5 factors that keep you from getting a business loan

6 Jun 2022

There comes a time in many a business' lifecycle when additional funding is required. A business owner might use a business loan to help get operations off the ground, expand, or overcome short-term cash flow problems. But what can prevent businesses from being eligible for finance? Let's find out.

Business man signing a small business loan application after being approved

If you're considering taking out a business loan now or in the future, it's useful to be aware of some roadblocks that could prevent you from being approved. 

Fortunately, there are a variety of lenders out there today that cater for companies that have recently started trading or business owners with a less-than-perfect credit history. Nevertheless, here are 5 things that could impede your eligibility:

1. Poor credit history

You're more likely to be able to get a business loan if you have a good credit file because lenders are likely to look at your credit report when making a decision. 

If your report shows that you've got a history of missing payments, you might be declined for a business loan. Start by checking your personal and business credit scores to see if the information they contain is accurate.

Getting a business loan with bad credit

If you have bad credit, you may find it harder to be approved for finance. 

Any loan you find might come with a high-interest rate because the lender is taking on more risk by lending to you. Businesses that haven't been trading for very long – therefore haven't built up a credit history – may also find it difficult to obtain a loan. 

You can improve your credit score by paying off debts and responsibly managing your existing financial obligations. Submitting many applications can harm your credit score even more – each lender will perform a credit check that will go on your file. 

Use our business loans calculator to see what you could get, without affecting your credit score.

Business Loan Calculator

2. Limited cash flow

Your cash flow is the cash and cash equivalents that flow in and out of your business. It's often one of the first things the lender will look at when determining your business' financial health and how affordable the loan will be for you. Positive cash flow is indicative of a business's ability to meet debts and pay expenses.

There are business finance options that are designed to help businesses experiencing a cash-flow gap. For instance, seasonal businesses might find themselves in this predicament at quieter times. Many businesses experienced cash flow problems – and still are – due to the impact of the Covid-19 pandemic. 

Business loans for cash flow

3. Lack of business plan

Setting out a clear business plan and sticking to it can help you achieve financial stability, which, in turn, can make you less risky in the eyes of lenders. 

Many lenders will want to see your business plan when you apply for a loan and your credit score and any assets you're offering as security. Your business plan should include a summary of your business and details of its products and finances. 

How to make a business plan

4. Disorganisation

Being disorganised can slow down the process of getting a business loan. You'll be required to provide paperwork, and not having the right documentation could impact your ability to get finance. 

Try to get everything together in advance. The documentation you might need to provide could include your business plan, proof of security, bank statements, balance sheet and income tax returns.

5. Failure to explore the market

Have you been rejected for a loan from your business bank? If so, you're not alone. It can be harder to get a loan from a traditional lender, but did you know that there are many alternative business finance routes to explore? Here are just a few:

Merchant Cash Advances

A merchant cash advance is a type of finance that you pay back through a percentage of your customer card payments. This can make it a suitable option for retailers and other B2C companies. You don't need to provide collateral, but interest rates can be high.

Looking for finance?

Let us help you find the best financial product in the market. We will guide you through the whole process and make sure you get the best deal.

See your Funding Options

Asset Finance

If you need to buy an asset but don't have the money, you can spread the cost using asset finance. You can also lease the equipment. The loan is secured against the asset, so bear in mind that it will be repossessed if you fail to repay the loan.

Looking for finance?

Let us help you find the best financial product in the market. We will guide you through the whole process and make sure you get the best deal.

See your Funding Options

Invoice Finance

Invoice Finance enables you to unlock the money tied up in your invoices. The lender provides you with a percentage of the invoice's value quickly, helping to ensure that your business can carry on growing without being held back by negative cash flow.

Looking for finance?

Let us help you find the best financial product in the market. We will guide you through the whole process and make sure you get the best deal.

See your Funding Options

Business Credit Cards

A business card works similarly to a personal one, and it provides you with cash as and when you need it, and, as long as you meet the repayment terms, it can help you build up a good credit score. Some come with rewards such as cashback and Airmiles. 

There are many business finance options to choose from aside from "typical" business loans. You can use Funding Options to match with over 120 lenders. It's free to apply, you get expert help throughout the process, and it doesn't affect your credit score.

Looking for finance?

Let us help you find the best financial product in the market. We will guide you through the whole process and make sure you get the best deal.

See your Funding Options

Getting a business loan without collateral

If you don't have any business assets to offer as security, such as property, vehicles or machinery (or if you'd rather not secure a loan against an asset), you might be able to get an unsecured business loan. 

In unsecured business finance, lenders tend to rely more on the borrower's credit report, so it can be worth building up a positive credit history. Bear in mind that you may have to provide a personal guarantee.

Unsecured Business Loans Guide

Is my business eligible? 

If you have a business that can meet its financial obligations, yes. Whether you are a sole trader, a partnership, a limited company, or a start-up - there are many kinds of business loans available with a lender to suit every need. 

How to find a business loan

You know your business; we know business finance. Discovering the best business loans, with the most competitive rates and the ideal lender can be time-consuming and complicated. 

However, through our award-winning, innovative and data-driven platform, Funding Cloud™, we can offer speed and certainty for SMEs through a real-time, centralised and two-sided marketplace delivering instant decisions and firm offers from lenders.

Register free today with Funding Cloud™ and connect your business to lenders and partners to facilitate fast, accurate and secure funding at scale.

Find a business loan

Simon Cureton

Chief Executive Officer

Simon has been Chief Executive Officer at Funding Options since 2019, spearheading its transformation into a leading fintech with the launch of its Funding Cloud platform. Simon has over 27 years of experience in financial services, having held senior posts at some of the biggest players in the industry all over the world.

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