.jpg)
It can be common for business owners to be turned away when going to the bank requesting a commercial mortgage loan, but many have no idea why they have been turned away. They are often left feeling puzzled because the bank will not always explain why their application has been denied.
For those who are unsure here is some insight into why commercial borrowers are frequently being rejected.
1. A poor business plan
After a little small talk and perhaps a coffee, what usually comes next? The daunting question; “can I see your business plan please?” If your business plan is not as strong as your request (opinion of loan officer) then she/he will not support your application. Avoid this by making sure your business plan is good enough, evaluate it yourself, if someone presented that to you, would you be impressed?
2. Issues with tax return, present or past?
If, in the past you have experienced issues with your tax returns, then it’s more than likely that you are going to be rejected. The most persistent issue, in this case is net income. But there are other concerns regarding tax return. If you do have issues with this then the bank will not approve your application.
3. Your business type might not be right
Banks can be picky when it comes to businesses, but even more so when it comes to business finance. In a lot of cases, businesses must meet required needs requested by the bank. A common example of this is restaurants, banks are not open (not literally) to them, they are also hesitant when it comes to auto service businesses. Both business types must meet the required needs requested by the bank in order to qualify.
Fact: Typically, in most banks funeral homes, churches and camping grounds are not included in the business-lending portfolio.
4. The bank sets limits
There is normally a limit set by the bank, of what they can lend to businesses or of what businesses can borrow from them. They will outline what you can and can’t do with the business loan. In few cases, a bank can approve a loan but they will not provide the money – this is equivalent to declining the loan.
5. No collateral? No loan
A bank will not approve a loan if there is no collateral. Collateral is used as reassurance for the bank as it acts as a lien to your personal assets. To avoid this, you should search for alternative lenders who do not require a sufficient collateral or any collateral. This will help you secure your business loan without any hassle.
