It is almost impossible to run today’s business with money from your pocket. Whether you want to hire new employees, increase your inventory, or venture into new locations, any business expansion or operation calls for working capital.
The other trend that we are quick to notice is that small and medium businesses (SMEs) are increasingly finding it hard to secure funding from big banks. There are many reasons why most banks decline SMEs’ loan requests, most of which you may find to be ridiculous.
Whereas banks are known for turning down your loan request by looking at your credit history, we do not let that be the overall determining factor of whether or not we will grant you the much-desired business finance. Yes, a merchant cash advance does consider credit score, but that is not the overall determining factor because our main concern is to keep your business operational.
Reasons banks turn down small business loans
Here are some of the excuses that banks often come up with when they are unwilling to grant a small business loan:
1. You have insufficient cash flow
The majority of bank loans are directed towards SMEs with a steady revenue stream and consistent monthly cash flow. More often than not, loan requests from SMEs that do not demonstrate this ability get turned down. That is ironic considering that the essence of requesting this loan in the first place is to get working capital that would help the midsize business to improve its revenue stream.
2. Failed to meet all the documentation requirements
Banks pay close attention to all the documentation submitted when applying for loans. Some of these documents include business plans, business credit reports, income tax returns, financial statements, legal documents, and resumes. In most cases, small businesses may not have all this information. On the other hand, the bank would not grant a loan without submitting all of the documents, hence turning down your request.
3. Insufficient collateral
To receive a money loan from the bank, you need to have sufficient collateral. Failure to meet this requirement excludes you from getting a bank loan because it is one threshold for completing the transaction and receiving funding. Whereas large businesses with property do not encounter this problem, SMEs find this a significant hurdle.
4. Unsatisfactory operating history
Businesses that have a long track record get preferential treatment from banks. Rarely do they grant small business loans to firms that have recently opened. Without a solid track record of operating for a given period as defined by the bank, the chances are that the loan request will be turned down.
5. Low credit
Banks have some of the strictest credit score standards as recession presents a threat to their operations. On the other hand, the credit scores of small businesses are still suffering from struggling economies. When the small business fails to meet the banks’ high credit score, it goes without saying that their business finance request will be turned down.
You can look into alternative financing – Merchant cash advance
As banks increasingly prove to be unreliable for business loans, it is about time that you look into an alternative financing solution. Merchant cash advance requires less documentation, does not need collateral, and processes funding in the shortest time possible. We can provide the financing within 24 hours, with the option of applying for same-day funding. Rather than forcing you on a fixed monthly payment, we work with your natural cash flow. A merchant cash advance is a way to go when you need help with working capital.