Don’t try you luck in the loan lottery! Find out why small businesses do (or do not) receive financing and take control of your own destiny.
Sometimes, trying for the ideal business loan can seem like playing a raffle. Maybe your ticket matches a few of the winning numbers, but the chances of everything lining up perfectly are slim to none.
Happily, small business owners in need of financing don’t have to rely on lady luck to quite that extent. Educating yourself about why businesses do or do not receive financing is the first step to taking control of your own destiny.
Here are seven reasons your business might be rejected for a business loan.
You’re Too Young
Young businesses don’t make the cut for many types of business loans. Lenders like to see that your company has a history of on-time payments and financial success. Startups are still working on proof of concept, so companies with less than a year or two in business are a riskier bet for lenders.
Some online financing options will accept personal guarantees as collateral for your loan, but many of the more flexible, larger loans with killer terms require good ol’ collateral in the form of your business assets (or personal assets if your business has none). This might be equipment, land, buildings or maybe even inventory.
Your Personal Credit Score Is Too Low
Personal credit plays a huge role in your ability to qualify for a business loan. If you think of this from a lender’s perspective, your payment history is a good indicator of how responsible your business will be with payments.