Nowadays, it seems more and more people are venturing into personal businesses. As the population continue to increase in most parts of the world and the standards of living become higher, there are few good paying jobs. For this reason, people want o create their businesses. to add on that, having your own business can be more profitable and will create job opportunities for other people.
Starting your own business may sound easy but it is not. For one, you will need some financial aid at some point in the business. You can get through a financial crisis or uplift a struggling business by getting a business loan. The issue with loans is that is very easy to get rejected due to the following reasons
You have a poor credit score
Lenders do not give out loans to business people with poor credit reports. if you do not pay your loans on time, your credit card company will keep track of this record and add it to your report. Lending services use this general report to determine your loan progress and how you handle previous loan payments. Lenders perceive you as unreliable and reject your loan application if your credit report is negative.
If you have unclear debts, there is no ways you are getting a loan from any kinder. When you have too many commitments to your loan how will they trust you will make the full payments on time?
You are just starting out
You are less likely to qualify for a loan if your business is new. A starter business is deemed as unreliable and under qualified for a business loan. This is because lenders need more information on the credit score of the company. Without it, they cannot predict your loan payment patters and therefore they will not trust you with their finances. You will need to stay in business for a longer period of time and create a perfect credit score in order to receive some business loans.
Inadequate cash flow
One of the other things lenders look at before they approve your application is the income. If you lack enough income and resources, they will label you as incapable of paying back their loan on time. Another instance where you will have very minimal chances of receiving the loan is if your inventory, payroll and rent plus other expenses surpass the profits your company makes. Make sure you take are of your invoice, cut on the expenses and creates a good savings account to resolve the cash flow issues and increase chances of getting the loan.
You do not have collateral
Lenders like to acquire collateral for security before they approve the loan. If your company lacks valuable assets, this ruins your chances of getting a business loans. You could opt for unsecured loas but it will probably cost you more.
Weak business plan
People who run businesses need to present their proposal to the lender in order to fund the business. to increase your chances, ensure you conduct a research and create a good business plan with the help of a professional.