Why people get denied for a business loan

Ever been denied for a business loan but wasn’t sure exactly why?

Unfortunately, there are a lot of reasons why a business loan application might be denied.

But the more important question to ask is, “What can I do to improve the odds of a successful loan application?”

Lenders want to make sure of three things essentially:

• Can this borrower repay a loan?
• Will this borrower repay a loan?
• What if something unexpected happens?

For the first question, are you making sufficient revenue every month to be financially able to pay back the loan?

For the second question, have you ever not paid back a debt? This is why credit is often a very important factor when getting funding.

For the third question, is there some kind of collateral that protects the lender in case of default? This is usually where collateral and personal guarantees come in.

How successfully you can answer these questions will not only determine whether or not a successful loan application is in your future, it will also determine the type of loan you may qualify for, the lender that will accept your loan application, and the interest rate (or cost) of the loan you’ll be required to pay.

Other factors that can lead to a denial are not being in business long enough and even the industry that you’re in.

Obviously the less time you’ve been in business, the riskier the loan is to the lender due to a lack of history, no established clientele or book of business, less experience, etc.

As far as industries go, some lenders prefer to work within certain industries and will automatically reject an application that doesn’t represent that industry.

Conclusion

There are many factors that come into play when trying to secure financing.

If you’ve ever been denied for a business loan, don’t get discouraged. You just need to find the right lender and keep working on your business to increase revenue, boost credit, etc.

This is also why working with a Funding Professional can be extremely beneficial.

He or she can guide you in the right direction and put a plan in place to get you the funding you need at the best terms possible.

Get qualified for business funding today by visiting our funding platform ROK Financial here.