Bussiness
Securing a business loan or financing for your small business can be incredibly frustrating, especially for first-time business owners who don’t know the ropes.
In fact, in its Spring 2015 small business survey, Nav discovered that despite having more business financing options available, such as online lenders, it’s still an uphill battle for small business owners to access capital. If that wasn’t bad enough, the increasing amount of financing options currently available may actually be making things worse for small business owners. The survey found that of those who were denied financing, 45 percent had been turned down more than once, and 23 percent didn’t even know why their applications were denied.
To clear thing-up, here are eight common reasons why your business loan was rejected, and how to make sure that won’t happen again.
1. Failure to understand your credit score.
The Small Business American Dream Gap Report that was mentioned above, found that one of primary reasons why a small business loan is turned down because the owner weren’t aware of their credit score. In fact, 45 percent of the entrepreneurs surveyed weren’t even aware that they had a business credit score. Additionally, 72 percent didn’t know where to find information regarding the credit score. Even more troubling, if they did, over than eight in 10 small business owners admitted that they didn’t know how to interpret their score.
Being aware of your credit score prior to applying for a loan will inform you if you have poor, or no, credit at all. If so, you can be certain that your loan application will be denied because you’re too much of a risk.
You can check your credit score through companies like Experian, Dun & Bradstreet, FICO, and Equifax.
The good news is that after your review your score, you can either repair or build your credit by making timely payments, keeping your debts low, avoiding opening up too many lines of credit, and keeping existing credit accounts open.
2. Inadequate cash flow.
Lenders also want to make sure that you are capable of repaying your loan each month, on-top of being able to cover rent, payroll, inventory, and other expenses. So, if you’re spending more money each month then what’s coming, then you need to solve that cash flow problem.
The easiest ways to solve any cash flow issues is to invoice promptly, instituted late fees, have an emergency fund, and cut unnecessary expenses.
2. Inadequate cash flow.
Lenders also want to make sure that you are capable of repaying your loan each month, on-top of being able to cover rent, payroll, inventory, and other expenses. So, if you’re spending more money each month then what’s coming, then you need to solve that cash flow problem.
The easiest ways to solve any cash flow issues is to invoice promptly, instituted late fees, have an emergency fund, and cut unnecessary expenses.
