Business loan applications are sometimes declined for not enough deposits.
Businesses have used cash flow loans to a great extent in recent years to finance their businesses. The business account has limited activity or no activity in one of the most recent months.
How can your business fix being declined for a business loan for not enough deposits? There are several tips that your business can follow to get financing, either right away or in the short term. Apply below or see our FAQ Frequently asked questions below :
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FAQ Frequently asked questions on being declined for a business loan for
not having enough deposits
My business was declined for not having enough deposits. How many deposits do we need each month?
The number of deposits your business needs depends on the type of loan the business is applying for. For a merchant cash advance, 5 deposits or more per month is best. Other business loans may require more or less.
Our business had more than 5 deposits per month, so why were we still denied for not having enough deposits?
Many businesses are declined for having deposits that are transfers from other accounts or deposits that are not from the operation of the business. Those types of deposits are not considered for an approval.
Our business only has 2 or 3 larger deposits per month. How can we qualify for loans that require more deposits?
Get more deposits per month and more customers. Lenders consider a low number of deposits into a business account as higher risk because it means the business has fewer customers that it earns revenue from. Losing 1 customer will impact revenues and ability to repay a loan much more. Some businesses request their customers to make smaller, more frequent payments. This shows a steadier income which lenders consider lower risk.
How to get approved.
Talk to lenders in advance and find out if the lender has a minimum number of deposits per month needed to be approved for financing. We can direct your business to these programs so that you can apply for the right program and can get approved.
Make more deposits immediately during the rest of the month and apply at the start of the next month. A deposit to a business checking account statement is often from several customers. Retailers usually have several checks and cash from several customers, go to the bank and make 1 deposit. Instead of 1 large deposit, break the deposit into several smaller deposits over the course of 2 or 3 days.
Talk to the Merchant Cash Advance companies and ACH business loan lenders directly about being declined and ask them how you can get your business approved. As your business grows, it will add more customers. Having deposits from more customers will increase the number of deposits per month into your business account. As a result, this will make your business a better risk from the lender’s point of view. The number of customers a business has is an important part of looking at risk by lenders.
For example, restaurants have hundreds of customers per week. As a result, they will show many deposits per month. Restaurants that lose a few customers only lose a small percent of their customer base. A business that has 4 large customers loses 25% of their customer base when they lose just 1 of their customers.
If you know the deposits you make into your business checking account have multiple items, you can tell the Merchant Cash Advance company or ACH business loan company.
What are multiple items?
Multiple items means that the funds in the deposit are from more than 1 customer. If the merchant cash advance company knows this, you can get a copy of the deposit from the bank. The copy of the deposit will show the items deposited. If it is 5 items, you may get credit for 5 deposits instead of 1. You may be able to get the MCA company to change the decline to an approval. A number of ACH lenders and merchant cash advance companies are open to this.
If this does not work, ask how long you have to wait before they will consider you again. Be clear on what they want to see the next time so you will not be declined again.
Get working capital through other loans
If the options above do not work or you cannot wait, your business can consider other types of business loans. Which ones are best depend mostly on your company’s profile. Choices include:
– Monthly Term loans up to 48 months based on Tax Returns
– Accounts Receivables Financing
– Business loans based based on Real Estate or Equipment Assets.
Business loans based on real estate, equipment or accounts receivables will usually not have this requirement. Having collateral that covers the loan amount means that cash flow is not as critical. The number of customers is also not important.
Unsecured loans depend heavily on cash flow and as a result, the cash flow of the business is scrutinized much more. Businesses applying for unsecured loans should also have financial statements that show the business making money and having net income. Many businesses do not show net income and this hurts their request and also causes declines.
The SBA small business administration also has excellent resources on alternative business loans