Whether you are applying for a line of credit for business or personal objectives, having a rejection on your application can be very exasperating thing. Rejection on your loan request not only have a negative impact on your credit rating, but also they can prevent you from getting the much needed funding to run and grow your small business.
There are many reasons that your application for business line of credit may have been rejected, and here we are going to review some of the major issues that are rejecting your funding request to help you improve your odds of getting a business line of credit in the future.
- Bad Credit Score
When you submit an application for business line of credit, one of the major things that your lender will definitely review is your credit ratings. Your business’s credit rating is a factor that can demonstrate to your lender that you have paid back previous lines of credit fully and timely. It also give an idea to your lender that you will be able to pay it back to them if they approved you for a business line of credit.
Recent research reveals that small business owners with credit score of 720 have almost 85.5% possibility of acceptance for business line of credit easily. On the other hand, small business owners with credit score ranging between 660 and 719 have almost 58.7% acceptance possibility. Although small business owners with low prime rate of under 659 have almost 17.1% possibility of getting approved for business lines of credit.
However, if you have low or poor credit score, your business line of credit application will definitely get rejected.
- Low Monthly Sales
In the same way as checking your credit score history, small business lenders will usually compare your business’s current sales facts and stats. Regular revenue streams convince your small business lender that he will get paid back on time. In contrast, if your small business generates low revenue, they will not be convinced that you will be able to repay the line and consider you as a high risk for lending.
- Existing Credit Lines
Even if you have a prime or super prime credit rating, having an excessive amount of credit cards or other types of credit can be a warning signal for small business lenders. The precise number of appropriate credit lines will differ by business type; however most small business lenders prefer to be a position of better priority. In case your business will not accepted for a business line of credit, you will need to close smaller accounts and consolidate previous lines before apply for a line of credit again.
- Excessive Credit Report Inquiries
Hard and soft inquiries are two different types of credit inquiries. Hard inquiry takes place when a lender examine your credit background with the intention of figuring out if they lend you or not. However, on the other hand, an individual himself generally performs soft inquiry.
In case there are many hard inquiries on your credit report, this suggests your small business lender that you probably have applied for several funding programs within the last two years, and might be the reason why you are not authorized for a line of credit.
- Wrong Information on Application
If you give wrong information on your line of credit application, it’s likely that you were get rejected for funding. Information like current address, date of birth, phone number, ID and social security number are easy to overlook throughout the application process. Providing wrong information makes you look careless and unreliable to the lender, and they will reject you.