Getting into the business world isn’t easy. For those who are starting of their business, it seems that endless challenges are being placed in your way. For those who are newly operating, nurturing and sustaining your business can consume so much of your resources. One of the greatest means of overcoming these challenges is getting a business loan.
A business loan can definitely help you especially when you keep running out of resources. Money can greatly help you in starting your business, nurturing it to become what you visualize it to be. There are some cases where a business loan can be denied. Here are few of those reasons why applications get rejected.
- Not enough assets registered in business.
This is especially true for startup businesses who are venturing into a service-oriented organization. Banks and licensed lenders would want to be able to collect from its borrowers. Lenders will always consider if your business closes down, how will they collect. A business backed up by assets can be collected by the lender to recover costs.
- Risky industry you are getting in.
One of the things that a lender will review is the collectability of the loan. The loan itself is already a risk that the lender is taking. If the success of your business is banking on risk as well, this may give a higher risk of collecting from a lender’s perspective. This is why lenders would like to make sure that your business will survive and allow them to collect the loan proceeds back.
- Problem with cash flow
This is an important matter that a lender will definitely look into. If you are an existing business, your cash flow will be reviewed by an evaluator before the loan is granted. If you are only starting your business, a forecast of how your cash flow would be would be important. It is necessary to present your cash flow well.
- Time in business
Companies that are starting out or companies that are about to start have the highest rejection rate. The reason is that banks and financial institutions would like to make sure that they would be able to collect. Besides, it is statistically known that 9/10 business fail on startups.
- Bad credit score
Any bad credit standing will definitely offer you a rejection waiting to happen.