Business loans can be essential for launching a new start-up or exploring an new height to an existing business, with available funds often used to secure inventory, purchase equipment, rent operational space, hire employees or cover many other expenses. But bank loans help you to finance a business need that you wouldn’t have otherwise managed, even you can pay back the borrowed money in pre decided instalments thereafter. However, getting business loans can be difficult for new companies for various reasons 

Poor credit report 

Credit reports are one of the tools lenders use to determine a borrower’s credibility. If your credit report shows your inability in paying back debts, you might be rejected for a loan. No lender is ready to risk giving out money to someone who has a bad credit history. Regardless of whether the credit history is a result of your actions or unavoidable circumstances like illnesses, divorce, or anything of the sort, as long as it’s bad, then that’s a real roadblock to getting your loan approved. 

Limited cash flow 

When applying for a loan to expand your business, lenders will want to know how the business has been performing so far. They will look at your bank statements and other financial records that they deem useful in determining how profitable your business has been. If the business hasn’t been that good or has been operating at a loss, then there is a great possibility the loan won’t be approved. It is, therefore, important to make sure that your business has an impressive track record before approaching lenders for a business loan. While at it, keep financial records organized and properly audited so nothing looks fabricated. This will go a long way in aiding the approval of your loan. 

Risky business 

 When lenders are offering you any amount of money, they want to be sure they will get it back. They will, therefore, be very keen to make sure that the plan you have is well-thought in that it guarantees returns. To convince them that you can pay the borrowed money back, you will want to have a solid plan highlighting how you are going to use the money to make profits. 

Applying loans from multiple lenders 

Most people will think that applying for loans from multiple lenders will increase the probability of getting one approved. On the contrary, it does just the opposite. When looking at your credit history, any loan that you take or apply for will pop up. When you apply for several loans at the same time, it raises a red flag. Some lenders could become reluctant to offer you a loan. It is thus crucial to try one lender at a time and choose them well before making your application 

Poor paperwork 

Before approaching potential lenders, business owners should have their act together. That means having all the paperwork necessary for your loan application on hand. One of the things that can be a problem when applying for a loan is if business owners don’t have the documentation that the bank will require. Obligatory documentation often includes a detailed business plan and proof of collateral; extensive financial records such as income tax returns, personal and business bank statements, loan history, and a balance sheet; and legal paperwork, such as franchise agreements, business licenses and registrations. 

Failure to seek expert advice 

When you apply for a business loan, lenders want to see that you’ve sought guidance from knowledgeable advisors. Accountants can be an important source of advice for small business owners. Business owners can get financial advice from business networking groups, by conducting research on the websites of the leading alternative funders, since many have detailed resource sections for small businesses about the many kinds of available capital and the best ways to prepare for funding.   

Fails to explore other option 

Finding a lender can feel so daunting that it might be tempting to sign up with the first one that comes along. But blindly pursuing one loan provider without exploring your other options is a mistake. Take the time to research a variety of traditional and alternative lenders to find the best fit for your business. 

 Indifferent attitude 

So much of the application process for a business loan is methodical, directed by the orderly presentation of concrete documentation, that it’s easy to forget there is an innately emotional component to this process as well. Too many business owners simply don’t demonstrate why they, rather than someone else, are a good candidate for a loan. They approach lenders with an apathetic attitude. 

When you decide to finance your start-up or expand your business, a business loan is one of the best ways to raise capital. However, it all depends on whether your application will be approved. If you understand the roadblocks above and are keen on navigating them, getting approved for a business loan shouldn’t be hard.