How to avoid a loan denial for your business
Small business owners across America are making big mistakes that cause them to get denied for business credit. These simple tips and strategies will help your business get approved.
MIAMI - Aug. 25, 2017 - PRLog -- Are you thinking about obtaining business credit for your small business? Many small businesses are committing simple mistakes that are preventing them from getting a loan approval. Running a business is not an easy task. As a business owner you need to deal with clients, staff, operational issues, and your family. Running a business requires special skills to be able to manage all of these activities. Every area of your business is important and requires special attention. There is one area that business owners don't pay too much attention and that is cash flow management.
Cash flow management is probably one of the most important areas of your business. As a business owner you need to pay attention to financial transactions that occur at your business as much as possible. Richard Lopez is a small business loan analyst and he informs that out of ten businesses only two have monthly financial statements. This means that only 20% or less of small businesses check every month the financial status of their business. Some business loans only require the last four months of business bank statements. There is a relationship between the business bank statements and monthly financial statements that cannot be overseen. The cash flow activity that occurs every month at your business is reported on the company's bank statement. If you are not reviewing your bank statements and your financial statements you may not get approved for a loan. It's important to conduct a reconciliation on a weekly basis. Why? You don't want to wait until the end of the month to find out that your business is left with no money or a low close out balance. If you review the bank accounts you can determine what you need to do in order to maintain healthly balances. This may mean reducing expenses, entering into a payment agreement with a creditor, or increasing sales. If you treat your business with caution this demonstrates to lenders that you will treat their money in the same manner.
Numerous online lenders and merchant cash advance companies explain that businesses are getting denied for loans because they see excessive non-sufficient fund activity, negative close out balances, checks bouncing and other adverse activity on the bank statements. This may be a result of not paying attention to cash flow management. If you want to obtain business credit you need to set some time out from the day to day operations and analyze the financial activity that occurs in your business. How often should you be doing a financial check-up? This depends on the revenues of the business and the amount of transactions. If a business has only 5 deposits it requires less work than a business that has 100 deposits. Aside from the deposits you need to take into consideration the amount of withdrawals, ach, and checks that are written on a monthly basis and other factors such as accounts payables and accounts receivables. Today, there is software online that helps businesses link their bank account to obtain financial updates even on a daily basis. Performing an analysis is not only a task that small businesses need to perform, but also mid-size businesses. Analysts at Lendinero explain that even businesses that generate $200,000 per month have negative close out balances and adverse activity reporting on their bank statements. If your business cannot demonstrate to banks and lenders that you cannot manage cash flow, they will not approve your business credit request. Cash flow management is one of the most important factors that will be evaluated when you request business credit. Also, cash flow management is important in running a business. If your business is not generating a profit, you need to make some changes so your small business becomes profitable. Healthy cash flow management translates into a healthy business.
Gil Zapata, expert on small business finance
Page Updated Last on: Aug 26, 2017