Four common reasons why small businesses get rejected for loans
If you’re looking to inject some cash into a small business, this stat may put you off: Up to forty percent of small business loans are rejected each year. All isn’t lost though. There are plenty of reasons why this is the case, but understanding the why puts you in a great position to become one of the successful sixty percent. This guide will help you reduce the risks of failure and put you in a stronger position to get your small business loan approved.
Your cash flow isn’t strong enough
Lenders often use proof of positive cash flow as reassurance that you’ll be able to make your repayments back on time. This means that it’s vital you have figures to hand and can provide a structured business plan. They may even request you bring along tax returns and bank statements to you application meeting.
You have too much debt
It’s very important to lenders that you can make your repayments. If you’re in debt already, they will assume that you won’t be able to. This is standard practice across the board, whether it’s for a small business loan or others such as payday loans. Some lenders may offer to pay a percentage of the debt, or give you a lower interest rate.
You haven’t been operating long enough
The longer your business has been operating, the bigger chance lenders will provide you with a loan. This is mainly due to them seeing you as a potential long term customer with a proven track record of being successful. If you haven’t been around for a long time, don’t worry. You could choose an online lender like Loanbird or look for another financial product such as a business credit card or one of many payday loans.
You don’t have enough collateral
Collateral is physical property lenders can put against a loan which they can seize if repayments aren’t made. If you can’t back up enough, or any at all, lenders may refuse your loan. To avoid this, you can put up other things like a house, or car. It’s important that you’re absolutely certain you can repay your loan, otherwise you may jeopardise losing your assets.
As a small business owner, getting a loan can be tough. Here at Loanbird, we make the process as easy as possible. Whether you’re after a small business loan, payday loans or a bad credit loan, apply online to find an option suitable for you.