Why Business Loans get Rejected

Why business do business loans get rejected? Is it because loan officers are just mean people? Though it may seem like it sometimes loan officers are not mean, they are just critical because they have to be. Try to see the situation through the loan officers perspective. A loan officer wants to be sure that you will be able to pay back the loan. That is why he/she will analyze several factors including marketing plan, qualifications, and experience. If you are rejected for a business loan don’t get discouraged, learn from your experiences and know better for the next time. Below are 5 major reasons why small business loans get rejected.

  1. No business plan– Not having a business plan is one way to show bank lenders that you are not prepared for starting a small business. Loan officers want to see that you spent time researching and planning your business venture.
  2. Lack of experience– You should have some experience in the field in which you wish to start a business in. For example if you want to open a restaurant, get a job as a waiter or better yet a restaurant manager. This will give you valuable experience in the field and will also be more appealing to the bank lender. Having experience starting or managing prior successful businesses can also be appealing to the bank lender. You can also hire experienced employees for your top leadership positions (such as managers).
  3. Lack of investment– If you don’t invest your own money why should the bank choose to invest in you. Banks want to see that you are confident enough in your business idea to invest your own money.
  4. Lack of confidence– Show confidence in your business idea. Demonstrate that you are prepared and experienced. Know your stuff- provide facts to support that your small business will become a success. Use statistics, market trends, ect. (Should be included in your small business plan). Do not show that you are desperate for money.
  5. Lack of financial information– Bankers like to see that you did your math. Include future projections of profits for your business and amount of time it will take you to pay back the banker. Bankers analyze this data when determining if they want to give you a loan.

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