Top Reasons Small Business Loan in Grand Rapids are Declined

Starting a small business in Grand Rapids can be a difficult and rewarding process at the same time. During the process, many business have to apply for a small business loan in Grand Rapids at some point in time. However, several businesses are declined for the loan. The following information explains a few of the top reasons small business loans in Grand Rapids are declined.

Bad Credit

Poor credit is one of the top reasons small business loans in Grand Rapids are declined. In any case, poor credit usually indicates that a business or borrower will not repay their debts. As a result, it's important for the individual borrowers and the business to have good credit scores. Most banks will not loan to a guarantor or a business owner with credit scores below 680.

Insufficient Collateral

Most if not all small business loans in Grand Rapids will require the borrower to have some sort of collateral. However, not every business has the right amount of collateral to support the amount of the requested loan. Another factor to consider with collateral is the price depreciation of certain collateral. Depreciation explains how collateral loses value over time and can be worth less than the amount the business owner wishes to borrow.

Problems with Cash Flow

All businesses exist to make money, regardless of the industry. As a result, when a lender sees no cash on hand, it instantly determines the business has a major cash flow problem. If a business isn't making money to start, then most banks will be unwilling to grant a small business loan in Grand Rapids with hopes that the business will eventually start generating income.

Time in Operation

Even if a business has excellent cash flow, it doesn't' t mean the lender will automatically qualify the business for a small business loan in Grand Rapids. There are several other factors that must be considered, especially how long the business has been established. The amount of time a business has been open and in operation can have a gargantuan affect on whether it will be approved for the loan.

Poor Conditions

Even when a business has amazing credit, sufficient collateral, and is managed properly; there is still a possibility it can face industry-specific problems. For instance, lenders may choose to turn down a small business loan Grand Rapids in the transportation industry if fuel costs are projected to increase. The lender may surmise that the rising costs of fuel will cause too much stress on the company and make it almost impossible for it to turn a profit and repay the loan.