Jan 10, 2022
Keeping a small business afloat is in itself a challenge for many entrepreneurs. When business finances got complicated even more by the coronavirus crisis, not only do you need to cut costs and revise sales projections but you also potentially need to seek out a loan to keep the cash flowing growing.
For most startup owners, entrepreneurs, and small businesses, seeking out an SBA business loan is the most common choice from a cash flow perspective. But before applying for it, you might have some doubts and questions.
For a variety of reasons, a significant number of small business loans don’t get approved. While the approval rates for big banks range from 10 to 30 percent, the approval rates for small banks and credit unions can range anywhere between 20 and 40 percent. It means there are greater chances that a lot of small business loans don’t qualify, regardless of their financing needs.
Fortunately, there is always hope in most cases. When you work with the right service provider, they will help you find a small business loan that best suits your financial needs.
Yes, you can reapply for SBA business loans but you can do so only 90 days after your application is declined. When you reapply, it is better to strengthen your loan application. To increase your chances of getting SBA business loan approval, you should be prepared to avoid all those things that get a small business loan application disqualified in the first place.
Some of the common reasons why an SBA loan application can be declined are:
· Low overall personal and business credit score
· Not enough collateral or assets to secure your loan
· Insufficient free capital and/or poor cash flow
· A huge outstanding debt or a line of credit that is close to maxing out
· Absence of a clear visible credit history
· Have a lien, bankruptcy, or judgment against you
· Previous history of defaulting on a government loan
· Not demonstrating sufficient financial need for the SBA loan
· The amount of loan is too low that makes the cost to service a loan for a bank too high
· Incomplete application and/or missing supporting documents
· The business belongs to the industry that the SBA doesn’t lend to.
· The business is not small at all according to SBA size standards.
There are many ways you can strengthen your SBA business loan application. Some of them are:
· Managing your debt more responsibly and not using all the credit limits
· Making repayments on existing debt obligations timely
· Staying free of liens, bankruptcies, and judgments
· Not defaulting on existing loan if you have any, especially government-backed loans either in personal capacity or business capacity.
· Not applying for credit too frequently
· Keeping overhead costs and additional expenses down
· Paying down both personal and business debts
· Reviewing business finances and increasing cash flow
Besides, you should also work on increasing personal or business assets so that you can have sufficient collateral to get an SBA loan approved. In case you can’t, you may still have other viable options. So, feel free to book a consultation appointment with experts to learn more about SBA business loans.