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American Businesses

8 Reasons Your Small Business Loan is Proving Difficult

Securing a small business loan can be difficult, especially in the current economic climate. With lenders tightening their requirements for borrowing, it can seem impossible to get approved for the funds you need.

Melanie Laurent

The struggle to secure a loan can have a major impact on your business. Here are 8 reasons why your small business loan might be proving difficult. 

1. Poor Credit History 

When applying for a loan, your credit history is one of the first things that lenders will check. If you have a history of late payments, high debt, or bankruptcy, it can be difficult to secure a loan. Lenders are typically more willing to lend to borrowers with good to excellent credit scores, so if your score is below that, it might be tough to get the loan you need. Learn how to improve your Small Business Credit Score here.

2. Lack of Collateral 

Most lenders require some form of collateral when providing a loan. This is to ensure that they can recover their funds if the borrower defaults on their loan. If you don’t have any assets to put up as collateral, it can be difficult to secure a loan. 

3. Insufficient Business History 

If your business is relatively new, it can be difficult to get approved for a loan. Lenders want to see that you have a successful track record of running a business before they will lend you money. This means that if you don’t have a few years of business history, it might be difficult to get the loan you need. 

4. Lack of Cash Flow 

When applying for a loan, lenders will want to see that your business has a steady flow of income. If your business is not generating enough revenue to cover its expenses, it can be difficult to get approved for a loan. 

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5. Unconvincing Business Plan 

When applying for a loan, you will need to provide a detailed business plan. This should outline your objectives, strategies, and projections for the future of your business. If your business plan is not convincing, it can be difficult to get approved for a loan. 

6. High Debt-to-Income Ratio 

When applying for a loan, lenders will also look at your debt-to-income ratio. This is a measure of how well you are managing your debt. If your debt-to-income ratio is too high, it can be difficult to get approved for a loan. 

7. Unclear Purpose of Loan 

When applying for a loan, you need to be able to clearly explain why you need the funds and how you will use them. If you are not able to provide a convincing explanation for why you need the loan, it can be difficult to get approved. 

8. Unreasonable Loan Terms 

Finally, the terms of the loan can also make it difficult to get approved. If the lender is asking for too much collateral or a high-interest rate, it can be difficult to get approved for the loan. 

Securing a small business loan can be difficult, but it is not impossible. By understanding the reasons why your loan might be proving difficult, you can work to improve your chances of getting approved. Make sure you have a strong credit history, a good business plan, and reasonable loan terms to increase your chances of getting the loan you need.

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Submit all the necessary information to a number of potential lenders in one place! We eliminate the need to fill out multiple applications and allow you to compareloan options from different lenders. Reduce the risk of errors and time to secure a loan, as all the necessary information is collected in one application.

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