LONDON – Applying for a loan can be a lengthy process and the last thing you want to hear at the end of it is that you got rejected and that you will not be receiving the financial aid. Many small business owners are scared that they will run into this problem. If you’re worried about having your loan application rejected, take a look here as we go over the main reasons why lenders reject loan applications. Whether you don’t understand what went wrong, or you’re trying to prevent the situation, knowing what leads to rejection can be very useful.
You have bad credit history
Credit is an essential factor that dictates just how much a bank, for example, is going to trust you when you tell them that you’re paying them back. However, even if you manage to repair your credit, your credit history will most likely still display some unfavorable statistics. Credit history is designed so that records of poor credit will remain there for a pretty long time. Keep this in mind when you apply for a loan.
Your cash flow isn’t that great
Cash flow represents the amount of money you can muster at a time, or in other words how much money you have on hand. If your business isn’t generating a good enough cash flow, it basically means that you won’t be able to pay back the money you borrowed. Lenders take this into account when deciding whether or not to lend you money.
You don’t have a reliable plan
Knowing how to get a small business loan isn’t all that matters. You also have to know what you’re going to do with that money if you get approved. What are you going to invest it in? What do you see in the future of your business? Lenders are very interested in this as it gives them reassurance about how you are going to use the money, and how it will generate enough income for you to pay them back. After all, lending money is a business for lenders, so as long as you have a loan to pay back, your business is their business.
You don’t show enough passions
This might seem a bit odd, but it’s important to show your passion for your business and your work. Seeing dedication and passion will encourage the lenders to give you their money. If you just seem bored, without a plan and with no drive, they can’t really trust you to pull through and pay them back when the time comes.
You’re not prepared
One of the things that really blow your chances at a loan is being disorganized. Not having all the required paperwork with you, not knowing important details about your business or your financial situation, not being able to find things, these are all examples of being disorganized and lenders try to stay away from this sort of stuff.
Getting a loan is a process that can differ considerably from person to person, but knowing what makes lenders say yes and what makes them say no, especially no, is the key to preparing accordingly and securing that loan.