Business Loan Rejections: 3 Reasons You Can’t Get Funding
Setting up a business is a tumultuous experience. With dreams to pursue and a vision to realize, you’re going to need all the support you could possibly need, especially when it comes to finances. Turning a business dream into reality means investment after investment, so plenty of new entrepreneurs turn to the saving power of business loans.
Unfortunately, business loan applications get rejected. While it may tempt you to surmise that the business world may not be for you, take a step back and breathe. It’s not uncommon for lending institutions to reject funding—the next step is to know why your business loan was rejected and work your way around them.
If your business loan has recently been rejected, here are three reasons why:
Reason #1: You’re opening a startup company
According to the Australian Bureau of Statistics, more than 60% of small businesses in the country cease operations after three years of establishing their business. Armed with this knowledge, most lending institutions become wary of approving loans, especially for new business owners without an established trading record.
What you can do: To get a higher chance of approval, place available assets on the loan application as security. The rates will be much higher than the norm, however, but there’s also the option of including personal loans or asking friends and family for some assistance.
Reason #2: You have a bad business credit score
The most important determining factor of your business loan is the business credit score. The higher your credit score is, the bigger the chances of getting a loan approved. While it may seem straightforward enough, the reality is that the process isn’t simple. Your credit score essentially demonstrates your history of borrowing and repayment. If your lenders see that you have outstanding loans, you’ll likely be denied credit.
What you can do: Avoid banks. These institutions aren’t always receptive to challenging personal circumstances. The best way to get your loan approved is to visit other loan institutions—even with outstanding credit, proof of assets and good cash flow will be enough to sway them into approving your loan.
Reason #3: You lack proof of income
Once approved for a loan, the first instalment will be due in 30 to 45 days after the exact day of approval. If you have no means of proving that you can repay the loan within that time period, the chances of your business loan application being denied are at an all-time high.
What you can do: Let lending institutions see that you have the ability to meet monthly payments. While proof of income may be enough, look for other ways to show them that you have the means. Back your evidence with further data, such as bank statements, utility bills payment, and other documents that prove that you can—and you will—be able to pay monthly,
Have You Been Rejected For A Business Loan?
If you have been rejected for a business loan, or are currently pondering your chances of getting approved for one, the best way to approach the situation is to educate yourself. Knowing the reasons business loans get denied is a good place to start, but if you wish for a foolproof plan, it’s integral that you gain access to the right advice.
Our team at Business Loan Experts will be more than willing to help. Experts at all things financial, we’ll help you apply for a business loan in Adelaide and the rest of Australia with ease. Whether you’re only starting out as a new entrepreneur or looking for ways to grow your business further, we’ll help you achieve the funding you need.
Ready to realize your dreams? Reach out to our team today.