Rejected by banks

Why Did Banks Reject Your Loan Application?

As anyone can tell you, getting a small business loan isn’t as easy as it used to be. More small business owners are being turned away from banks day after day, and at times, it may even seem impossible for you to even get a “maybe.” Believe it or not, you aren’t alone in the struggle. Banks reject people for a huge variety of reasons. Here are the most common reasons, and what you can do about them.

Reason #1: No or low collateral.

If you aren’t willing to secure a small business loan with a bank, then they most likely will refuse to lend to you regardless of how good your credit is, or how long you’ve been in business. Sadly, because of the economic downturn and banking greed, having equity that you can secure a loan with has become somewhat of a “must” before banks will clear you for a loan. This is the most likely reason why your loan application was rejected.

Reason #2: You and/or your business have bad credit.

Most business loans, especially the rare unsecured ones, will require sterling credit scores from both you and the business. If you don’t have a 720 credit score for your own personal finances, then they will likely require more collateral or simply reject you. If your business has bad credit, then you will likely end up seeing the banks decline your application regardless of your personal credit score.

Reason #3: You’re a first-time business owner, or your business hasn’t even started up yet.

Banks are risk-averse, and they don’t want to deal with people who could be considered risky. If you don’t have a track record of actually getting businesses off the ground, then you will likely be seen as a high-risk borrower. The less experience you have in an industry, the worse off you’ll be in terms of getting accepted for a loan.

Reason #4: There’s no business plan in sight.

Major banks will want to see a fully written out business plan before they issue out any loans. If you come into a bank requesting a small business loan and have no business plan, it will look like you’re trying to get a personal loan while masquerading as a business owner. A business plan shows that you’re serious and that you understand the demands of the world of business.

Reason #5: You’re not making enough money.

Most small business loans rejected by banks are rejected because the business isn’t making enough money to sufficiently pay off the loan. If you aren’t pulling in enough profit, banks will simply refuse to offer you money…even if you need the money to make your business more profitable. It’s a Catch-22, but it’s one that can’t be avoided when you are dealing with bankers.

There is some good news about this, though. You don't have to play by the rules of big banks, since there are many alternatives that you can explore. If you look at alternative business funding, you might just find that getting accepted for a bank loan isn't even necessary at all.



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About Capital Key

Capitalkey will help you take your business to the next level! Our expertise is business funding and merchant processing. We offer great options to businesses that need a quick and easy cash infusion (even if you may have got turned down previously!) We also offer some of the lowest rates in the merchant processing industry! If you are currently processing with another company we highly recommend taking advantage of our free statement audit, which will allow us to identify if you are getting charged higher rates and/or fees unnecessarily. Typically we can help our clients reduce their processing costs by 20-30% on average!

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