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Banks Have a Lot of Reasons to Reject Your Small Business Loan

For a small business to grow into a big business, it needs a loan unless it has exceptional sales and profit margins. A small business owner has quite a few places where he/she can go with a loan request. Banks seem to be one of their options on most occasions. What these owners might not realize is that banks have recently developed a reputation for rejecting small business loans. It seems that banks are more interested in financing large businesses due to their benefits. A bank can come up with a variety of reasons to reject loan approval for a small business. Some of the common reasons are as under:

Reasons for Banks to Reject Your Small Business Loan

Credit History

One of the barriers between you and the business loan is credit history. When you go to a bank, they look at your personal as well as business credit reports. Some people are under the impression that their personal credit does not affect their business loans. But that’s not always the case. A majority of banks look into both the types of credits. One of the aspects of credit that matter a lot to the banks is credit history. The length of your credit history can affect your loan approval negatively or positively.

The more information banks have at hand to assess your business’ creditworthiness, the easier it is for them to forward you the loan. However, if your business is new and your credit history is short, banks will be unwilling to forward you the desired loan.

Risky Business

You must be aware of the term high-risk business. In fact, lending institutions have created an entire industry for high-risk businesses to help them with loans, credit card payments, etc. A bank can look at a lot of factors to evaluate your business as a high-risk business. Perhaps you belong to an industry that is high-risk per se. Examples of such businesses are companies selling marijuana-based products, online gambling platforms, and casinos, dating services, blockchain-based services, etc. It is imperative to understand that your business’ activities can also make it a high-risk business.

For example, your business might not be a high-risk business per se, but perhaps you have received too many charge-backs on your shipped orders from your customers. In that case, the bank will see you as a risky investment and might eventually reject your loan application.

Cash Flow

As stated earlier, your credit history matters a lot when a bank is to approve your loan request. While having a short credit history increases your chances of rejection, a long credit history isn’t always a savior too. Any financial incidents on your credit history that do not favor your business can force the bank to reject your application. One of the most important considerations is the cash flow of your business. When you have cash flow issues, you are at risk of receiving a “no” from the bank for your loan.

Your cash flow is a measure for the bank to know how easily you return the loan. If you are tight on cash flow, how will you manage the repayments? However, cash flow is one of the controllable factors for you. Find ways to increase your revenues and lower your expenses. Once you have the right balance, you can approach the bank for a loan.

The Debt

A mistake that small business owners often make is trying out too many places for loans. They will avoid going to the bank first but get loans from several other sources in the meantime. Once you have obtained your business funding from other sources, it makes sense to return it in time. Approaching the bank when you already have a lot of debt to pay is not advisable at all. Do keep in mind that the debt you or your business owes affects your credit score as well. In short, the bank does not even have to investigate to know your debt. An overview of your credit report can tell the story.

The Preparation

Sometimes, your business is doing fine, and your credit score is in good shape as well. However, what’s missing is a solid business plan and proper preparation for loan approval. If you haven’t already figured out, banks require you to present a lot of documents with your loan approval request. Here are only some of the documents you will have to present to the bank to get approval for your loan.

Income tax returns
Existing loan documents
Personal financial documents
Affiliations and ownership
Business lease documents
Financial statements of the business
You have to be exceptionally careful when these documents and presenting them to the bank. Any discrepancies can result in loan rejection.

Concentration of Customers

This one might come as a surprise to some, but a lot of banks consider this aspect of your business seriously. You must not forget that loans are banks’ investments. Businesses that approach the banks are their vehicles to multiply their money in the form of interest. If the bank senses that your business does not have the potential to expand, it can reject your loan request. Think of a mom and pop shop in a small town with a small population. If it only serves the people of that town and has no potential to grow further, a rejection is imminent.

In this particular case, even if the business has considerable profit margins, it relies on its regular customers for that. The bank might see it as a returnable loan but not as an investment opportunity.

