Applying for a business loan can seem daunting to many. Banks will look into your ability to be able to repay the loan and will consider lots of different things, including your income, your age, your business’ age, your job stability and, most importantly, your credit report.
Your credit report is very important to banks because it gives them an idea of your creditworthiness. There are many reasons why banks may turn down a business loan. Below is a list of five of the most common reasons your business loan may have been turned down.
You or a Member of Your Household is on the Defaulter List
If you or a member of your household has missed a payment on a credit card or a loan repayment and been reported to CIBIL, you are likely to be refused a business loan. This is because the bank will have a record of this missed payment and your address will be matched to it.
This is one of the main reasons why loans are turned down, so make sure that the people living in your property are up to date with all of their re-payments.
A large Number of Previous Loans and Low Income
If you already have a number of loans in your name, then banks will take this into account before agreeing to a loan. They will have a look at what your monthly repayments are and then take this away from your current income, which will give them your real income. If they think that you’ll be unlikely to repay your loan, then they will reject your application.
Become.co is the perfect place to start if you’re looking for business funding and have struggled to get funding in the past. They offer funding that is tailored to suit both yours and the lenders’ needs.
Lack of Collateral
Many banks require you to have collateral – this is a property that they can use to guarantee a loan if it is not repaid. Many new businesses have no collateral, which can make it hard for them to be approved for a business loan.
Weak Cash Flow
Banks take into account your past history. They will look to see if your business is making enough money to enable you to pay back the loan in addition to paying employees, the rent, and any other business expenses. Many small businesses have very little cash flow; this can be the case even if they are a profitable business.
You Have Had a Loan Refused in the Past
It isn’t a good idea to keep applying for loans unless you have a reason to. Any loans that get rejected will be recorded on your credit record and, therefore, bring your credit score down, making it harder to get a loan in the future. Make sure you receive a concrete offer before applying to any other banks.
There are many reasons why banks may refuse your business loan. Make sure that you have a good credit score and settle any current debts that you may have. If you’re struggling to find what you’re looking for then seek advice from a professional.
Identity Magazine is all about guiding women to discover their powers of Self-Acceptance, Appreciation, and Personal Achievement. We ask that every contributor and expert answer the Identity questions in keeping with our theme.
Their answers can be random and in the moment or they can be aligned with the current article they have written. In that way, we hope to encourage and motivate each other, thus inspiring you to Get All A’s.
What have you accepted within your life, physically and/or mentally? Additionally, what are you still working on accepting? Now, we’re not talking about resignation, rather stepping into, embraced, and owned.
I have come to accept my failures as well as my strengths in dealing with day to day struggles. I understand that sometimes situations cannot always be controlled and that I should learn to appreciate the good times and accept that whatever happens, happens.
Appreciation is everything. What have you learned to appreciate about yourself and/or within your life, physically and mentally? On the other hand OR in contrast, are there elements of who you are that you’re still working on appreciating?
I have learned to appreciate the people I have that have stuck by me. It’s rare to meet individuals who become an integral part of your life offering support and companionship especially at times when you need it most.
Share with us one of your most rewarding achievements in life? Tell us not only what makes YOU most proud but also share the goals and dreams that you still have.
The biggest achievement in my life would be my 2 children. The goals I have are what I strive to give to my kids for them to have a better life.