Top reasons that prevent businesses from closing loans
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.
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.
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 many NSF’s and overdrafts, 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 a DecisionLogic check, and Joinme. Bank verification can also be done through phone verification.
Cannot pass merchant loan closing call
The lender will often call the merchant just before closing for a merchant loan closing call. The purpose of this is to go over the terms with the merchant, get agreement and simply verify the merchant and that they want to close the loan.
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.
A new business and businesses less than 2 years old will have a hard time getting funding. There are still some options for a very short time in business that a new operation can take advantage of to get funding.
All of these reasons add up to a long list of why banks don’t lend to small business. Apply for programs that DO approve small businesses.
Frequently asked questions FAQ: The top reasons business loans don’t close
What are the main reasons businesses can’t close a loan?
Problems at closing and denials include not being able to satisfy closing requirements and
customer background checks. Other reasons include low revenues, bad credit, short time in business and type of business.
What can we do if there is a problem before closing?
Many obstacles to closing can still be overcome and the loan might still close. Possibilities include asking the lender for a lower amount. Ask them specifically what can you do to correct any closing problems and still fund the loan. Some things cannot be corrected but get them to offer solutions to you.
What business loans can we get after the banks have turned us down?
There are many alternative options your business can consider when traditional banks won’t
close the request. Contact us to review your specific situation.
Avoid these problems and you stand an excellent chance of having your business loan close fast.