Keeping a small business running without consistent cash flow or working capital is a challenge, especially as inflation continues to rise. Many small business owners find it difficult to obtain a loan from a bank in the timeframes they need, with the resources at their disposal or under their financial circumstances, which may include imperfect credit scores, existing loans, past judgments or defaults.

Here are seven of the most common reasons you may have been rejected for a business loan. Plus, learn how Bizcap can fund businesses that other lenders won’t.

1. Bad Credit Score

Banks and traditional lenders often rely heavily on credit scores to approve business loans, usually requiring scores of 500 or higher. Unfortunately, this is unachievable for some businesses, rendering them unable to obtain funding.

What’s more, each time you apply for a loan, lenders will likely run a credit check and each check, or "hard inquiry," can slightly lower your score. What’s more, some lenders view multiple credit inquiries within a short period as a sign of financial instability.

The more credit inquiries you make, the lower your credit score falls. Most private lenders and banks make a credit score inquiry with each application, potentially damaging your credit score.

The Bizcap Difference:

  • No minimum credit score requirement.  
  • We can assess your application without running a credit check, which makes applying for a Bizcap loan completely risk-free. Only once you decide to proceed with the loan do we run a hard inquiry to finalise the offer.

2. Your Application

Inaccurate or incomplete paperwork can also lead to a business loan application being rejected. No matter your credit score, business tenure or revenue strength, if your documents are faulty or missing, lenders will be unable to establish your true financial position and make you an offer.

When applying for a business loan, ensure you provide accurate and complete paperwork.

The Bizcap Difference:

Applying for a business loan with Bizcap couldn’t be easier. Being a low-doc lender, the only documents we ask for to make you a conditional offer are your business bank statements.

To learn more about the documents you need to apply for a business loan, click here.

3. Lack of Consistent Cash Flow

Lenders prefer small to medium enterprises (SMEs) with regular and consistent cash flow, to ensure they have funds to make frequent repayments.

Lenders are looking for:

  • Multiple and Consistent Deposits: These indicate diverse customer channels and financial stability.
  • Diverse Sources: This demonstrates a well-spread reliance on various customer channels.

Businesses that cannot show proof of steady cash flow often have their applications rejected, especially if this can’t be explained or supported.

4. Existing Loans and Debt

Lenders are reluctant to offer funds to businesses with existing loans or debt.

  • Banks and Private Lenders: often reject applications for businesses with similar existing loans, regardless of the purpose of the desired funds.

The Bizcap Difference:

  • Open to funding: We fund customers with existing loans, even of the same type.
  • No Payout Required: We don’t expect you to pay out an existing loan before taking on another loan with us.

5. Lack of Trading History

Lenders prefer SMEs with longer trading histories:

  • Private Lenders: Generally open to businesses that have been trading for at least 6 months
  • Preferential Treatment: Often give loans to those with a trading history of 12 months or more.

The Bizcap Difference:

  • At Bizcap, most businesses only need 4 months of trading to apply for a loan.  

6. Economic Concerns

The current economic climate is also a concern for banks, traditional lenders and many private lenders. Rising inflation and market instability make banks and traditional lenders more cautious, leading to stricter eligibility criteria. During these times, even small financial inconsistencies can result in rejection.

The Bizcap Difference:

  • Bizcap is an Open-Minded Lender: We maintained funding throughout the COVID-19 pandemic and continue to do so in the current economic climate.  We welcome businesses from a wide range of industries and risk parameters despite the tough times. Our commitment to saying “yes” more often is reflected in our high approval rates:  76 percent of eligible Bizcap loan applications are approved.  

7. Your Industry is “Risky”

Some industries are considered “risky” by lenders, due to seasonal fluctuations causing inconsistent revenue, being easily replaceable with new technologies or if the industry has a precarious relationship with the law.

Examples include:

  • Construction
  • Car Dealerships
  • Security
  • Cryptocurrency
  • Finance Businesses
  • Commercial Cleaning
  • Security
  • Labour Hire
  • Transportation

If you have had feedback from a lender that this is the reason your application was rejected, contact Bizcap. We are open to industries that are restricted by other lenders.

How Can We Help?

Many businesses that were turned down for business loans elsewhere have been able to get funding from Bizcap.

At Bizcap, we understand that running a business is hard, so we don’t get deterred by bumps in the road; if we believe a business faces a viable opportunity, we’ll actively seek out a way to support it.

Find out how Bizcap can help your business by applying online. It takes less than 5 minutes and doesn’t require an up-front credit check. Prefer to speak with someone? Give us a call on 0808 304 8690.

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