Have you been denied a loan? Don’t worry, it’s not yet the end of the line. There are still ways for you to take out the funds you need. Consider other financial institutions. While banks deny you a loan, there are others who can look beyond your financial situation. Talk to Non-traditional financial institutions like Loose Lending (https://looselending.com/).
What to do next if your application for a mortgage loan is denied
Six Reason Your Loan Application Is Rejected
1. Bad Personal Credit
Your personal credit rating has a huge impact on lending, even if your company has been in the market for a long time. This principle follows the logic that if you are not in control of your personal creditworthiness, you cannot guarantee it for your company. If poor personal creditworthiness prevents you from getting funding, you should review your creditworthiness and take steps to improve it.
2. Business Is Too Young
If your company is relatively young or a start-up, you probably don’t have a long-standing credit history. This is often an exclusion criterion for many banks that do not want to bear the increased risk due to requirements. In the case of young companies, in particular, banks pay attention to realistic forecasts of sales development or profitability, assuming understandable hypotheses.
3. Risk Like Industry
Many industries are often classified by banks as being more risky than others. A good example of this are transport companies where you can find a high failure rate. If your company is in one of these industries and you were therefore rejected for a bank loan, you should find out more about specialized lenders for your industry.
4. Insufficient Securities
A certain minimum of security is required for most forms of traditional financing. If the necessary collateral is insufficient, you will be dismissed as a small or young company and in particular as a freelancer in most cases. In this case, you should look for alternative methods, such as pre-financing your open customer invoices.
5. Problems with Capital Flow
For almost all lenders, capital flow is a key unit for lending. This is not just about whether you can cover your operating expenses, but also the repayment of your interest including a buffer. Strong variances in cash flow (e.g. due to seasonal factors) are often an exclusion criterion for most lenders. It is not for nothing that poor capital flow management is one of the most common reasons why companies fail.
If you have problems getting funding due to a lack of or a large variation in the flow of capital, you should take a closer look at how liquidity shortages can be overcome. On the one hand, you can try to turn your claims into cash faster and grant your customers shorter payment terms or warn you faster. In some cases, however, this does not make sense, since it can damage the relationship with your customers in the long term. In these cases, it makes sense to consider other options such as financing bills that do not affect customer relationships, but which will quickly help you overcome losing streaks.
6. Incomplete Credit Application and Documents
Unfortunately, incomplete documents are one of the most common reasons for rejecting loans for freelancers and small businesses. Missing or inadequate documents are often an automatic knock-out criterion for many banks because important and necessary background information is missing.
The most important supporting documents include a realistic business plan, income tax returns from the past 3-5 years, business account histories, as well as historical profit and loss accounts and balance sheets. In addition, contracts (e.g. leasing contracts), licenses and industry-specific documents can be requested.