Common Reasons Business Owners are Turned Down for Funding

Common Reasons Business Owners are Turned Down for Funding

February 27th, 2017: One of the most nerve-wracking parts of doing business is getting your financing in order. Obtaining approval for a conventional loan can be frustrating, time consuming, and too often futile.  According to a 2016 study, only one in four small business owners will qualify for a standard bank loan. If you have looked at getting funding for your small business, you may wish to consider all of the options, including conventional bank loan alternatives. That same 2016 study found that the typical alternative or private lender approves around 60 percent of loan applicants.

While working with a private lender for a fast commercial loan may be the best option, it is still important to understand why business owners are turned down for funding so you can set yourself up for success during any loan application process.

  • Business is Too New – A newer company is less likely to be approved for a loan from a bank. Startups do not have the financial history and look like a “bad bet” to many banks. In some cases, conventional bank loan alternatives available from a private lender may give newer businesses a better option.
  • Lack of Cash Flow – Cash flow shows that you have the ability to pay back a loan. Negative cash flows means you are more likely to be rejected. Work to show you can make those payments as you enter any approval process.
  • Poor Credit Score – In most cases, the higher your credit score, the better you have been with credit in the past. Luckily, it is possible to raise your score by resolving old debt and clearing up any inconsistencies on your credit report.
  • Company Has Tax Liens – If you haven’t paid your taxes and the government has a lien on your business, this could be a sign that your business struggles. Expect to be rejected from many fast commercial loan options if you are dealing with a tax lien.
  • Tax Returns Unfiled – If you haven’t filed your taxes in the past year, you may be rejected for a loan. Both banks and providers of conventional bank loan alternatives want to look at your recent taxes to see more information about your profitability.
  • Business Holds Too Much Debt – Too much existing debt will restrict your cash flow and may make it harder to get a new loan. Lenders may shy away from offering you a loan if you already hold a significant amount of debt.

If you would like more information about what it takes to get a fast commercial loan from a private lender, reach out to us at Worth Avenue Capital, LLC. We’ve provided conventional bank loan alternatives since 2008 and have experience working with businesses facing all of the issues described above. We look forward to working with you!