Keeping a small business running without consistent cash flow or working capital is a challenge, especially at the moment! Many banks and traditional lenders’ eligibility requirements make it hard for many small businesses to secure funding. Securing non-asset backed financial assistance from lenders can be difficult, below we outline seven common reasons you may have been rejected for a business loan in the past, along with what makes Bizcap different to the others and how we can help:
Bad credit score
Banks and traditional financial institutions heavily rely on the company and individual credit score reports to determine the denial or approval of your business loan application. Generally speaking, traditional lenders approve customers with credit scores of 500 plus. For many Small Business Owners, this is too high an expectation, especially during the current pandemic and the ongoing changes to businesses. The double-edged sword is the more credit enquiries you have, the lower your credit score falls. The majority of private lenders and banks make a credit score enquiry each time you submit an application, meaning shopping around for an Unsecured Business Loan could be doing your credit score a fair bit of damage. (It’s worth noting Bizcap can assess your file without running a credit enquiry and have no minimum credit score requirements).
When applying for a business loan, you need to ensure you’re providing the requested paperwork and that it is accurate. For instance, for our team to assess your file for an offer, we require your basic financials in the form of bank statements. We may request your BAS statements depending on the size of the loan and the complexity of the business. Keep in mind that no matter how impressive your credit score may be, how long you’ve been in business, or how strong your revenue is, etc. – if you submit documents that are inaccurate or incomplete, lenders cannot confirm your cash flow position and therefore cannot make you an offer.
Lack of consistent cash flow
Lenders typically prefer to provide loans to SMEs that have regular and consistent cash flow every month, to ensure they have the funds to make frequent payments, and pay off the loan. Lenders want to see that you have multiple and consistent deposits every month and that they originate from multiple sources – that shows that you have a variety of customer channels and your reliance on them is well spread. Businesses who cannot show proof of steady cash flow often have their applications rejected especially if this can’t be explained or supported.
Existing loans and debt
Banks and private lenders are reluctant to approve businesses that have existing loans or debts. The vast majority of the time, many lenders will reject loan applications for businesses that have existing loans of a similar product style irrespective of the use of the funds being wildly different. Bizcap is always open to funding customers who have existing loans, even if they are the same product type and for the same use, we also don’t expect you to pay out an existing loan prior to taking on another loan with us.
Lack of trading history
Many lenders give preferential treatment to SMEs with longer trading histories over those who have only been trading for a short period of time. The majority of private lenders are open to lending to customers who have been trading for at least 6 months but a number of them want to see 12 months or more.
The current economic climate is also a concern for banks, traditional lenders and many private lenders. They will avoid lending money to businesses when the current economy is not favourable for them. Bizcap has maintained funding throughout the pandemic with minimal adjustments to our lending criteria.
Your industry is “risky”
Some industries are simply considered “risky” by lenders. For example, many private lenders consider Construction, Panel Beaters, Towing Services, Agriculture, Marketing industries totally off-limits. If you have had feedback from a lender that this is the reason your application was rejected, find lenders like Bizcap who are open to industries often restricted and always ask what the requirements are before doing an application.
How Can We Help?
Many of our customers have previously been declined for a business loan from another lender and then get the capital they are after from us. We don’t penalise someone’s previous efforts to succeed; we’re focused on supporting our customer’s current position and making sure they have the capital they need to grow and succeed in the Australian small business market.
Bizcap truly is Australia’s most open-minded lender; we provide non-asset backed capital up to $600,000 to SMEs Australia wide within just a few hours.
If you’d like to apply for a business loan with Bizcap, you can fill in the application form or call us on 1300 922 223.