Why was my application for business financing turned down?
It’s a terrible situation for business owners: you were banking on securing that business loan finance, but the bank turned you down.
It’s discouraging to have your company funding application refused. You’ll be bombarded with questions such as, ‘Why was my application rejected?’ ‘Should I try again with a different lender?’ ‘What do I do now?’ or the more popular ‘What do I do next?’ ’
There are a variety of reasons why company loan applications are turned down. Here are the top four reasons why your company loan may be refused. If you’re going to apply for a loan in the near future (or if your application has previously been denied), this list can help you prevent future rejections.
NEED BUSINESS FINANCING?
It is a New Business
Business financing is hard to secure if you’ve only recently started your company, you may not yet have enough business credit history to qualify for business financing. Remember that merchants don’t always submit your payments to the business credit bureaus automatically. As a result, whenever you open an account with a new vendor or provider, double-check that they record your payments. This will assist your company in establishing a positive credit history.
Of fact, even if you’ve just been in business for a short time, you can have solid finances and manage a great business. However, you may have to seek a little harder for the perfect lender to meet your scenario in order to acquire the business finance you require.
Related Topic: Things to Consider when Launching a Small Business Website
Credit History Issues
Lenders can use your credit history to learn about your payment history and how you manage your money, in general, to know if you are qualified for business financing or not. If you’ve ever defaulted on a loan, missed many payments, or maxed out your credit card(s), your FICO score may suffer. As a result, lenders may have a negative impression of you as a possible borrower. Other grounds for business loan rejection include insufficient credit or a credit history of little to none.
Typically, creditworthy consumers have FICO ratings of at least 670. FICO suggests a few easy strategies to raise your score:
- Make sure you pay your payments on schedule.
- Check your credit report for inaccuracies on a regular basis and dispute them right away.
- Make a plan to pay off your debts.
Lack of Collateral to qualify for a Business Financing
Before you can get a business loan, most traditional lenders need you to put up enough collateral. So, if you don’t have enough collateral – or the wrong kind of collateral – chances are you won’t be authorized for business finance. Collateral can take several forms, including a car, a house, heavy machinery, and so on.
‘Unfortunately, this is the reality: you are unlikely to be approved for a loan due to a lack of valued assets.’ If this describes your position, consider an unsecured loan as an alternate source of funding.
Documents and paperwork that are incomplete or invalid
Incomplete or inaccurate documents and paperwork are unfortunately one of the most typical causes for business funding applications being refused. It’s possible that the applicant didn’t properly complete the application or didn’t supply all of the required supporting documentation.
Bank statements, tax returns, proof of business registration, business licenses and permits, financial statements, Employer Identification Number (EIN), and personal and business credit reports are among the documentation most lenders request. Other documents relating to your firms, such as leases, contracts, permits, licenses, and corporate documents, may be required.
Make sure your paperwork is in order before submitting your application to avoid any problems. Make careful to double-check everything after that. Also, check through each stage of your loan application carefully to confirm that you’ve filled it out accurately.