Why are Businesses Rejected for Loans? Published May 14, 2015
Every commercial lender has its own recipe for underwriting. This depends on a multitude of factors such as type of financing, amount being funded, industry type of borrower, risk tolerance of lender, and general risk management and due diligence strategies. Tax Guard is a piece of the underwriting equation for commercial lenders of all types so it’s always of interest to us to read about the “hows” and “whys” that drive the credit decision process for lenders and borrowers alike.
The following article is by no means comprehensive, but it serves as an overview of six driving variables that help answer the question: Why are small business owners turned down for small business loans?
6 Reasons Small Businesses are Rejected for Loans
1. Bad credit or no credit
2. Lack of collateral
3. Weak cash flow
4. Lack of preparation
5. Seeking small loans
6. Risk-averse banks
Read the article in full: https://www.nerdwallet.com/blog/small-business/6-reasons-businesses-rejected-small-business-loans/
At Tax Guard, we encounter many businesses that have outstanding tax liabilities and/or missing tax return issues that need to be addressed and resolved in order to be successful in the financing process. However, for both lenders and businesses, in many cases a tax issue should not be a deal breaker alone. There are strategies that lenders can employ to ensure their credit decision is sound with respect to the tax compliance issues of a business. Please contact us with any questions about a prospect or client that you are working with to help better understand your options.