NO COLLATERAL ; THE UNSECURED BUSINESS LOAN
A faulty credit profile and failure to plan adequately are the major causes of business loans denials.
FAULTY CREDIT PROFILE: Maintaining a solid credit profile is one of the surest way to prevent business loans denials. The credit profile shows the lender your past pattern of loan payments. A good credit profile is one of the ultimate proof to any lender that giving you a loan is not a big risk. An unstable credit report and inconsistent payment pattern is a red sign to any lender. Ensure all loops are closed and always have a solid backing for and inappropriate or complicating detail that can indicate a bad credit profile. Offer explanations to your lender for issues or inconsistencies in your profile if you can, this is better than it being discovered by your lender. Close credit lines that are not functional. Go through every detail thoroughly before submitting your business loan proposal. Ensure your profile is in order to prevent the lender from seeing 'risk' written all over your proposal. Unpaid taxes, defaulted payments, late payments, bankruptcies are also factors that can cause a business loan denial.
INADEQUATE PLANNING: planning is a very vital part of any business deal, it is as important as the implementation of the very deal. Stanley Judd said; ' A good plan is like a road map; it shows the final destination and usually the best way to get there.' Always present a solid business plan, not only present but the future plans. It shows you have a vision, especially goals related to the proposed loan. Have a well detailed plan of the loan utilization and repayment plan. You need to convince the lender that the loan will have a great impact beyond the present day. Ensure your required basic credit data which includes; your credit history, name, basic personal demographics and detailed credit facilities (e.g. credit cards) are well documented and error free.
REASONS FOR BUSINESS LOANS DENIALS
The unsecured business loan may come with a higher annual percentage rate relative to the secured business loan but it is secure and fast mens of funding. Compare the interest rates of different lenders before your selection. A competition admist lenders can work in your favour
Why you should rent, The unsecured business loan is a risk to the lender, so, the lender will need a strong assurance that you will pay back. The lender may request a breakdown of future income generation prospects.
Conclusively, just like every other loan type, it has its advantages and disadvantages; nevertheless, the fact that the unsecured business loan is a means of funding your business with little or no stress is not negligible.
Expectation cut short, a new application process, search for another loan are sometimes the consequences of being denied a loan; In severe cases, business liquidation or bankruptcy. This makes it very important that you know what to do, when to do it and how to prevent being denied a loan.
Although, there are many sources of getting a loan, either from a bank, credit unions e.t.c. the traditional method of getting a loan still stands as the most reliable as it has more flexible rules regarding repayment and is a good option for business owners. Alternative lending sources might give a loan within a shorter period of time with less requirements in some cases, however, it most times comes with high payoffs and further complicate the state of the business leading to more debt and liability. This makes it very important that you do not focus on your present need alone and take any offer that comes.