Reasons Why Indian Companies Are Rejected For Business Loans

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The journey of an entrepreneur is complex. One of the many decisions an entrepreneur has to make is how to finance their business. Managing finances is a huge responsibility, especially with soaring interest rates. Whether you are starting a new business or expanding an existing business, having access to liquid capital is essential.

By answering the question ‘how to get a business loan?‘, most companies turn to credit institutions. However, applying for a loan depends on many things, including your business plan, financial records, and loan repayment history. In this article, we’ll look at the reasons for business loan denials and what you can do to improve your chances of getting one.

1. A weak business plan

When it comes to presenting your case to the lending institution, a solid business plan is the first line of defense. People usually devise business strategies in a hurry and end up falling flat. A good business plan includes a financial plan on how you intend to use the loan and repay the institution and an outline of your business to the lending institution.

Your business plan should include profit margins, potential customers, some of your competitors, and industry-specific information. To make your presentation successful and get the lowest interest rate on business loans, you can include mission, vision, manpower and experience presentations. It will justify your plan and make it clear to the potential lender.

2. Bad credit history

The credit history of your business and its directors are also important considerations when applying for a loan. If you don’t pay your credit card bills or EMIs on time, your credit score will suffer and your application will be rejected. Even one missed payment could hurt your credit score. Keep in mind how you manage your finances; your credit history may affect your business loan application.

3. Disorganized approach

It’s better to have your financial records ready in advance rather than searching for them after the application is in progress. It indicates your readiness and allows you to fill in any gaps. If you need help getting a business loan, contact our experts. Lenders typically look at your income statements, cash flow statements, and balance sheets to determine whether or not you can repay the loan. Rather than prolonging the process, it is advisable to collect these comments and forward them on request.

4. False Disclosures

If you apply for a loan, the lending institution will do a background check to make sure everything is in order. They will access your financial records, including filed bankruptcies, liens, and NSF check concerns. You need to be honest and give them a reason to consider you despite your past issues. If these flaws are discovered during their background check, your business loan application will be denied.

5. Duration of existence

When a company’s experience or professional background in the field seems insufficient, it can be difficult to obtain a loan. Lending institutions will focus on a flawless business plan and candidates. Therefore, they may refuse a loan if it appears that a group or sole proprietor lacks experience in the industry and may not be able to run the business as expected.

6. Collateral Concerns

Lending institutions generally require collateral as collateral for a loan. Any high-value asset, such as real estate, house, inventory, machinery, etc., can fall into this category. Lending institutions take possession of your assets as collateral to cover loss of funds, if any, in the future. Lending institutions will offer ineligible collateral if the collateral has issues, such as multiple owners or a legal dispute.

7. Criminal history

Your credit history is crucial in your loan application. Due to a lack of confidence in the transaction, lending institutions may refuse a loan if the applicant has a criminal record. Therefore, it is essential that the applicant either discloses his criminal history with sufficient substantiation to request a reconsideration, or that another person applies for the loan.

Conclusion

Being organized is the best approach to moving forward with a business loan application. With structure and efficiency comes the ability to deal with unforeseen events. Knowing who you will be doing business with and the Business Loan Interest Rates. Several options are available that offer flexible services to people looking for a business loan. So the next time you’re thinking about getting a business loan, think outside the box.
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