Are you thinking of applying for a business loan? Financial institutions may reject the business loan application for a variety of reasons. These are things that will hold you in good stead and you should also have a clear idea about Business Loan Bajaj Finance eligibility criteria and interest rates before you apply.
Here are some of the key reasons why a lender may reject your business loan application-
● Poor Credit History- In case you do not have a good credit score and your credit report contains instances of defaulting on loans and other payments, your business loan application could be rejected by the financial institution. A credit score above 750 is always important for getting your loan sanctioned at the earliest. You should always build up your own credit history before starting a business.
● Unclear Purpose of Loan- A lender will always want to see a particular reason or purpose for taking the business loan. You should always have a clear blueprint in place as to how you want to use the money to grow/consolidate/start your business. If this is not in place, your application may be rejected.
● Document Issues- You should always endeavor to provide all the necessary documents required for business loans. In case of incorrect submission of documents and any other inconsistencies, your business loan may be rejected.
● Failure to pay taxes- If your business taxes have not been paid in a timely manner and you are behind on your payments, you will not qualify for a business loan. Ensure that all taxes and duties are paid before applying.
● Age of the business- Many lenders do not offer funding to businesses that are absolutely new or too young. The eligibility criteria for many lenders often state that a minimum of 2-3 years of business operations are essential for securing funding.
● High Debt- In case your business already has a pile of debt waiting to be serviced, your business loan application will anyway be rejected and your credit score will also be negatively impacted at the outset.
● Low Cash flows- In case the cash flows of your business are not sufficient to meet the repayment of the business loan and other expenses, you may not be eligible to get a business loan in the first place. Your business turnover and cash flows should be sufficient in order to pay back the loan.
● Incorrect Information- You have to submit all business documents including your profit and loss statements, balance sheet, projections and bank account statements while your business loan application is being verified. Any inconsistencies in the numbers will lead to the application being rejected outright.
These are some of the potential reasons for your business loan application being rejected. You should keep all these pointers in mind and follow the eligibility criteria and documentation guidelines. Compare business loan interest rate offered by various financial institutions before coming to a final decision. These tips will help you avoid the pitfalls and qualify for a business loan.