When you have started a business or you are into this field for so long at any point you might need some business finance and for which you may concern such authorities that are capable of providing finance. But for some reasons, it is seen that lenders deny loans to business owners. Do you want to know why? Here are the top 6 reasons why lenders deny:
- Uneven Credit History:
This problem is often faced by small business owners that their credit is uneven. So when you have approached a lender for finance the first thing that a lender check is your credit card because certainly, your credit history tells about your flexibility and expenses. Before issuing you a loan your history is checked because it may tells that how would you pay the loan back?
It is certain that if you have paid your bills on time and have set your liabilities then it is obvious that you will get the loan and if there is an opposite track then the lender would deny giving the loan.
- Weak Cash Flow:
A weak cash flow shows your feeble skills. To go along with the best future you need to have good cash flow with the finest business strategy or else, you would not be able to get the loan. Weak cash flow is one of the top reasons for getting the loans rejected.
A lender wants security as s/he is lending you a handsome amount in return it requires safety and technically there is nothing wrong in that. A lender wants the security that you are capable enough to meet your liabilities as well as able to pay the loan back. However, if you stick to a good plan it is more likely to see that you will get what you were asking for.
- Time Lag in Business:
It is also one of the most important reasons when it comes to loan sanction. Also, this is the top reason due to which the lenders deny to provide the loan. Yet again the safety comes first. Your time lag in business tells a lot about yourself, for instance, about your skills and determination.
However, it is more likely to be seen that if your time lags are more than 2 years there are more chances to get the loan.
- Preparation Is A Must:
Whether you are going to attend a party or meeting a lender, preparation is a must. You just cannot be random. Being spontaneous with the work will might be unflattering your personality and this is something you would not want, right? Here are a few of the things that are important to have when you are visiting a lender.
- Your financial statements
- Your business plans, if any
- Your credit history. Personal and business, both
- Tax Returns Report
- Legal documents that include; contracts, ID card, license, etc.
- Lender’s statement, if given
- High Operating Expenses:
This is the most favorite reasons for lenders to deny for the loan. Well, economically the point is valid, for instance, if you are earning $5000 and your expenses are about $4500, whereas, you have applied for a $25000 loan which has a compound mark up of about 15%. How is that possible for you to pay-back?
- Gender Biasness:
It is very unfortunate but true that even now in this modern era, there is a gender biased. It is taken that women might not be able to pay back. Moreover, they feel that they cannot pressurize a woman. So the lenders deny to give the loan.
|Gender/State||Loans approved (in %)|
|American Indian owned businesses||1%|
|Asian owned businesses||24%|
|African American owned businesses||2%|
|Hispanic owned businesses||6%|
|White-owned businesses received||53%|
|Male owned businesses||70%|