April 11, 2019 | By Mason Roberts
When owning a small business, gaining . It is something that can throw a wrench in your plans time and time again. After all, if you do not have funding for your business, how are you expected to excel? It is a simple fact that you cannot own a business without the backing of funding, whether it comes out of your pocket, from your family and friends, or a traditional bank. This is a non-negotiable aspect of the corporate world. Business funding must be obtained.
Issues can arise when trying to gain business funding from a direct funding company, such as your application being rejected. Now what? The best way to help yourself is to figure out exactly why your application was rejected in the first place. This is a very real circumstance that can happen to all different types of people, for many underlying issues. Not being able to receive funding can end your business before it has even begun. Do not let this happen to you. Get ahead of the issue.
Here are some of the most common reasons as to why you may not be receiving the business funding you need.
1. Your Poor Credit Score
When applying to receive funding for your business, your credit score will, more often than not, be the first thing the direct funding company will look too. When reviewing your credit score, they will look to see if the number is too low. The score you must reach differs from company to company, so if you an exceptionally low score, look for direct funding companies who bend to this type of situation. Try to get your personal score up if it is not considered a strong score. If it is too low, this will lead direct funding companies to second guess trusting you with borrowed business funding, as it will have to be paid back, just as a credit card bill does. Be smart about your decision making.
If you deem your credit score the reason for your funding rejection, there are steps to take to fix this. It is not a lost cause. First, review your score. Figure out why it is so low, and what it is being used for. Try to understand why it is in the state it’s in. Once this is accomplished, you should have the information you need to figure out a plan for repair. You are not the only person who this has happened too, so do not let yourself or your dreams be defeated by this.
2. Risky Business
If you have chosen a risky business (pun intended) then receiving funding will generally be a bit harder than an industry that is more reliable. Many business ideas are not as strong as you may think and fail within the first couple of years. If you have chosen an industry such as this kind, then you may be struggling to come up with strong capital. If this is the case, figure out a way that your business can be more reliable. This will show direct funding companies that not only do you have a great business idea, but you can also be trusted to pay your debts back on time.
3. Short Time In Business
If your business has been open for only a short time period, it will be more difficult compared to others who have been in business for decades. Your business credit history, and sales coming in, simply may not be high enough. If you cannot prove to direct funding companies that your business is strong and to be relied upon, you will not receive the capital you need. For example, if your sales are low in the beginning stages of your establishment, along with a low business credit score, it will be hard for a direct funding company to agree to your borrowed asking price. This situation is another where you need to find the right direct funding company for your circumstance, as others are more lenient than some. Review your options, keeping in mind what you need to grow a successful business.
4. Not Enough Collateral
Collateral to offer to direct funding companies is an important aspect in this. In order to receive business funding, you may need to put down collateral. This is sort of an insurance policy for direct funding companies, to ensure you will make your payments. If you do not have collateral to offer, or if it is not valuable enough, you may be turned away. If this sounds like something you are going through, look to direct funding companies who not require a large amount of collateral or any at all. They may compensate for something else though, such as stricter terms or higher rates. Make sure you are okay and able to follow through with what you are committing yourself too.
5. Lack Of Cash Flow
Most direct funding companies will review your cash flow rate when applying for business funding. They need to be knowledgeable on the cash coming into your business, as well as going out. If given borrowed funding, will you be able to pay back your debts when sales are coming in and expenses are being paid out? Will you have enough left? This is something that direct funding companies need to be sure of before going further with your application. If they determine right off the bat that you do not make enough revenue to pay back your debts, as well as stay financially strong in your business, you will likely not receive the capital.
If this is the case for you, review what your earned cash is being used for. Is there something you can cut out? When determining what is necessary and what is not, do not be stubborn. This can be the difference between you receiving a career-changing amount of funding, or not. Anything that is deemed excessive, get rid of. This small task can help your business soar.
Whatever your reason may be for not receiving your business funding, you can fix it. It is not the end of the road for you. First, figure out what the issue is. Then, repair it. Grow your credit score, come up with a great business idea, and bring in an obscene amount of cash flow. You will be receiving funding in no time and become an accomplished entrepreneur in the meantime.