Here's the scenario, you need cash for a new piece of equipment, or maybe new office space, perhaps you want to hire on a couple of new employees. So, you fill out the requisite application and then wait—potentially a very long time. Finally, a decision and yet it is not what you hoped. Why is your bank, with whom you've done all of your checking and other such business, turning you down? Unfortunately, this is not an uncommon situation. Many smaller businesses get turned down by their very own banks.
To answer the question of why we've compiled a list of some of the most common reasons your bank might turn down a small business loan request.
Your Business Credit Score Was Too Low. Credit scores are important, especially for traditional lenders. It is an indicator of your creditworthiness and your ability to repay the loan. Do you know what your business credit score is? If not, it's probably time to do a little legwork, find out more about that score and start to repair it.
You Haven't Been in Business Long Enough. Most banks like to see at least 2 years' worth of bank statements, balance sheets, and profit and loss statements. Some may require even longer. So if you haven't hit that two-year mark yet, customer or not, they are probably going to reject your application.
You Have Very Little to No Collateral. Banks want security. They need to balance the risk of loaning you money, with the safety net that is collateral. However, as a smaller, newer business you simply might not have any to offer. Again, this is likely to get your business loan denied.
When You Need Small Business Funding
If your bank says no, there are alternatives. Online lenders have been helping small businesses when the banks say no for years now. At First Union, we want to see you succeed and even expand. Our lines of credit and short term loan programs could be exactly the solution your company needs. Call today and let's see how we can help!