Acquiring Business Loans Can Be Tricky, Here’s 8 Reasons Why Your Small Business Loan Isn’t Getting Approved
Getting a business loan is often an essential part of launching a startup or developing a business. However, they can be quite hard for newer companies to acquire. Be warned about these eight points that might be preventing you from getting that small business loan approved:
1. Bad credit history
A credit report without diligence in paying back debts will get anyone denied a loan. Also, it’s hard to get a small business loan with a credit score below 700. If that’s your case, review your personal and business credit scores for accuracy and correct any errors before starting the process of a loan application. You can consider non-traditional funding options, too since there’s usually less emphasis on credit scores.
2. Insufficient cash flow
Cash flow is the benchmark of how much money is on hand to pay back loans and is often the first thing lenders consider when assessing a business’s health. Therefore, it’s important that you check if you can actually manage a loan. Try to calculate your cash flow every quarter, so that you can optimize it before approaching possible lenders.
3. No concrete business plan
Having no formal business plan isn’t unusual for very small businesses. However, developing a standard business plan—with your company’s summary, products, market, and finances—will help sway lenders into giving you a loan. It’s important to also be ready to explain how you plan to use the funds you’re borrowing.
4. Overloading on loan applications
Some entrepreneurs think it’s a great idea to apply for multiple loans all at once so that they can choose from a variety of potential propositions. On the contrary, credit bureaus might see having too many loan applications at the same time as a red flag.
5. Being unorganized
Before you approach possible lenders, make sure you have all the paperwork needed for your loan application with you. Take the time to collect all the required information, complete filling out all the forms, and read over your application before you submit it.
6. Not seeking expert advice
Lenders usually want to know if you’ve taken some advice from experts such as accountants, who can be an essential source of guidance for small business owners. Entrepreneurs can also get financial advice from business networking organizations. Many of them have detailed resource sections about the various kinds of accessible capital and the best methods to prepare for funding.
7. Failing to shop around
Blindly proceeding with one loan provider without exploring other choices is a mistake. Research various traditional lenders or alternatives such as online lending platforms, peer-to-peer lending websites, and even your network of friends and family.
Lastly, you have to radiate enthusiasm and trust in your enterprise to entice the lender and make them a believer. To successfully do this, you must learn how to tell the story of your business in a way that’s compelling to the lender. If you appear prepared and passionate about your business, they might just trust you enough to approve your loan application.
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