The Real Reason Banks Decline Business Loans
For the majority of businesses the main reason they are declined bank finance is never truly understood, it is vaguely concealed in a broad explanation that never really feels justified or right.
The reason this happens is that your bank wants to keep you as a client. They have also never run a business in the big bad world and genuinely, with the very best of intentions, do not understand what it is like running your own company.
The other part that always confuses things is that you are hearing the decline reason from a third party. The lending decision is made by a credit underwriter, the decision is being communicated by your local manager.
The Popular Reasons – Not
When clients tell us the story of being declined a business loan then it is normally for one of the reasons below, all of which are not the real reason;
- Poor business plan
- Bank doesn’t understand my business
- Lack of security
- Doubts over future performance
All sound fairly feasible but the main reason is missed.
The Real Real Reason Why Banks Decline Loans
There are two main reasons why;
They Don’t Want You – Put simply, they probably don’t want your business. Don’t take this to heart, it is nothing personal and actually has a basis with some justification.
Take the world cup. How many people were calling for wholesale changes in the England team because they failed? Banks are little different. They have a bad experience and then want nothing to do with what caused it, it is wholesale change.
After a bad experience the banks want to be selective. It is this reason they probably don’t want your business, nothing personal, nothing derogatory, just the way it is.
It Is About Profit – Remember that banks are companies who want to make a profit. They have a particular target client in mind that they want to sell to, if that is not you then they may not want to do business with you. It is like any retail business, they target their most profitable profile customer and entice them. Sometimes that will not be you. This element links in with how banks credit score customer applications.
How To Change It
There is an analogy that says ‘don’t go to the butcher to buy bread’. If your bank doesn’t have an appetite to lend to you then shop elsewhere. There are lenders out there who will lend to you if the proposal stacks up. It is just that they may not be your bank, it will also help to ask your bank manager some challenging questions.
If you want to know what proposals suit what banks, or where to find the right finance for your business then give us a call on 01293 541333 and we will let you know. Don’t do the hard work yourself when we will do it for you, in the meantime you can see some different ways of financing your business on the website.
By Dave Farmer
PS – As always, please add your comments above or contact us direct with your feedback!