It’s the dream of many Americans to open their own business. In fact, statistics show that small businesses which mean companies with fewer than 500 workers make up for 99.7% of all companies throughout the United States. That being said, it’s understandable to not have enough personal funding to accomplish this goal. Therefore, many people seek to obtain business loans. If you’re needing to obtain a business loan, it’s important to be prepared. With that in mind, here are four common mistakes that cause small business loans to be rejected.
- Not Having Personal Credit in Order
It’s important that those trying to obtain business loans have personal finances in order. Lenders will be looking at your past credit history. If you have a history of not paying back debts, this might make lenders skeptical. Therefore, it’s important for people to take care of personal credit matters before trying to obtain business loans.
- Being Unprepared for the Future
As a business owner, it’s important to be prepared for the future. With that in mind, many lenders what an idea of your company’s future plans. In turn, this can give lenders more knowledge about the risk of lending to your business. Therefore, you’ll want to take your time preparing extensive business plans and reports. Having these documents shows lenders that your company has a plan to repay the loan it wants to take on.
- Neglecting to Obtain All Documents
In order to obtain business loans, company owners need more than a plan. It’s important that company representative prepare and have all required documentation ready. Neglecting to do this is a leading cause of many small business loans being denied.
- Bad Cash Flow
Statistics gathered from the United States Small Business Administration found that there are nearly 28.8 million small businesses throughout America. Considering that, this often means that large amounts of businesses are looking to obtain funding. Therefore, it’s important that your company stands out from the crowd. In order for your company to obtain new sources of financing, it’s important that they have good numbers. Companies with strong financials are likely to be better candidates for lenders than those with poor cash flow.
To summarize, there are several factors that can prevent companies from receiving small business loans. Statistics show that about 33% of small companies will remain in business for a decade or longer. Considering that, it’s important for small company owners to have business finance professionals on their side. If you’re needing assistance obtaining a loan on behalf of your business, consider contacting a trustworthy financial institution. In turn, you can rest assured that everything possible will be done to help your company obtain funding.