A good business loan application is a key to success in any business. It can help you get the funds you need to grow your company, expand and hire new employees, or even get things off the ground.
But there are plenty of reasons why you might have a hard time getting approved for a business loan — here are five of them:
Reasons Your Bank Denied You a Loan
1. Your business is new
If you’re new to the loan game, it’s going to be harder for you to get approved for a business loan than someone who has been in business for years. This is especially true if your company has never received funding before. You should take this into consideration when applying for a business loan.
2. Poor personal credit score.
Many lenders will only lend money to borrowers with good personal credit scores. If your personal credit score isn’t high enough, then it’s unlikely that you’ll be able to get approved for a business loan. Your lender may even require that you pay them back before they consider approving your funding request.
3. Bad business credit score.
Your business credit score is just as important as your personal one when it comes to getting approval for a loan from a lender. The good news is that most businesses have at least one valid report from an established financial institution.
This means that even if your company’s overall financial standing needs improvement, there may still be enough information available to decide whether to approve your request for funding.
4. You didn’t go to the right lender
When you’re applying for a business loan, it’s important that you choose a lender who understands your industry and has experience in lending to your type of business. If you don’t know where to ask or how to find them, consult with other businesses in your industry.
5. You don’t have a convincing business plan
Before you get approved for a business loan, you need to put a few things in place. One of these is a well-researched and detailed business plan that clearly shows how much money is needed, what the expected return will be, and why the money needs to be repaid over time versus being paid back all at once.
If you don’t have this information ready when applying for funding from lenders, they may not see enough value in your idea or project and deny your loan application outright or offer less favorable terms than what they might otherwise offer.
If traditional banks turn down your funding request, you can always try other loan products from alternative lenders. Merchant cash advances, equipment financing, invoice financing, and lines of credit are all smart ways to access the money you need to keep your business up and running.