The biggest difference between personal loans to than of business loan is that the former is much easier to get than the latter. Reports say that based on the number of application of bank loan for business the number of rejection go much higher than that of the approved one. There are various reasons why banks reject your business loan.
Wrong Timing of the Loan application
Most business persons forget that the timing of the business loan is crucial in getting the loan approved. For instance, if there are some businesses who make profit gradually and there comes also a stage when the trend towards loss starts. As a business person you need to go for bank loan for business at this very time. It is only when a business owner goes through dire losses beyond recovery that one applies for a loan making it most likely to be rejected.
Applying for more than one loan
The credit score should always be a constant reminder to the business person about its business actions and behavior. Many people have the misconception that if they apply for multiple loans then the chances of getting one or the other becomes higher. Rather the reverse is true. It leaves a bad mark on the credit score and gives a wrong impression of the person’s behavior in respect to the market.
Lacking Credibility of the Collateral
While applying for business loan for new business entrepreneurs often do not pay attention to the collateral based on which they are going to get the business loan. For instance, if you intent to give your house as an asset based on which the bank loan for business are to be applied, then you need to keep the asset in good condition and be also aware of the market value based on which you seek the loan.
Insufficient Credit Score
As mentioned earlier the credit score is the prerequisite to getting your business loan approved. Hence before even thinking to apply for the bank loan for business you need to assess your credit score. It is worthy to mention that credit scores are something that is built over time. Hence whether you are an entrepreneur or is in the business for a longer time, an error free business transaction helps you built credibility for business loan. Any discrepancy in the credit score of both the borrower and the business is seen as a major flaw.
Lack of Preparation before Applying for business loan
To apply for bank loan for business one needs to keep all personal and business related documents at handy. One thing that most business persons forget is that he has to present a strong business plan to the banker regarding the utilization of the loan amount. The banker needs to see whether the business has the potential to retrieve the money given in the loan. Hence a strong business plan coupled with the adequate documentation makes approval of business loan for new business or older ones comparatively easier.