Robert Trosten small business loans could prove to be immensely helpful while you are starting. A business or expanding an already existing business. Even during the COVID-19 global pandemic, small business loans could assist your organization to survive, sustain, and even thrive amid the dire circumstances and disaster caused by the Coronavirus pandemic. We understand from a report by US News that loan programs from some of the direct lenders and also even the SBA Paycheck Protection Program could help provide working capital and other financial aid when businesses need them the most. However, be careful while putting in loan applications.
And lending credit limitations & restrictions for minimizing their risk. The most effective way of avoiding a small business loan denial is to identify and understand the reasons behind loan denial and the proactive steps your small business could take to prevent any loan rejection in the future.
Top Reasons for Loan Rejection Highlighted by Robert Trosten
Poor Credit History
Remember that your credit profile helps lenders to get an insight into not only your payment history but also how you are handling your finances. Your FICO score can become low if you are having a history of missed payments, loan defaults, and numerous maxed-out credit cards. All this may negatively impact the first impression lenders have of you as a loan applicant or borrower. If you do not flaunt a substantial credit history, your loan request may be declined. Here are a few tips from Fico for enhancing your credit score:
· Pay your bills promptly.
· Keep all your credit balances as low as possible
· Better stick to taking out as many cards as you are hoping to use.
Recent History of Bankruptcy
Small business loans often are rejected if your small business has been facing bankruptcy. All organizations need the cash to pay for operational and living expenditures. Once your business declares bankruptcy, it is quite evident that you are incapable of paying off your business’s outstanding debts. Robert Trosten points out that the specific type or kind of bankruptcy filed by your business could impact. Your loan eligibility and also credit score.
Cash Flow Inconsistencies
Small business loans are declin often because of a lack of consistency in cash flow. It is because lenders wish to be sure that your business is making adequate money for covering monthly loan repayments. If your small business’s financial data indicates the absence of a positive cash flow or that your business is in a current state of flux, no lenders will let you borrow from them.
Short Period in Business
It is a wise idea to maintain a robust credit score. Moreover, the absence of collateral could act as barriers to your business obtaining working capital.
It could be a major setback for a small business if their loan request is declined by the lenders. It is a wise move to focus on figuring out what had gone wrong and the precise reasons why your loan application was rejected.