A business loan is an option to opt if you are running short of capital or need to borrow some small or big amount for a limited time. There is a number of lenders available in the market nowadays who can hold your hand in bad times to fulfill this financial gap.
But on this journey, you might face some issues. A lender may say “sorry, we can’t proceed with your application” or they can ask you to fulfill some extra formalities which may annoy you. You could face this situation on the basis of your past debt to the bank or other financial organizations.
Everyone wants to make their portfolio clean and clear but unfortunately, sometimes knowingly or unknowingly, we stuck with some unwanted problems. So here, I am going to tell you the ways to handle the situations if you have applied for a business loan and your business loan application is being declined.
First, you need to know the rejection reason for your personal loan application. So below are the few points to analyze before taking further steps:-
Ask the lender:
The lender only can give you the exact reason for declining your application. So, ask them politely to understand the same. Also, ask them the suggestion to reapply
Check Your Credit Score:
In approval of any loans, the credit score is the key factor to consider. In most of the cases, you are declined because of a poor credit score. So, you need to cross-check your past transaction history if any. If you were failed to repay on time, you might have earned a poor credit score. For your knowledge, more than 600 points help you to get a hassle-free loan.
Your monthly earning is lower than the required milestone:
It depends on the amount you are applying for taking loans. As per the lender’s calculation, if it will not fit to easily recover the loan amount on the basis of your current income, they might reject your application. Their prime concern is to know how capable you are to pay the loan amount within the given tenure.
Any current loans or dues:
Make sure that you are not delaying the repayment of your existing loans if any. If it’s pending for a long time, you might be rejected for the next loan you are going to apply.
Collateral to provide to the Bank:
You don’t have the equal value of collaterals to submit then your applied loan amount. Lenders ask for any assets or property papers to recover the given amount if in case the borrower is not in a condition to clear the dues.
It is the ratio which determines your financial health, means your income and the debt. If the ratio is more than 40%, then your business loan will be disapproved by the Lender. So, it is always recommended to keep the margin below 36% by reducing your debt or by increasing the income.
Contact the SBA:
SBA stands for Small Business Administration. It is a Government agency who offers the loan to the borrowers at a minimal interest rate. Actually, SBA acts as a link between the borrower and the lender.
Let’s know the top 10 ways to overcome the gap for easy approval of your business loan application:-
1. Provide Limited information to the lender:
At the initial stage, the lenders want to know as much as the information possible to gather about you and your business. To prevent any unwanted situations, provide limited info in fewer words by carefully listening and judging to the lender’s query.
2. Don’t trust on 3rd Party:
Might be somewhere you had heard a phrase “the prevention is better than cure”. And in the way to proceed with your application, this phrase is applied. Before taking the final steps, the lender wants to know the hidden factor about you. So they could talk to your neighbors or friends. And here, your role is to not reveal your plans of getting a loan to them Else, there are possibilities that they may share the details to the lenders which might include some negative points that could be the rejection reason of your application.
3. Blueprint of your Business:
Submit the forthcoming plan outlines while applying for a business loan. As a part of a security check, the lender wants to know, how you are planning to repay the loan amount by running your business simultaneously.
4. Risk involves in your business niche:
Sometimes, the personal loan application gets rejected just because lender analyze that the niche of the selected business can’t give a good hike in future, which may lead the borrower to face the financial problem to repay the loan amount. So, to prevent the rejection, properly analyze the future growth of your business and make them believe that how you will handle the repayments in coming days.
5. Check your personal credit score:
If you are the owner of a business and applying for a business loan then the bank may ask for your personal credit scores and transactions history to prior to proceeding your application. So, try to pay the dues (if any) on time to get the earn credit score in the future.
6. Clear your previous debt:
Banks always offer the business without any hassle to those borrowers who have cleared the debt on time. So, if you don’t want any issue amid the processing of a business loan, then clear your all dues.
7. Look out for another Lender:
If you failed to get the assistance from the bank related to a business loan, then don’t worry as there are a lot of online lenders who provide the loan at a reasonable rate.
Hence, these were some useful steps which may help you to get a sbi business loan in an easy manner. But before proceeding to the lender, make sure to execute the above-mentioned points properly as this will help you to get a business loan in an easy manner.