banks – without even knowing exactly why. Here are three reasons your business loan application may be turned down.
You don’t have high-quality cash flow.
A bank will want to see if you have enough funds to make your monthly payments in addition to meeting your operations expenses, such as rent, payroll, inventory, and so on. It can be difficult to keep cash flow going when profits are low – or even when you are profitable but need to pay suppliers up front. If you don’t have financial statements that show stable, continuous, and predictable earnings related to your core business, a bank may reject you on this basis.
You don’t have sufficient collateral.
Collateral is physical property that guarantees your loan if you don’t repay it. Banks don’t always require collateral before agreeing to lend, but they nearly always do if you’re a smaller business. If your business doesn’t have equipment or real estate to offer as collateral – and you don’t want to put forth your personal assets, like your home or vehicle – a bank may not be willing to lend you money. In these cases, business cash advances – also known as merchant cash advances – may offer you an alternative. While there will be a higher interest rate than a traditional bank loan, they often don’t require collateral.
You have low – or no – credit.
Banks will look at both personal and business credit scores when they decide whether to lend you money. Your personal credit scores are reported by three main bureaus – Equifax, Experian, and TransUnion. The three major business credit bureaus are Equifax, Experian, and Dun & Bradstreet. Each one of these bureaus calculates your credit score differently, and different lenders may use different scores to make their decision. Factors such as bankruptcy and late or missed payments to creditors contribute to a poor credit score. And if you’re a new business, you may not have established any credit history at all.
This is why many business owners with plans for large-scale financing in the future will take out small, manageable loans as soon as possible. By making timely payments and spending within their limit, they build credit, raise their personal and business credit scores, and establish a relationship with a specific lender.
If you’re looking for a loan, don’t let rejection from a traditional lender stop you from achieving your business goals. Let Plousio find the right option for your small business.
Other Useful Resources By Plousio
- What is a business loan?
- Credit Score Explained
- Why borrow money to purchase business equipment?
- Business Loan Underwriting Explained
- Interest Rates & Factor Rates Explained
- Why business loans get declined
- Business bank account requirements for loans
- Preparing for a business loan
- Getting approved for a business loan
- How to qualify for a business line of credit?
How Does Plousio Work?
Plousio makes it easy to find a great small business loan with the most competitive rates. Simply answer a few questions, select a lender and fill out our account creation form and you’ll start receiving new offers right away! With 3 easy steps, you can get your death care business funded!
Step #1: Apply online or call 1-508-848-0534
Step #2: Receive the most competitive offers
Step #3: Get funded within 24 ~ 48 hours
Contact a Plousio Funding Adviser Today
If you need help with determining your funding eligibility or preparing application and documents, please contact our funding adviser today. Plousio funding advisers pride themselves in transparency and non-aggressive communication practices. They are not here to make sales quotas, instead, focus on helping you every step along the way of your funding process. In the unlikely event, you do not think that Plousio is the right solution for you, just let us know – No problem! We promise we wont be calling you 5 times a day like some other companies do.