The Main Reasons Why Small Business Owners Get Turned Down By The Banks!
Why do businesses get turned down?
Banks that take deposits are limited to the amount of loans they can give out due to government regulations. That is why they turn down the majority of applications filed for small business loan requests. This is also the reason why alternative lenders are the best way to go as they do not fall under the same government regulations.
Growing a small business is an everyday challenge to small business owners due to employees showing up, doing their tasks, competition which can cut their profit margins, and most of all having enough capital on hand to keep afloat with materials, rent, payroll, taxes, inventory,etc
With a large variety of financial obligations out there today in the market,the small business owner still has a very hard time of securing a working capital loan to grow their business.These are .very stressful times for small business owners as they are getting turned left and right for small business loans and lines of credit.Most businesses fail in the 1st year due to not having enough capital,and not able to borrow funds to keep afloat.
There Are More People Than Ever Opening Their Own Businesses Today!
While this might sound optimistic about the growth of small businesses, 4 out of 10 business owners are finding it harder to keep their costs down. 30% of all small business owners find it hard to budget for unexpected expenses. In the last 15 years 23% of the small business owners had considered closing down their businesses due to lack of sales growth and cash. Over the past 5 years over 50% of those small businesses had seek loans several times and 50% of them were turned down several times, 25% of them had no idea why they were turned down for the loan. Because of this about 30% of the small businesses that were turned down were not able to hire and expand because of lack of funding.
Because small business owners were not able to borrow the funds they dipped into their savings or maxed out personal credit cards to try and keep their business afloat. A recent survey 65% withdrew from savings, 25% used business credit cards, 23% used personal credit cards,12% relied on family and friends. Only 35% of the group was successful in seeking a small business loan.
How Important Is Business Credit Today?
50% of small business owners today have no Idea about what a business score is and how important it is to getting a small business loan. 70% didn’t know how to go about getting a business score. By businesses establishing business credit, it stops small business owners from maxing out their personal credit cards or lines of credit. Every business has whats called a FICO SBSS Score. The lending institutions use the score to set the terms of the loan as well as the line of credit. Small business owners should be aware of their SBSS Score and should always work on it to build credit up with making payments on time to suppliers and vendors. Dun&Bradstreet, Equifax, Fico, Experian generate the business scores.
Why Business Credit Matters?
Those small businesses that understand and build their business credit scores up are most likely able to get loans and lines of credits successfully enabling the business owner to predict future growth. On the other side of the coin small business owners who don’t know about business credit and never built it up wont be able to seek capital or lines of credit making it impossible to grow business.
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