Every business owner knows the importance of having sufficient capital for their business. Without money, it’s always difficult or near impossible to keep it alive, but the truth is sometimes, capital is difficult to come, hence the need to borrow. This is how it’s always been.
Borrowing can come from close associates or banks, the latter being the commonest way. However, banks don’t always lend money to everyone that asks them to. There are requirements and conditions needed before a customer can successfully get money from their bank. These conditions vary, but if met, a customer can easily get the money they want.
If you apply for a loan, and your application isn’t greeted warmly, then, it’s probably for any of these reasons…
INCONSISTENT CASH FLOW
Banks tend to favour small and medium- scale businesses that have a steady flow of revenue coming in every month. If your business can’t demonstrate this consistency, your loan request will be denied.
INSUFFICIENT COLLATERAL
Depending on the amount of money you’re asking for, and your bank, to get a loan, you need commensurate collateral. Now, while this may not be a problem for large businesses that own large assets, it can very difficult for small businesses.
PERSONAL GUARANTEES
Your bank needs personal guarantees that you won’t default when it comes to servicing your loan. This is a very risky position for enterprises struggling to stay on top of their monthly expenses.
POOR OPERATING HISTORY
Banks give preference to businesses with a track record of good performance. The truth is they don’t want to fund a business that has been operating for a short time and hasn’t sustained a certain amount of success and credibility.
WEAKENING INDUSTRY
Operating a small business or startup in an industry that your bank perceives as weak or in fast decline will limit your chances of getting loans from your bank.
ECONOMIC CONCERNS
Banks will not lend money to a business if they feel that the current economic conditions are unfavourable for getting the money back in a timely manner. This is simply because they do not want bad debts.
If you’ve tried to get a loan once, and failed, you can try again. Sometimes, persistence is all you need.
Drama