Why Your Loan Application Was Rejected

Monday July 26

Have you ever felt discouraged because your business loan application was turned down? In reality, business loans can be gotten without hassle but this is only possible when the borrower meets the requirements. Now, this is where the difficulty may come in but once you learn the ropes, meeting the requirement shouldn’t be a big deal. Here are few things we feel you should know before you hit that apply button.

This is one of the major reasons loan applications are rejected. Both ratings and scores are designed to show potential lenders and creditors a borrower’s likelihood of repaying a debt. They are created by independent third parties (such as the credit bureau) rather than by creditors or consumers. Credit scores are paid for by the entity requesting it. Small business owners especially tend to overlook this because they assume that they would be able to make up for their credit history in no time but when this does not happen, it lowers the credit score of the business owner. This is why it is important to maintain a good credit score whether or not you plan to apply for a loan soon.

Numbers Matters

As a business owner, you should not lose your financial records or fail to keep track of expenses and profits. If you do this, there is little to no way you can prove that your business is deserving of investment as everyone (including your lender) wants to see how far you have run your business well because they do not want to go through the rigor of having to resort to legal options to get their money back. If you haven’t started keeping records yet, then this is the sign that you need to immediately.

Your Character is Your Personality

When any agreement is signed, relationship is established. No one enjoys a toxic relationship, even when they manage it. if after carrying a background check on your character, the lender confirms that you won't keep your part of the whole agreement , they would rather turn down your request than take the risk because there are many other business owners with a good character out there who need the loan.

Cash Is King In Business,So Let It Flow!

When applying for a loan, one of the requirement your lender will need access to is your bank statement. Having an inconsistent cashflow is a red-flag for your business. The aim is to know how frequently you receive payments for your services and this would inform the decision of your lender in analyzing your minimum revenue band. Make sure you pass your revenue through an account.

Multiple Debit

No one is saying you won't have debt obligations as an entrepreneur, but this can be the worst mistake you will make as a business owner. When you take multiple loans that you cannot repay, then you are setting yourself up for multiple rejections in the future and also putting your business in a tight corner. Lenders see you as a huge liability and no one likes a liability, not even you. So always take business loan when the need, data and figures match, showing your ability to repay.