For any small business owner, operating without a business loan is almost impossible. Most businesses that thrive rely on business loans to ensure that things are running smoothly. But what if your loan application gets rejected?compare small business loans online with Lantern This is something that most business owners dread.
Lenders have requirements that must be met before issuing loans. Failure to fulfill such requirements means that your loan application won’t go through. The truth is that your business loan application can be rejected for simple reasons. The fact that your loan request has been disapproved doesn’t mean that you will never get a loan.
Here are some of the reasons why your business loan is getting rejected:
1. Your credit score
This is one of the main reasons why small business loan applications get rejected. Lenders tend to focus more on the credit history of a business before deciding to issue a loan. If your credit score is poor, then it means your chances of getting a loan are much lower and vice versa.
In case your loan application is being turned down because of a low credit score, the best thing will be to review your credit score and come up with a way of repairing it. Understanding what goes into your credit score will help you manage both your personal and business credit properly.
2. Lack of collateral
Most banks and lenders require some form of collateral as a security for the loan. They may ask for physical property and other assets before giving you a business loan. If you fail to repay the loan in full and on time, then the lender has the option of selling the collateral to regain the loan. You should therefore try to provide some collateral to increase your chances of getting the loan.
3. New businesses
If you are just getting started with your business, it might prove difficult to get a loan from a traditional bank. A majority of lenders shy away from lending startups or new businesses because of the uncertainty that they face. As such, you will have to spend enough time building your business and prove to the lenders that it has a bright future.
4. Weak cash flow
Lenders always want to see that your business has the adequate cash flow to make prompt monthly payments other than covering other expenses such as payroll, rent, inventory among others. You should be able to demonstrate to the lender that you are able to cover all your bills and at the same time make monthly loan payments.
How do you increase your chances of approval?
There are several ways of increasing your chances of approval. One of them is to maintain a high credit score. The other one is to have a strong cash flow so that the lender can see your financial muscle. Finally, be ready to provide collateral when requested by the lender.
In general, no business owner likes the idea of his or her loan application getting rejected. As a business owner, you should try to compare small business loans online with Lantern in order to get the best lender to approve your business loan.