Every business owner has heard the same reply from their bankers when their loan application was rejected. I can't exactly say why your loan was rejected as there are many factors that our credit officers look at during the loan evaluation process. They fumble and stumble and try to hint to you the possible reasons but you aren't sure what went wrong.



Understand the mentality of your banker

You have been with your local bank since the start of your business and you have been happy with them until the recent rejection of your business loan. You wonder whether they have detected that times are less than rosy for you right now. When you probed for answers your banker said that he doesn't know the exact reason but it could be due to a variety of reasons. What your banker is not telling you is that he has all the information of your business and he has run the ratios and looked at your credit history and finds it lacking. But he can't tell you about it so he hems and haws and offers you a different type of bank product. Like a whole lot of use that would make to you right now.

Consider looking for another bank, one that does not know that much about you as they would have lesser information to run the ratios. That increases the probability of your loan being approved.

Understand the risk profile of your industry

Bankers are conservative people. That's because they are dealing with other people's money. They have to ensure that they are not lending funds to people who are not involved in vices like terrorism, drug trafficking, money laundering and the list goes on. Needless to say, the same goes for certain high risk countries which your company may be dealing with. These are like red flashing lights to reject your loan without even looking at your application.

Be honest about your business and personal liabilities

Nobody likes to be honest especially when it comes to revealing the truth about the amount of liabilities they have. It is an issue of ego and most people would conveniently miss out a few details about their personal loans or the amounts. If you want to have your loan approved, help yourself by telling your banker the truth. Whatever details you leave out now would surface later on in the credit bureau report. The report has an extensive list of details on the credit facilities that you have with the banks in the country and some of which could be detrimental to your loan application.

Prepare for the interviews

Whether the interview is going to take place over the phone or in your banker's office, be prepared for it. Being prepared means having a brief description of your company's history, principal activities and most importantly what you intend to use the funds for. Suit up if you are meeting the banker as you need to portray the aura of success and confidence. After all you could be walking away with a large sum with no collateral save for your personal guarantee.