March 29, 2024

Tannochbrae

Built Business Tough

6 Reasons Banks Won’t Give You a Business Loan

6 reasons banks won't approve your business loan request – Business Info  Finder

There are many banks in the USA but it doesn’t mean that you can get business loans without credible history. Everyone knows it’s almost impossible to start a business without having a dime for its operation. It is more difficult to not be able to afford the inventory essential for the business. This is why there are many loans in the USA which you could access for your business needs.

However, regardless of the business decisions you’ve made, you may be declined loan requests. This is a challenging period for entrepreneurs in the US. What could be responsible for this? The following are the reasons why your business loan request will be rejected without a second thought:

  1. Inconsistent Cash Flow: 

Just as America can’t go to a war that exhausts most of its money, banks don’t want to invest in enterprises that lack consistent cash flow. 

Banks will ask for your revenue and when they see that you have a poor history with cash, they may choose to deny you the loan. This happens the most when you are requesting a substantial amount of money.

  1. Lack of Sufficient Collateral: 

For your small business, having insufficient collateral may leave you without a loan. To the bank, you must have a viable property or alternative before you can be funded for your business. It doesn’t matter that you’re not a large corporation yet. This is because they don’t want to take the risk.

  1. Lack of Consistent Customers: 

If you haven’t been lucky with customers, you may not get the financing. Banks are skeptical of businesses that have most of their sales from a few customers. If the business sales and revenue aren’t balanced, it could pose a threat to the possibility of getting a loan.

  1. Debt-to-income Ratio: 

This is when you are indebted to other lenders at the moment you’re requesting the loan. As a business owner, it is dangerous to take loans from different lenders at the same time as you may eventually cripple your business. 

If a bank or lender discovers that you’re presently in debt to other lenders, they’ll reject your application.

  1. Lack of Sufficient Credit: 

Regardless of the recession that has attacked your business, you need to have a credible credit score to qualify for a business loan. Without it, you may not be able to get a loan. If you have at least 720 as your credit score, you can enjoy some luxury. Without it, it could be difficult to get a loan.

  1. Lack of Personal Guarantors: 

Sometimes, banks are ready to overlook some lapses in your business when you have personal guarantors. These are people who will stand in for you should you fall short of your promises to pay back the loan at an agreed date. 

However, if you lack personal guarantors who are reputable people in society, your application will be ignored.

Aside from these, having a poor operation history, the weak structure of management or your business is in an industry that has lost its fame, you may need to consider alternative financing options. This could be getting a loan from your family members, friends, social societies, or church.