How to Reduce Your Chances of Being Turned Down for a Business Loan

It is not uncommon for small businesses to get denied for business loans. Unlike personal loans or credit cards which can be quite easy to obtain, commercial loans are often harder to get approved. Lenders tend to have higher standards and more strict guidelines for approving small business loans due to the high risk of small businesses failing.

When small businesses fail, lenders have to go through the trouble of seizing business assets or foreclosing on their property in an attempt to recuperate their loan and in turn possibly losing money. Lenders are not in the business of repossessing or foreclosing as seen in the 2008 U.S. financial crisis backed up foreclosure proceeding.

There are various reasons a lender may reject your small business loan. Illegible documents, errors on your application, omissions, or incomplete financial disclosure could also cause you to get denied. If you have any large outstanding debts or are behind on your payments, the chances of your loan being denied also increase. If your business struggles to make ends meet, your loan may also be denied, as late or missed payments will show up on your credit report.

If your loan is denied, find out why. Ask your lender to explain why your loan was not approved so you can take measures to correct the problem. Otherwise, you will get the same result from other lenders. At “As Is” Loans we do not provide denials, we provide you step by step solutions to take to receive the capital you need.

Some issues that lead to rejection are minor and can be resolved within a day or other may take a couple of days to a couple of months.  It may take some work, but not impossible. Never accept a denial without getting an explanation from your lender. Here are just a few of the many issues that could be resolved.

Bad Credit or Below Average Credit

Bad credit on your credit report can have a detrimental effect on requesting a business loan. A poor credit rating is a reflection of how you handle your finances and how the lender expects you to handle their money when they give you a loan. If you can’t manage your own personal funds, in the eyes of a lender, chances are you won’t do much better managing your business affairs.

The first step to obtaining a business loan is to fix your credit score. This can be accomplished by paying off outstanding debts and establishing a habit of paying bills on time. Depending on your situation, it can take anywhere from a couple of days to a couple of months. We can show you how to start and can even refer you to a credit repair specialist to assist.

The sooner you start, however, the better. Once lenders see you are taking measures to improve your credit score, they’ll be more agreeable to approving your loan.

You can start by getting a handle on your personal debts. Obtain a copy of your credit report and start calculating your debts. Include interest rates, fees and penalties in your calculations. Then create a financial plan to pay them off.

Talk to your creditors to see if you can negotiate a deal for reduced payments or interest rates. Some creditors are happy to deal with debtors as reduced payments are better than none. Refinancing or consolidating your debts could help to get them paid off sooner.

Existing Lawsuits

Make sure you resolve any active or pending lawsuits before applying for a new loan. Lenders do not look favorably on any open or possibly lawsuits. To begin with it tells the lender may have the first impression that you are either not ethical, hold unprofessional business practices, or you are unable to avoid legal issues.

Regardless, most lenders in order to protect their reputation and long lasting standing do not want to be associated with any borrower that may tarnish their reputation.

Problems with Cash Flow

Lenders will review your cash flow statements and monetary projections to determine how your business is doing. They’ll also review your business accounts, looking for such factors as low monthly balances, overdraft charges and bounced checks as these indicate that your clients or your company isn’t doing well financially.

Many entrepreneurs struggle with cash flow problems in their startups. Even experienced business owners can have trouble from time to time with gaps in their cash flow. Creating a budget for your company’s operating expenses can help strengthen your cash flow. Your budget should prioritize spending to ensure you have sufficient funds for essential costs.

If receivables are a problem, you can try offering customers a slight discount for paying invoices up front. Although you won’t get the full amount due, you’ll more than likely get paid quicker and on a regular basis which will improve your cash flow.

Another solution is to obtain additional unsecured credit cards or lines of credit to allow you to float the days your waiting for your account receivable to come in. Give us a call we can help you obtain unsecured credit cards or lines of credit on both your personal or business up to $250k per principle.

Lack of Revenue

Businesses that bring in little income are high-risk in the eyes of a lender. To help remedy this problem, you need to work on increasing your revenue. A well-developed marketing strategy that attracts new customers could also help in this area and a great idea for a business loan.

Another idea would be to drop your prices. If your products or services are more costly than your competitors, consider reducing your prices. You could also offer discounts to first-time customers to expand your business or provide coupons to your existing customers to keep them loyal to your products and a referral incentive.

Expanding your area of distribution, bundling products and offering new products that complement your current inventory can also help in boosting revenue. Are you online? Are you using the leverage of all your social media accounts? Think outside the box! We know you can!

These are just a few ways you can reduce your chances of being denied a small business loan. For more options on business financing, contact us today. We would love to listen to where you currently are so we can help you get to where you would like to be.

We will help you reach your goals with our numerous financing options for small businesses ranging from structured corporate and business loans both secured and unsecured, lines of credit, security backed lending, mergers & acquisitions financing, bridge loans, renewable energy, waste-to-energy (WTE) financing, free business energy consulting, and financing consulting.

We don’t provide denials only approvals! Call us today to have a free consultation.