It's almost impossible
these days to keep a small business running with money from your own pocket. To
meet up with financial commitments, entrepreneurs usually approach their banks
for loans and it is rejected. As such, here are reasons you may not be granted your business loan request.
Lack of
consistent cash flow
Banks tend to favour
small and medium-scale businesses that have a steady flow of revenue coming in
every month. If your business can't demonstrate this consistency, your loan
request will be denied.
Insufficient
collateral
To get a loan, you need a
commensurate collateral. This may not be a problem for large businesses that
own large assets, but it can very difficult for small businesses.
Personal
guarantees
Your bank needs personal
guarantees that you won't default when it comes to servicing your loan. This is
a very risky position for enterprises struggling to stay on top of their
monthly expenses.
Not
enough operating history
Banks give preference to
businesses with a track record of good performance. The truth is they don't
want to fund a business that has been operating for a short time and hasn't
sustained a certain amount of success and credibility.
Weakening
industry
Operating a small
business or startup in an industry that your bank perceives as weak or in fast
decline will limit your chances of getting loans from your bank.
Economic
concerns
Banks will not lend money
to a business if they feel that the current economic conditions are unfavourable
for getting the money back in a timely manner. This is simply because they do
not want bad debts.
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