Top Reasons business loans don’t close
October 13, 2017. Today we will consider the top reasons business loans don’t close. We will review the most common reasons and how to avoid them. Applicants can get their loans closed by preventing these problems.
Not being able to Prove Ownership
Business owners sometimes have trouble proving ownership of their business. The Secretary of State often lists the Registered Agent and Officer, but does not list or clarify who the owners are. Officers to not have to be Owners of the business. Another problem is that ownership percentage is not not listed. Owners often have to provide their Articles of Incorporation or business license to prove ownership, which many times they do not have on hand.
Not being able to provide proof of the existence of the business
Some States do not require a business license to operate a business. The owner will operate the business in their personal name and say they run a business. They will not be able to get a business loan because they cannot prove the existence of the business the way Lenders require it.
Cannot prove time in Business
Businesses often begin as a Sole Proprietorship or Partnership and Incorporate later.
When this happens, the Secretary of State will only show the time in business since the time of the Incorporation. The time the Company was a Sole Proprietorship or Partnership will not be added.
For example, if a Company was Unincorporated for 3 Years and has been incorporated for 2 Years, it will only show on the Secretary of State as 2 Years Time in Business. If the Company wants credit for the full 5 years, they should provide the business licenses since it began as a Sole Proprietorship. Lenders will give the Company credit for the full 5 years.
Business Account balances are too low or overdrawn at the time of closing
After a business is approved for a business loan, their Business Checking account may be reviewed before closing. This will include a review of the current balances, the Month to Date balances, NSF’s and Overdrafts within the last 30 to 60 days. If these are too negative, the Lender may withdraw the approval. Review your balances and activity to make sure this will not impact your approval.
Cannot pass bank verification
Many business loans require a verification of the business bank account. This is often done through 3rd Party Vendors such as DecisionLogic, and Joinme. Bank verification can also be done through phone verification.
The business cannot provide all of the documentation required in the closing stipulations.
Business loans have a list of closing requirements that have to be met. If the applicant can get most of them but not all of them, they may not be able to close the loan. If you fall short in getting the Documentation required to close a business loan, talk to the Lender about what is missing. You may be able to get the remaining items waived. Another option is to provide substitute information. Many times alternatives to what was asked for may be accepted.
Avoid these problems and you stand an excellent chance of having your business loan close fast.