Why get turned down?

 

Current C Consultant Explains Why Banks Turn Down Loan Proposals.

Getting shot down can really hurt whether or not that rejection is from a potential lover or the bank. Many business owners know how it feels to be told ‘no’ repeatedly. A surprisingly small number of businesses that apply for funding get loan approvals from their banks. This troubling trend has caused Current C to dive into the issue of small business owners being turned down by banks when they need loans.  Current C L.L.C. Financial consulting services were designed to help businesses find the funding they need by using a network of unconventional lenders, who are funding businesses financial proposals.

Here are some things to know about why a bank might turn down your business loan proposals.

Risky Business.

Lending money to small businesses is going to be seen as a risky undertaking for most banks. Lending money to new business is looked at as too risky as well. Many banks have had to raise their bar for approval of a business loan since the financial crisis occurred. The strict lending standards enable banks to avoid such risks. After a recession, more and more banks became reluctant to take on the high risk of new business and small business loans. These types of loans are naturally riskier than consumer loans and large business loans. If you have a good relationship with your bank as a small business, personally, then you might have better luck getting a conventional loan from a bank for your small business. Being known by bankers increases the possibility of favorable results for some small business owners.

 Little Loans= Little Commissions

  Seeking a small loan from a conventional bank for your small business might not be fruitful because banks prefer larger loans that are more profitable. If it costs the bank the same amount to process both small and large loans, why wouldn't they just want to do the larger loans if they had the choice, and they do. So it can be challenging for a small business owner to get a loan from the bank, nevertheless, a number of online lenders offer small loans that conventional lenders would not underwrite.  

Business Proposal Preparation

Some small businesses are turned down for loans due to the owners not properly submitting the proposal to the bank. Many small business owners are not familiar with application processes and think they can just walk in the bank and walk out of the bank with all the cash.  But before a (new) business applies for a loan, it is mandatory to have a clear business plan, financial projections or statements, business and personal credit reports, bank statements and tax returns. Financial reports prepared by certified accountants, Businesses are also required to have copies of legal documents such as permits and licenses, leases, contracts and articles of corporation. 

Cash Flow Problem

When businesses do not provide the Banks what they need to be able to see that a business has sufficient capital to make loan payments on a regular basis along with the ability to cover inventory, payroll, rent and other regular business expenses. Often, we find that small businesses find it difficult to retain enough money in the bank, including those that are profitable. One common reason for this is because they often have to make payments to third-party suppliers before they are paid for goods or services. Small business owners have to know the amount of money that flows through operations. When they fail to show that the amount of revenue going out exceeds the amount coming in, changes are necessary.  The loan to value ratio must also be within a certain percentage (above 75%) for banks to consider if this loan can be funded.  Suppose a borrower wants to borrow 9,600,000 USD$ to purchase a building that costs $16,200,000.  To find the loan to value ratio you must divide 9,600,000 by 16,200,000.  That equals the Loan to Value .5925 or 59% Fifty nine percent is excellent as the preferred LTV is 75%   If your business is running low on cash flow, consider working towards reducing expenses or identifying ways to increase revenue before making loan applications. At one time or the other cash flow may be a major challenge for various small businesses, some are witnessing improvement by factoring accounts receivable for example.  If your business has accounts that come due regularly you could assign the collections of these accounts (factoring) to a lender who will pay you up front for the account receivable. 

Lack of Security

Business loans from conventional banks usually require collateral, which refers to security interest to tangible property that can be used to guarantee a loan in case it is not repaid like a lien on your house or car. New, and small businesses often cannot offer real estate or equipment as collateral. Businesses that do not own property that is considered to be valuable will find it harder to secure a bank loan.

 No Credit or Bad Credit 

The businesses that get turned down most often will usually not have been able to show a good credit history.  If the business is new and has no credit history, then the owner or, members, or partners... Etc. had better have a good credit history they are prepared to show the lenders.  The better the credit the more likely they are to want to approve the loan/lease that the business owner(s) are requesting.

Contact Current C to find out how you can get funding for your business from unconventional lenders even if you don’t have all the above qualifications, visit us at this link below or call 8am-6pm E.S.T.

99 Wall Street#1443                                                                                    Hawk Silverdragon             New York, Ny 10005                                                                                    Financial Consultant      1-332-244-3391

https://www.currentcllc.com/                                     https://www.currentcllc.com/free-consultation.html