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Sep 23, 2019 2:55 AM ET

6 Reasons Your Business Loan Was Rejected

iCrowd Newswire - Sep 23, 2019

Have you been trying to get a startup business loan, but cannot seem to get approved? I know it can be tough trying to get started when you don’t already have the funds to do so, but don’t give up! There are so many funding options for entrepreneurs just like you! So, if you are having trouble getting approved for a business loan, you must understand why. Here are reasons your business loan may have been rejected.

Your Business is a Startup

If you are a startup, that is probably your number one reason. Startup business lack the business experience that lenders are looking for before dishing out money. It is quite often that lenders are looking for at least 1-2 years of business experience. This would be so they could look at how your company is doing financially, what your company’s credit rating is and what your financial trends are looking like for the future. If you are a startup a bank loan may not be what is right for you. Perhaps you could look into a bank line of credit or possibly getting a startup grant.

Low Credit Score

Credit can sometimes be a stressful thing for people to talk about. Maybe you don’t have any credit or maybe you made a few poor financial decisions in your past. Don’t worry! Credit fluctuates and can be improved in a small amount of time. So, to get a business loan you may need a credit score of at least 600, but most likely more than that. So, is your credit score lower and why? Credit score is calculated by a few different factors. These factors are the amount of debt you have, types of credit accounts (car loan, student loan, credit cards, etc.), length of credit history, payment history, and credit utilization. Some factors are more crucial than others. For example, it is very important to have a credit utilization of less than 30 percent. Having a low credit score can make you seem like a very big risk for lenders and will lower your chances of approval. Just try to pay down any debts you may have and always make your payments on time. There are business consulting agencies like Seek Capital that may be able to work with the credit score you currently have.

You’re Entering a Dying Industry

What industry are you trying to enter? Well, if you are entering an industry that is “dying” you may be seen as a risk because your business may have a lower chance of succeeding. If you are entering a thriving industry, then you may have a better chance of getting approved. Some industries that are thriving would be retail, microbiology, digital therapeutics, CBD products, personalized nutrition, baby tech and work leisure apparel. Some industries that are not thriving would be jewelry, legal services, sporting goods stores, hobby stores, etc. So, look to see if there is a market for your business idea.

Not Enough Cash Flow

Cash flow is an important factor when looking to get approved for a business loan. If you don’t have any cash in the bank and you are solely relying on bank loans to get you going, this might be the reason you are not getting approved. If you could save up some money to put into your business instead of relying on a large business loan, you may have a better chance for approval. Remember you are going to have to cover expenses like rent, payroll, insurance, inventory expenses, etc. So, if you have a lack of cash flow, then paying off a large business loan may not be practical.

Not Enough Collateral

Do you have something to offer for the banks as collateral? If not, then this might be another reason you are not getting approved. Some options for collateral would be any real estate, equipment or even your car. If you are a startup, you may not have any business assets yet to use as collateral, so this could lower your chances of getting approved for a business loan.

A Not So Great Business Plan

How does your business plan look? Did you spend 1 day on your business plan and maybe it doesn’t include all the important elements? Did you “wing” it and not do your research. Well, if so, then that may be why your business loan was rejected. If you do not have a solid business plan in place, then it is unlikely that a lender would trust that your business will be successful enough to pay back the loan. Business plans should include these Executive summary, company description, market analysis, organization and management, service or product, marketing and sales, funding request, financial projections and an appendix. Check your business plan and see if you are missing anything! If you need help writing a business plan that will “wow” the lenders and get you that business loan, you could always seek out help from a business consulting service.


Okay, so as you were reading, does it make a little more sense that your business loan was rejected? It’s totally okay! You can always improve your credit score, create a better business plan and save up some money. Perhaps, you may not be ready for a business loan, but you could get a business line of credit to get started or look at other funding options. Take a deep breath, decide what you need to improve and make it happen!


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