Hidden Reasons Why Banks Won't Grant A Loan For Business

It's almost impossible these days to keep a small business running with money from your own pocket. To meet up with financial commitments, entrepreneurs usually approach their banks for loans and it is rejected.

So, below are 6 reasons you may not be granted a business loan request from any bank.

(1). 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.

(2). Insufficient collateral 
To get a loan, you need a commensurate collateral. This may not be a problem for large businesses that own large assets, but it can very difficult for small businesses.

(3). Lack of consistent 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.

(4). Not enough 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.

(5). 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.

(6). 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.