When you’re a small business owner, there’s nothing more discouraging than a bank declining your application for an SME loan. You need the funds to start or keep your business going, but now all hope is gone.
Before you give up completely, you should know that it’s not uncommon to get rejected by banks, even for successful business owners. Rather than beating yourself up, figure out why your SME loan application got denied in the first place.
Check out the few reasons why your application wasn’t successful:
Too young in the market
Some banks may not approve your SME loan application if your business is relatively new. This is because you don’t have much of a business credit history, thus disqualifying you business for a small business loan.
However, that doesn’t mean you can apply for a loan if your business is new. You just need to find the right lender. Some lenders are more lenient and approve SME loan applications even if you don’t have enough time in business.
It is recommended to have at least three months worth of business credit history or look for a party willing to loan you money.
Low credit score
Your credit score covers your business’ revenue, assets, liabilities and profits. Since the finances and credit scores are closely linked, it can be a reason why banks reject loan applications business with low scores.
The logic is if you can’t maintain your credit score, what you think that you are reliable enough to pay back an SME loan?
If lenders reject your application because you have a low credit score, don’t be deterred. You can still improve your credit score by paying bills on time or keeping balances low on credit cards.
Poor cash flow
If you’re struggling to cover your business expenses, don’t be surprised if banks refuse to approve your SME loan application.
A business can’t survive without a stable cash flow. Poor cash management skills may result in reduced cash flow, which also leads to business failure.
Keep track of your cash flow and don’t drag out invoices. There are also many accounting programs that help you monitor the cash flow.
Whatever reason your SME loan got rejected, it’s not too late to correct your errors. Understanding your problems is the first step to get your application approved.
Interested in applying for an SME loan? Visit https://www.rhbgroup.com/products-and-services/business/business-banking/sme-banking.