Home Business Success is Guaranteed When You Follow These Home Based Business Management Tips

There are all manner of reasons why folk decide to start up a business working from home. Some people basically don’t have any desire to hold down a regularly paid nine to five job where everything about their working life from pay and vacations are dictated by others. Some want to spend more time concentrating on family life whilst others simply yearn to be their own boss. A successful home based business will provide you this freedom and financial independence. However, along with the benefits of home business success, you will need to follow these home business management tips.Whatever the reason, starting your own home based business and controlling everything yourself without having anyone else to lean on is not always easy to begin with. We all pick up good and bad habits throughout our lives and in order to successfully run a home business, the bad practices and poor time management we have got into need to be done away with.You can do this by writing down your bad habits on paper as and when they arise. It will not be long before you can easily spot the things that are letting you and your business down, and then all you have to do is take steps to wipe out those old bad habits.Many people tend leave things until tomorrow when they really should be done today. This only leads to a business which crumbles from the roots and when deadlines don’t get met, it doesn’t take much for clients to go elsewhere for what they need. Its worth remembering that these are the clients you tried so hard to get in the first place and its not an easy task to get them back once they have strayed and taken their business to your competitors.Everything needs putting in place prior to getting your home business up and running. As many of the necessary tasks such as making contacts with clients and chatting with the bank manager have to be done during the working day, time should be set aside on a daily basis to focus on these important aspects of setting up a business from home. However, it is essential that once your daily schedule is put together, you stick to the plan in order to avoid overloading yourself with work.New business ideas are continually being updated and you really need to keep your finger on the pulse and move forward with the times. This can be achieved by learning on the Internet or taking classes to improve your business acumen. After all, staying ahead of the game and being knowledgeable is the key as far as running your own home business is concerned.You, above all, have to be seen taking your business seriously. If you don’t do this, how can you expect anyone else to? Nonetheless, it is essential to have a little fun now and again and it helps to keep you fresh and as keen as you were when you first started out. Don’t burn yourself out – enjoy your home business as well as working hard at it.When you work from home you can set your own schedule and afford yourself the luxury of being able to do the things you wanted to do but couldn’t when you were employed in your previous nine to five job. Working from home does not mean you have to be stuck to your computer seat all day, every day. Let’s face it, with modern technology such as PDA’s, cell phones and texting facilities your home business can be as mobile as you wish it to be.It’s a good idea to make every attempt to keep business and pleasure apart whenever possible. Make sure when you are spending some quality time with family or friends that you are not forever taking out your Blackberry to see if you have any new mail. There is a time and place for this and as long as you don’t miss any important messages from clients, everyone in your world will be happy.

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Why Start a Home Based Business?

My, how times have changed thanks to the development of the internet. Remember when the only way to own and operate you own business centered on opening up a brick and mortar establishment? Today, this is not longer necessary and, thankfully, neither is it necessary to spend outrageous amounts of money on startup costs. It is possible these days to feasible work from home and earn solid revenues. In fact, there are many that have earned substantial incomes from such a venture.Still some may wonder why it is so valuable to launch a home business. They may be currently content in their regular job. What is it about working a home based business that can motivate those on the proverbial fence to do what is needed to launch such a business? Well, there are several reasons why this might be an excellent idea. Let’s take a look at a few of them:You can have the freedom on no longer being locked down to a 9-5 job. While some jobs are rewarding, others are not. Additionally, there are many stressful aspects involved with a traditional job. This includes dealing with long commutes and the issue of office politics among many other common problems. Why deal with these problems when you do not have to? A home business offers a much better alternative.Then, there is the very important issue of developing financial stability in one’s life. When you work for yourself in a home based business, you always have the potential to earn significant sums of money based on your own labor. While there are never any guarantees in life, the likelihood of earning significant income from a home based business is more than what it would be if you worked for someone else. Basically, you can be in charge of your own destiny because you will not be anchored or constrained by any management rules. This can be of significant benefit to those that may be in need of generating additional revenue and do not want any roadblocks put in front of them. While money is not everything, it can be the conduit to a much safer and financially secure life. One should never lose sight of this fact.One of the greatest laments busy professionals have is their inability to spend time with their family. This is understandable considering the fact that much of their time will be tied up with work responsibilities. But, what happens when you are working in close proximity to your family? Then, you would not have the common problems associated with balancing family and work related responsibilities. Consider this another huge positive to working at home with a home based business.There are complexities associated with many home based businesses and that is why it is suggested to check out http://www.changeurlife2day.com. This is an excellent resource for information on working at home and running your own business. The information it makes available may very well change your life.

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