5 Barriers That Stand Between You and a Small Business Loan

As an entrepreneur, you will desperately want a small business loan to get your business offer the ground, or to expand your operations. But try as you might, there are a few barriers that are preventing you from obtaining the small business loan that is so important to you.

Let’s take a look at them and tell you what you need to do to get over the hurdles that stand in your way.

5 Barriers That Stand Between You and a Small Business Loan

Barrier #1: Poor Credit History

Is your credit history holding you back from getting a small business loan? Credit reports are tools used by lenders to determine the suitability of a buyer for a business loan. If your credit reports show a failure to make loan payments on time over the years, this can be held against you.

Many small business owners have a poor credit history because of non-business reasons such as illness, divorce settlement and other unavoidable circumstances. As a result, a lot of good people get penalized for no fault of theirs and this stops them from starting a small business.

If you have bad credit then you should opt for an alternative financing option, preferably one that does not prioritize your credit score as a factor for giving you the loan.

Barrier #2: Limited Cash Flow

A business is only as good as its cash flow. Without a positive cash flow, you don’t have a business. Cash flow shows how much cash you have for the purpose of paying the loan AND carrying out your daily business operations.  Lenders look at cash flow very closely when analyzing the health of the business.

That is why it is so very important that you should calculate your cash flow every month or every quarter and take concrete measures to optimize your cash flow before applying for a small business loan.

 Barrier #3: No Business Plan.

Do you have a business plan? You should know that lenders expect business owners to come up with a detailed and highly organized business plan. That tells them how serious the business owner really is about their venture.

But most small business owners neglect this part of starting a business. There is nothing complicated about writing a business plan, anyone could do it.

The business plan should be a simple and clear statement of what your business is all about, how you’re going to make money from it, who your target customers are, why you want the loan and how you’re going to use the loan.

Make a projection of your future earnings over the next 3, 6, 12, 18 and 24 months. Write that down in the business plan. This will give the lender an idea of how profitable your business is likely to be and whether you can be trusted to repay the loan on time.

Barrier #4: Mistakes with the Paperwork

Any lender will agree. What we hate the most is lack of professionalism from a business owner. We just hate it when a loan applicant comes to their office without the proper paperwork. This is not on and shows an utter lack of seriousness. If you’re looking to secure financing, make sure to communicate with your lender on what documents will be needed.

TIP: You must have all of the essential documentation with you when you arrive at the lender’s office. You’re not sure what’s required? Have a look at this detailed checklist from the Small Business Administration website.

 Barrier #5: Not Consulting with an Expert.

Have you gotten declined by the bank? Did their small business specialist speak with you and decide that your business isn’t worthy?
Banks operate by different rules and you can’t expect them to understand your particular industry. Besides going through us, A good idea is to speak with other business owners in similar industries and seeing what worked for them. That way you’ll have a better idea of the process and what works.

Keep in mind, alternative lenders are easier to work with, but not all are created equally. Many lenders have varying requirements. We don’t look at your business plan but rather your past performance. If you’re passionate about your business, many times that enthusiasm can transfer over to your lender.