If you’ve been denied a small business loan in the past, it can make it rather daunting to apply again in the future. And that’s a problem – because you’re going to need additional capital eventually – one way or another. So what should you do next to avoid stagnating?
Pinpoint where you went wrong. Then address the issue(s) and prepare to reapply! If you’re in business for yourself, you probably already know how important it is to be driven. You can’t let a little rejection stand in the way of your financial success!
The 5 Most Common Reasons A Bank Will Deny Your Small Business Loan
Some reasons for application denial are more common than others. With some effort and time, you can fix any of the following issues. Leaving you free to confidently reapply for loans!
Insufficient Collateral and/or Incoming Revenue
If you lack sufficient funding, collateral, or proof of incoming revenue the bank can’t issue you a loan. Legally. These are considered high-risk ventures, and cannot be processed without a third party getting involved such as the SBA. They’ll guarantee repayment of a certain percentage of your loan to help you qualify.
Existing Credit Utilization
Lenders will definitely look at your credit utilization. According to credit experts such as CreditKarma, you should avoid using anything more than 30% of your available credit. You can learn how to calculate your credit utilization here.
Incomplete or Incorrectly Filled Out Application
This is the simplest setback to address if you’ve been denied. Just make sure that you have everything filled out properly and resubmit.
Negative Credit History
If you have negative credit history it can take some time to resolve it. Experian gives some great tips here on how to get started, however.
You Have a Great Idea – But No Business Plan to See It Through
There are more capital sources for small business owners than ever before. However, many people that plan to go into business fail to realize that they need more than a great idea. Securing funding and running a successful business requires a well-researched business plan that will effectively keep the business on track to make a return.