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Reasons for Banks to Reject Your Small Business Loan
One of the barriers between you and the business loan is credit history. When you go to a bank, they look at your personal as well as business credit reports. Some people are under the impression that their personal credit does not affect their business loans. But that’s not always the case. A majority of banks look into both the types of credits. One of the aspects of credit that matter a lot to the banks is credit history. The length of your credit history can affect your loan approval negatively or positively.
The more information banks have at hand to assess your business’ creditworthiness, the easier it is for them to forward you the loan. However, if your business is new and your credit history is short, banks will be unwilling to forward you the desired loan.
You must be aware of the term high-risk business. In fact, lending institutions have created an entire industry for high-risk businesses to help them with loans, credit card payments, etc. A bank can look at a lot of factors to evaluate your business as a high-risk business. Perhaps you belong to an industry that is high-risk per se. Examples of such businesses are companies selling marijuana-based products, online gambling platforms, and casinos, dating services, blockchain-based services, etc. It is imperative to understand that your business’ activities can also make it a high-risk business.
For example, your business might not be a high-risk business per se, but perhaps you have received too many charge-backs on your shipped orders from your customers. In that case, the bank will see you as a risky investment and might eventually reject your loan application.