Apply for Business Loan!
Are you worried about Business Loan getting denied? Lenders reject Business Loan applications when they believe that the borrower may not be able to repay the money on time. Common reasons include poor credit history and insufficient cash flow. Ensuring your financial records are in order can improve your chances of approval.
5 common reasons for Business Loan rejection
1. Poor credit score
Banks check your credit score to judge how well you handle credit. Many banks set a minimum credit score that you must have to qualify for a Business Loan. If you have a poor credit score or if your credit score is lower than the minimum requirement, your loan application can be rejected.
2. Bad credit history
Lenders also check your credit reports to understand your credit history. If you have a history of not paying your dues on time, your Business Loan application may be rejected. Before applying for any loan, use a Business Loan EMI Calculator and make sure that you can afford to pay your EMI on time every month.
3. Not meeting eligibility requirements
Every lender specifies Business Loan eligibility requirements for applicants. These could be related to your credit score, business experience, revenue, etc. For instance, you must have a business under your ownership for at least 3 years to be eligible for an Axis Bank Business Loan. If you meet the eligibility criteria, you can get a loan with a repayment tenure between 6 and 60 months without collateral. You can apply for the Business Loan online.
4. Existing debt
If you have outstanding debt, lenders may view you as a risky customer. It may be viewed as your inability to clear off the Business Loan on time. Try to keep your credit balances low while applying for a new Business Loan to avoid this issue.
5. Lack of a proper business plan
Lenders ask for business plans to judge your intentions and ability to build a strong business. They may reject your application if your business plan is not well-researched, detailed and realistic. Ideally, your business plan should include important details like -
- Location of your business
- Description of your target customers
- Your plans for marketing, branding and customer acquisition
- Financial projections of your business
What to do if your Business Loan is denied?
- Work on your credit score: Improve your credit score to ensure that you are viewed as an ideal and responsible borrower. Pay your current loans on time, clear off your existing debt and keep your credit utilisation ratio low to improve your credit score.
- Draft a concrete business plan: Put sincere effort into drafting a solid business plan. Consider taking the help of a professional to make sure your business plan is impressive.
- Resolve cash flow issues or financial problems: Try to solve the financial issues of your business without the help of a loan. For example, focus on growing your revenue or try to minimise your expenses.
Conclusion
View your Business Loan rejection as an opportunity to make your business stronger. Understand the common reasons for Business Loan rejection and make sure you avoid them. Focus on improving your credit score and cash flow to make sure that your business is viewed as a strong loan applicant in the future.
Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.
