Five Possible Reasons Why Your Small Business Loan Application Was Rejected
It is the dream of every entrepreneur to have a successful business. However, without the needed capital, it is impossible to make that dream into a reality. Thus, it is a common trend for entrepreneurs to apply for a business loan from banks and licensed moneylenders. Unfortunately, not all of these loan applications are approved. If you are reading this, then you may be looking for answers as to why the bank or the lender had rejected your loan application. To help you, here are five possible reasons why banks and moneylenders rejected your business loan application:
- Your business income is insufficient to meet the minimum criteria of the lender.
Banks and moneylenders need the assurance borrowers can repay the loan, which is one of the reasons why lenders require to see the cash flow of the business. Lenders will not approve a business loan that shows a negative cash flow with poor signs of recovery. Try to improve your cash flow by improving your inventory, eliminating unneeded expenses, and among others.
2.Lenders are extra cautious with start-up businesses.
While it is not impossible to get a loan to start a business, banks and moneylenders can be more stringent in granting a loan to start-up businesses. It can be risky for lenders to approve a loan from a business that has no track record of revenue or experience. Thus, on your part, you must convince the lender why approving your loan application will be worth it. However, if you are having difficulty in getting your loan approved from these institutions, you can try applying for government grants.
3.Your credit score is low or not good enough for the lender.
If you are going to avail for a business loan from a bank, then you should know how stringent banks can be with credit scores. Having a low credit score will be a huge red flag for lenders, telling them that you may be unreliable in paying the debt. Thus, it would be wise to improve your credit score by paying bills and loans on time, keeping your debt low, and the like.
4.Your business is not eligible or lacking requirements.
One of the common requirements of a business loan is that the business must be registered in Singapore, and a Singapore Citizen or Singapore permanent resident must be a shareholder of the business. You should ask the lender what the required documents and eligibility criteria are. From there, assess whether your business can pass the standards of the lender.
5.Your collateral might not be enough.
When it comes to secured business loans, banks want collateral that is valuable enough to let them know you are serious in repaying the loan. However, they will reject a loan application even if there is collateral because the collateral is not valuable enough. If this is the case, you can opt for an unsecured business loan from licensed moneylenders.
Find the right lender in Singapore…
It can be difficult to get a business loan approved, but it can be more difficult if you did not avail it from the right lender. With Loan Advisor, you can see a list of the top banks and licensed moneylenders in Singapore to grant your business loan.