Applying for a business loan doesn’t always go as planned. Sometimes you are expecting to get approved and unfortunately find out the opposite. In some circumstances you are declined for a loan and nobody tells you why. A lender might reject you for credit, for cashflow, or for lack of collateral, but if you don’t know, how can you fix these problems?
Understanding what lenders care about is a crucial component to making sure that you don’t waste time. It’s time consuming filling out documents and putting together paperwork just to find out that you are declined for a loan. Wasting time on this means you are not focusing on important aspects of your business.
Read about the loan requirements for the program you are applying for, before you apply! Below are 5 common reasons that your loan application may have been declined.
One of the most common reasons business owners are declined for a loan is personal credit. Your personal credit is an indication of whether or not you pay your personal bills on time. This is the easiest decline to avoid! Monitor your personal credit using companies like Credit Sesame and make sure that your credit score meets the lenders minimum threshold.
Just like your personal credit, your business has a credit score also. By making sure that your bills are paid on time and your vendors are in good standing, you can avoid rejection for past due business bills. Here’s a tip, the bigger the vendor, the more likely it is they report on your business credit. Utilities and credit card companies are the first to report!
Lenders want to make sure you can repay your business loan without a hiccup. If your business is tight on cashflow and you can’t show the ability to repay, your loan application will be declined. A common mistake is waiting till the last minute to apply for a loan. The loan application process is all about showing your business is healthy, don’t wait until it’s too late!
Lack of Collateral
If you are applying for a loan that requires collateral you might want to check to see what type of collateral is needed. The most common types of collateral are equipment, inventory, accounts receivable, and commercial real estate. Some lenders don’t require collateral while others do. If you don’t have the collateral a lender is looking for, apply elsewhere and avoid the headache!
These are just a few of the reasons your loan application was rejected. Ask questions to your lenders and don’t take no for an answer. You should find out why your loan application was rejected to learn what you can do to fix it. If you fix the problem now, you can avoid being rejected in the future.
Fast Small Business Loans
Contact us to learn more about what lenders are looking for in the application process. Let us help you fix the problem and avoid being rejected for a business loan. Speak with a Lending Advisor now by emailing us at email@example.com or calling (888) 853-8922.