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Top 10 reasons banks won’t loan money to your business

Top 10 reasons banks won’t loan money to your business

Most of the people who wish to start new businesses tend to go ahead and seek the assistance of banks. When you are getting the help of a bank, you might sometimes be rejected in getting your loan approved. Here is a list of 10 of the most common reasons why banks don’t approve loans for business purposes.

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  • Debt to income ratio

Your bank will take a look at your debt to income ratio when approving a business loan. If that is not good, you will not be able to get your business loan approved.

  • Insufficient collateral

You need to have sufficient collateral to get the loan approved and obtain funds that you need. This will not be a major issue for large businesses because they have assets. However, this is one of the most common problems that small businesses have to face.

  • Lack of consistent cash flow

You must showcase that you are getting a consistent flow of cash to get the loan approved.

  • Personal guarantees

You will need to go ahead and provide personal guarantees from business owners. Failing to do that will keep you away from getting money that you want for the business.

 

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  • Insufficient credit

During the recent past, banks have started paying special attention to credit scores. If you are not having a good great score, you will not be able to get the business loan approved. You must have a credit score of at least 720.

  • Customer concentrations

You need to have a diversified customer base to increase your chances of obtaining the loan for business. Otherwise, there is a possibility for the loan to get rejected.

  • Lack of operating history

You must provide all the documents related to your operating history to the bank so that you can get your loan approved. Failing to do that will keep you away from getting the loan approved.

  • Weakening industry

The industry where you are going to start the business will also be considered. If that is a weakening industry, you cannot get the loan approved.

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  • Lack of management team

You must prove that you have a strong top-level management team to take your business forward. Failing to prove this will also keep you away from getting the business loan approved.

  • Economic concerns

Last but not least, you need to understand that unfavorable economic conditions would lead banks towards rejecting your application to get a loan for business purposes.

 

 

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