How to Make Sure your Finance Application Isn’t Rejected
Applying for a business loan can be disheartening, with more and more companies being rejected by mainstream lenders. High street banks have a very strict set of criteria, and no matter how hard they try, the majority of businesses can’t jump through the endless hoops. Unfortunately, many business owners find themselves in the position of having a loan application rejected.
It can be really discouraging to have one or more applications for finance rejected, and not only that – it can harm your chances of lending from other financial institutions too. Always check the eligibility criteria, and don’t apply unless you know you tick all the boxes. Different lenders have different criteria, so shop around to find the right lender for you who is most likely to offer you a loan.
There are many reasons why a finance application isn’t approved – it could be a basic issue with paperwork, or the lender may think your business is too much of a risk. Many people are confused as to why their application was rejected, and it’s important to find out the exact reason from the bank. Here are some of the most common reasons why business loans are rejected.
Bad Credit History
There may be something in your personal or business credit history which has flagged up and caused the lender to be cautious. It’s a good idea to find out your credit score and get a copy of your credit rating before applying for any type of loan. There are various steps you can take to improve your credit score, and sometimes these small actions can make a big difference.
Cash Flow Issues
All businesses have ups and downs, and you may have seasonal fluctuations in revenue. However, if you have ongoing cash flow problems and spend a lot of time in an overdraft, this can signal that you can’t yet manage loan repayments. Finance is often refused if lenders don’t believe a business is in a strong financial situation.
Short Trading History
Because banks are being extremely cautious and limiting credit at the moment, they are not considering start-ups or fairly new businesses. They want to see years of financial records, so if you’ve only been in business for a year or two then this could be the reason why the lender has considered you as a risky investment.
Just because you’ve been rejected by the mainstream banks doesn’t mean you no longer have access to finance. There are many other options to explore, even if you are have a short trading history or an adverse credit history. Talk to our alternative finance advisors today to discuss the options open to you and your business.
