One of the most critical factors for business growth is capital, and this often means securing a loan. Don’t be discouraged if you’re having difficulty acquiring a business loan from a traditional lender. Several factors could be hindering your application.
In this blog post, we’ll outline some common reasons why your loan might not be approved and what you can do to overcome this challenge. By understanding what these factors are, you can take steps to improve your chances of getting the funding you need to grow your firm.
GE Credit Solutions provides credit consulting services to improve your credit score. So, keep reading to learn more!
Your Credit Score
One of the crucial elements that lenders consider during the loan approval process is your credit score. This number represents your creditworthiness, and it’s used to predict your likelihood of defaulting on a loan. The higher the credit score, the more probability your business will be approved for a loan.
If you have a low credit score, you can take steps to improve it. One method is to make all your payments timely. It includes not only credit card and loan payments but utility bills, rent, and other monthly expenses. If you struggle to remember to make your payments on time, set up automatic payments or reminders on your smartphone so you don’t miss a payment.
Another way to improve your business credit score is to pay off any loans you may have. It includes both revolving debt, like credit cards, and installment debt, like car loans. The lower your debt-to-income ratio, the better. You can improve your chances of acquiring a loan by paying off some of your debt or increasing your income.
High Credit Utilization Ratio
If you have a high credit utilization ratio, it means you’re using much of your available credit. This can be a red flag for creditors, who may think you’re struggling to make ends meet. Keep your balances below 30% of your credit limit to improve your credit utilization ratio.
Stage of Business
Lenders will want to know what stage your business is at. Are you just starting out? Are you established and looking to expand? The amount of money you’re asking for and the repayment terms will vary depending on where your business is. So, this can be a factor if your business loan is not approved.
Your monthly revenue is one of the critical factors lenders will review when considering your loan request. They want to know that you have a steady income and are making enough money to cover your expenses and make loan payments.
The Bottom Line
These are some factors that may be hindering you from securing a business loan. If you’re unsure where to start, it’s always a good idea to speak with a lender or financial advisor to get guidance on how to improve your chances of getting your loan approved. GE Credit Solutions serving Fort Worth, TX, is a credit consulting service that can help you improve your credit score.