It can be a source of your frustration to secure financing or business loan. This is true particularly if it’s your first time to run a business and don’t have a clue on anything. So to clear things up, let me help you in understanding some of the common issues why a business loan is turned down by lenders or banks.

See to it that you make yourself aware of the following so it would not happen to you or would not happen again on your next application.

Cluelessness of the Credit Score

Being mindful of the credit score is extremely important before you apply for a loan. Your credit score can inform you a lot of things especially your odds of getting an approval.

Therefore, you can forecast whether your loan application would be approved or denied based on how financial institutions assess how much risk you bring.

Poor Cash Flow

Lenders want to ensure as well that you have the capacity to repay the loan monthly, this is on top of covering inventory, payroll, rent and several other expenses. Therefore, if you spend more than what you make each month, then something’s wrong with your cash flow that should be fixed.

One simple way to do this is by invoicing promptly, have emergency funds and get rid of unnecessary expense. Practice this habit until you fix your cash flow and build your credit.