When you are the owner of any type of franchise or small business, there will be a point where you will need business funding to be able to grow. That money usually can either be derived from a bank loan or from money lenders. However, many businesses shy away from applying for loans due to their fear of being rejected.
Applying for loans is a complex process and there are a number of options to choose from. Most people want fast loans and no credit check loans . There is a lot of paperwork involved. Plus, not every loan application is rejected. And why does it happen? Listed below are some of the reasons:
- Lack of collateral
One of the major reasons small businesses are rejected from getting loans from their local banks is because of the zero collateral they have to offer. It is simple, you have to own something you can give to the bank, something physical and of value, for example your car, or property etc., as collateral. It is turned over to the bank under the circumstances of you not being able to pay back the money. It’s just a way for the bank to feel secure.
If you have nothing to offer to the bank as ‘collateral’, there is no reason for the bank to take such huge risk on you and grant the loan. Many people get carried away and offer personal possessions as collateral, but it is a very risky move and not recommended by experts for you can lose out if you are unable to return the money. Even if you are looking for small business loans for women or small business loans in Texas or any other estate, you will be required to provide collateral as it is one of the prerequisites for getting cash loans online.
- Poor credit history
Any lender will look at your credit history before they sanction you a loan. This is what helps them decide if you should be trusted or not. Your credit history can get affected by a number of things including the number of loans you’ve applied for and how timely your payments are. If you have a poor credit history, you need to improve it before you apply for a loan, especially if it is a big one. Plus, you can also establish your reputation with the lender by:
- Taking a smaller loan beforehand so that your reputation is well maintained.
- Constant usage of credit by your business through the bank.
The above factors will increase your authenticity and increase the chances of even your bad credit loan application being accepted. You can also apply for bad credit loans online but make sure to make your bad credit loans monthly payments on time. You may have a tough time looking for loans for bad credit online since there aren’t a lot of legitimate online loans for bad credit.
- Unsteady cash flow
Before you are given a loan from the bank, each and every detail will be scrutinized and if the results are not found to be satisfactory, the loan will be rejected.
One of the main things is the flow of cash. It is important to have a steady cash flow for your business and have no pending expenditures remaining. If the balance between the money coming in and the money going out is huge, then your loan offer will be rejected outright.
So make sure to clear all your outstanding dues and expenses before you go to the bank to ask for a loan. It will not look nice on your statement and the bank will refuse.
To increase your likelihood of being accepted, look for merchant cash advance companies. The merchant cash advance industry is known for merchant cash advance loans that are comparatively easier to get.