If you’re a small business looking for a business loan to expand or consolidate debt, you may be frustrated to find that lenders turn you down. Sometimes, a loan is essential for maintaining your business but lenders are more cautious than ever about who they give their money to. If you’re wondering why you keep walking away empty handed, here are some things you may need to work on.
Bad Credit History
If you have a history of bad credit, any lender is going to refuse your loan application. This may not seem fair because there are many instances when people can’t avoid getting a bad credit score. You may have been unable to work due to illness and forced to miss a few payments on your bills. There are times when explanations on your credit report could sway a lender into changing his/her mind, but you’ll still need to work on increasing your credit score. You can also look at alternative ways of lending if you think it will take a while to change your credit report. Investment is always a viable option for small businesses.
The first thing a lender is going to look at is whether the business can afford to pay back the loan. If you’re hoping to get a loan in order to increase your custom, you’re going to need to prove that the business will make more money soon. If you’re constantly being rejected because of this, it’s your entire business plan you need to rewrite. Lenders need a good reason to give you money, and it’s usually because they’re sure they’ll get their money back, plus interest. Demonstrate to your lender how their money will make you money.
A loan is usually a long-term commitment. If you currently have the money to pay the loan back but you’re still being rejected, it may be because lenders believe your business is likely to fail. If you want to succeed in business you need to have a vision for the future. You can’t stay in business unless you’re willing to roll with the times and upgrade when necessary. If a lender can see that you have no direction planned for your business and no enthusiasm for making it work, they may decide that you aren’t worth investing in.
If you walk into a bank for meeting with the loan manager and forget to bring the proper documentation, you’re certainly not walking back out with an approved loan. Lenders will observe everything when it comes to loaning money to businesses. You need to present yourself as professional and organized. Don’t walk in with tax returns covered in coffee or crumpled up documents squeezed into your handbag. When you want to impress, have the documents ready in protective casing and in order of when the bank will need them.
Getting rejected for a loan can be disappointing, but with some expert advice and a few changes, you won’t have to wait much longer to get the acceptance that you need.