Running a company can be quite an arduous task, starting with acquiring a small business loan. Unfortunately, more than half of loan applications are rejected. If you find yourself in those shoes, do not lose faith. Even successful small businesses have had their share of rejections.
Troubleshoot the problems, learn from your mistakes, and reapply with adjustments. It could be something as simple as forgetting to complete the form or not including requested financial data in the loan application package. Here are some common reasons why small business loan applications are rejected.
Bad Credit Score
One of the leading causes of loan rejection remains low or no credit score. Lenders believe the best way to predict your future reliability in paying back loans is by scrutinizing your prior track record in regards to paying bills and loans. Your credit score provides a simple method of computing your prior credit history. There are many methods of improving your credit score, including opening a small business credit card and paying it off in full for several months. (Be judicious in how much you spend.)
Weak Business Plan
Lenders want to invest in a company that is organized and prepared for success. A weak business plan will scare away loan providers. Your business plan is the best indicator of how detailed-orientated and thoughtful you are as a leader. Share your optimism with the reader, but also stay honest and realistic in regards for your business plan. Add as much detail as necessary in a concise manner. Seek further advice from loan experts at Biz2credit.com (800) 200-5678.
Lack of Collateral
At the end of the day, lenders want to make their money back along with interest. Lacking collateral or other sources of personal revenue will make them think twice before handing you a loan. If you believe this is the weakness with your application, find other methods of strengthening your application to counteraction these deficits.
Just remember to not lose faith in yourself if your business loan application was rejected. The process can be one of learning and self-growth. Keep your head up and visit biz2credit.com for further advice.