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No Doubt Reasons Why Banks won’t Loan Money for your Business

There are points listed here that you will not have to doubt this page that its the possible reasons why Banks won’t Loan Money for your Business. Always remember that the banks are also into business, to make profits for their financial institution, but the fact remains that there are factors Banks considers not to release loan for upcoming business or already existing business, all that you see in this page.

Why Banks won't Loan Money for your Business

Here are No Doubt Reasons Why Banks won’t Loan Money for your Business

According to “The Business Journals“website, they have been able to point out key point with No Doubt Reasons Why Banks won’t Loan Money for your Business.

1. Lack of Consistent Cash Flow

Banks tend to favor SMBs that have a steady revenue stream and consistent cash flow coming in every month. SMBs that can’t demonstrate this consistency are denied loans significantly more often than not.

2. Insufficient Collateral

For SMBs, lack of sufficient collateral excludes them from obtaining financing because loan applications usually include a request for a viable piece of collateral in order to complete the transaction and receive funding. That’s not a problem for large businesses that own property or other big ticket assets, but it can be an insurmountable hurdle for SMBs.

3. Debt-to-income Ratio

Banks are wary of lending to businesses that have existing debt with other lenders. In many cases, they won’t even consider lending to a business that has already taken financing. Since many SMB owners seek credit from multiple sources, especially during the start-up phase, this can be a major strike against them when applying for a loan or cash advance from a traditional bank.

4. Customer Concentrations

Banks are often skeptical of businesses that report a significant bulk of their sales from only a select number of customers. Lenders, in general, like to see diversity in a business’s clientele as opposed to the same customers. For example, a local pub or restaurant that relies mainly on its “regulars” for steady income can present a perception problem with traditional banks.

5. Insufficient Credit

In the wake of the recent recession, banks have increased their credit score standards, but many small businesses have credit scores that are still suffering from the aftermath of the financial crisis. In most cases, a business will need a credit score of at least 720 even to get a foot in the door for a bank loan. That’s too high for many SMBs.

6. Personal Guarantees

Personal guarantees from business owners are requirements from banks, but that also makes the owner personally responsible for paying back the loan. That’s a precarious position for those struggling to stay on top of expenses every month.

7. Insufficient Operating History

Banks give preferential treatment to businesses with lengthy and significant track records. After all, they don’t want to fund a business that has been operating for a while, but hasn’t sustained a certain amount of success and credibility. Banks demand a solid track record of generating profits over a specific time period in order to receive funding. Without that solid operating history, a SMB will make likely be rejected for a loan.

8. Economic Concerns

No pun intended, but banks are always concerned with their own interests. They simply will not lend money to a business if they feel that the current economic conditions are unfavorable for getting the money back in a timely manner. This puts an unfair burden on SMBs to maintain revenues and keep costs down when the economy takes a bad turn.

9. Insufficient Management Team

Banks will reject SMBs that don’t have strong top-level leadership with a noticeable chain of command, since that can bring up concerns about the organizational integrity and long-term success of a business.

10. Weakening Industry

Operating an SMB in an industry that a bank deems as “weak” or in decline will hinder the chances of receiving financing from a traditional bank.

Also Read This: Top Lucrative Businesses To Do in Nigeria (African) – Trending Businesses

Banks Alternatives to Get Loan Money for your Business

Every thing in life has an alternative, the only thing could be that the condition attached to if might not be friendly to your business. So, when a bank declines a loan request for your small business, what is the solution? One of the best available options is alternative funding.

Alternative funding, which comes from non-bank entities that specialize in lending funds to small- and medium-sized businesses, exists in several different solutions that allow lenders to create flexible terms for owners who need access to capital for growing businesses. These are some options:

  • Merchant Cash Advances

This is a business cash advance program that provides you with a sum of capital by purchasing a set amount of your future credit/debit card sales. Instead of making fixed monthly payments, MCAs work with your natural cash flow, automatically deducting a small percentage from your credit/debit card sales until the cash advance is repaid in full.

  • Inventory Purchase Programs

Designed to help small businesses with one of their most critical and basic expenses: inventory. This innovative inventory-financing program lets merchants buy inventory at no upfront cost, while an alternative lender will fund 100 percent of the purchase order.

  • Family and Friends

Although it isn’t considered alternative funding in the standard sense, borrowing money from your family and friends is one of the easiest ways to help business owners receive extra working capital for their businesses. It could be considered the most tried-and-true option available, as owners are dealing with people they know and love, and personal relationships are solidly in place.

The caveat here is that money and personal relationships don’t always mix, and it’s critical that everyone involved communicates clearly about payment terms and expectations beforehand or else things can get messy.

  • Personal or Business Credit Cards

In order to get the funding owners need, they can always buy now and pay later by using personal and business credit cards. However, this could have a big impact on credit scores and limits, and while it is a quick fix, it’s also one of the riskier options.

Overall, the first three alternative lending options are much safer play than the friends/family and credit card route. You’re dealing with proven entities that will work with you and bring a successful track record of helping businesses meet and exceed their goals to the table.


The alternative funding space continues to grow and become accepted by mainstream business. Alternative lenders are filing for IPOs, getting backed by some of the biggest companies in the world, and reaching previously unfathomable highs in the amount of loans being provided to SMBs. American small business sentiment is higher than it has been since before the financial crisis, and the support from alternative lenders has made a significant impact in helping the economy across the country.


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