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It's therefore becoming difficult for such businesses to secure funding from various financial lenders, including banks. These institutions are declining loan requests, especially at these challenging times with Covid-19. But people are taking advantage of their marketing techniques; you can also buy Twitter likes. 

If you have a small business, the bank can either agree to provide you with a loan or not. Some of the reasons why you could not get a loan for your small business include: 

Lack Of Consistent Cash Flow

When you approach a bank for a loan, it has to check your business cash flow. You are likely to get a loan for your business if it has consistent cash flow every month. Perhaps your business doesn't demonstrate that; it's likely to be denied a loan. 

Insufficient Collateral 

The other reason why your business is likely to lack a loan is insufficient collateral. This is because you need to have viable collateral to complete the transaction for a bank to award you a loan. It isn't a problem for large businesses owning property or big-ticket assets. So, a business that doesn't have sufficient collateral will likely not get a loan. 

Debt-to-income Ratio

Another common thing that worries banks are lending your business, yet it has other existing debts from lenders. In most cases, these businesses won't even consider lending your business because of other debts. 

Commonly, most small businesses would sell credit to fund their business from multiple sources. So, you will find it challenging when applying for a cash advance or loan from a bank. 

Customer Concentration 

You will realize that banks are skeptical of those businesses tending to have significant bulk sales from some customers. This is because lenders would like a business that sees diversity in their businesses and not the same customers. 

Perhaps you have a local restaurant or pub, relying on the same customers to have a steady income. Such a business presents a perception problem. So, banks are likely to decline your loan requests. 

Insufficient Credit 

After the wake of the recent financial recession, financial lenders have continued to increase their credit scores. Unfortunately, most small businesses have poor credit scores, and they are suffering due to financial crises. 

Perhaps for a bank to agree to lend your business money, it should have over 720 value of credit score. Without such a level, there is no need for you to step foot in the bank for a loan. It is a high level for small businesses.

Personal Guarantees 

Remember that, to get a loan, the bank has to be sure it will get its money back. You, therefore, need to have personal guarantees. This will be challenging, especially when your business struggles to stay on the top. 

Insufficient Operating History 

You will realize that it's easy for a bank to give your business a loan when it has a significant track record. Besides, no bank would agree to fund a business that has continued to operate for a long but hasn't achieved success and credibility. 

Expect to be asked for a solid track record that proves your business has continued to generate profits over a certain period. That's the only way you can be sure your business will get a loan. If you can't produce a solid operating history, it's likely to be rejected.

Economic Concerns

Remember that banks are businesses, so they do things that favor them. Banks won't lend money to any business having unfavorable economic conditions. This is because that could put an unfair burden on the SMBs on maintaining revenues and cutting the costs after the economy goes south. 

Insufficient Management Team 

Another reason why the bank is likely to reject your loan proposal is when your business lacks top-level leadership. A business should have a noticeable chain of command. If not, that will bring up concerns regarding your organization's integrity or your small business's long-term success. 

Weakening  Industry 

Sometimes, the banks categorize businesses as weak. If the bank puts your business in this category, you're not likely to get a loan from a traditional bank. You have to ensure your business stays strong before requesting a loan. 

Conclusion

You have seen that it's easy for a bank to decline your businesses' loan request. The above factors would make your business not get a loan. If you find yourself in such a situation, but you need the money urgently, what would you do?

The next thing you could think about is alternative funding. This refers to financing that won't come from bank entities. It refers to financial institutions that specialize in lending small and medium-sized businesses. These lenders exist in different solutions and allow the lenders to create flexible terms.