It can be really discouraging to have one or more applications for finance rejected, and not only that – it can harm your chances of lending from other financial institutions too. Always check the eligibility criteria, and don’t apply unless you know you tick all the boxes. Different lenders have different criteria, so shop around to find the right lender for you who is most likely to offer you a loan.

There are many reasons why a finance application isn’t approved – it could be a basic issue with paperwork, or the lender may think your business is too much of a risk. Many people are confused as to why their application was rejected, and it’s important to find out the exact reason from the bank. Here are some of the most common reasons why business loans are rejected.

Bad Credit History

There may be something in your personal or business credit history which has flagged up and caused the lender to be cautious. It’s a good idea to find out your credit score and get a copy of your credit rating before applying for any type of loan. There are various steps you can take to improve your credit score, and sometimes these small actions can make a big difference.

Cash Flow Issues

All businesses have ups and downs, and you may have seasonal fluctuations in revenue. However, if you have ongoing cash flow problems and spend a lot of time in an overdraft, this can signal that you can’t yet manage loan repayments. Finance is often refused if lenders don’t believe a business is in a strong financial situation.

Short Trading History

Because banks are being extremely cautious and limiting credit at the moment, they are not considering start-ups or fairly new businesses. They want to see years of financial records, so if you’ve only been in business for a year or two then this could be the reason why the lender has considered you as a risky investment.

Just because you’ve been rejected by the mainstream banks doesn’t mean you no longer have access to finance. There are many other options to explore, even if you are have a short trading history or an adverse credit history. Talk to our alternative finance advisors today to discuss the options open to you and your business.

The post How to Make Sure your Finance Application Isn’t Rejected appeared first on Genie Lending: Business Loan Alternative Finance Specialists.

We’ve put together this useful short guide to the pros and cons of alternative finance options and traditional bank loans.

Alternative finance options

Because there are so many different types of alternative finance available, it is hard to group them all together and differentiate the pros and cons. However here are some general points to note:

• Speed and efficiency – applying for an alternative finance loan is quick and efficient compared to the long process at high street banks. If time is not on your side, an alternative finance provider can help
• Specialised providers – while national banks work with a wide variety of businesses, many alternative finance providers have specialisms. This means they will understand your business model and needs better than a general financial institution
• Tailored options – banks offer standard loans and commercial mortgages, while the alternative finance sector provides a range of solutions for all types of SMEs. Find something ideal for your finance needs, from asset finance to a merchant cash advance. You may also be able to benefit from flexible repayment options.

The main downside to using this type of funding is the higher level of risk. Instead of borrowing from a large financial institution which is fully regulated and protected, you will be lending from individual investors or a group. Also, the risk is high on the side of the investors which means interest rates can be higher with some products.

Bank loan options

• Safe and predictable – a bank is the first point of call for many people to apply for a loan. It’s a safe place and you know the financial institution is accountable and credible.
• Fixed interest rates – banks have the power to offer slightly lower interest rates than other lenders for certain products, and fixed interest for the loan term. Some alternative finance providers will try and match the interest rates of the banks but it’s not always possible as it’s down to individual lenders.

While a bank loan seems like a great choice, the main con is that the majority of SMEs and start-ups will not be eligible to apply. There is a long application process with lengthy paperwork, and businesses usually have to be established and profitable with the support of historical accounts. To get a business bank loan you’ll probably also need strong credit and capital to secure the loan.

Want to find out more about your alternative finance options? Contact our commercial finance brokers today.

The post The Pros and Cons of Bank Loans & Alternative Finance appeared first on Genie Lending: Business Loan Alternative Finance Specialists.

Some businesses are set back after being rejected from a bank, and give up on finding the funding they require. Nevertheless others keep trying, and many have found suitable financial solutions from the alternative finance market. Non-bank loans are gaining popularity firstly because SMEs are being pushed into this type of lending by the banks who refuse to lend to them. Secondly, alternative finance providers can provide a wider range of finance and sometimes match the interest rates of high street banks.

What are the reasons for SMEs being refused a bank loan?

In the Close Brothers report ‘Banking on Growth: Closing the SME Funding Gap’ which is based on a survey of 1,000 financial decision makers in UK SMEs, the main reasons these small enterprises were refused finance were:

• Cash flow not strong enough
• Banks not lending to SMEs at all at this time
• Not enough capital
• Business plan not strong enough

With many high street banks not even considering SMEs for loans, or having extremely strict criteria, it is easy to see why other forms of lending have grown in popularity.

Non-bank loans: challenging traditional lending

Thankfully for start-ups and SMEs, new products have become available on the alternative finance market. Peer to peer lending, crowdfunding and asset finance allow small businesses to access vital capital in order to grow and succeed. These “non-bank loans” and unconventional forms of finance are acting as a lifeline to British start-ups which wouldn’t be able to trade without a significant cash injection.

But it’s not just snubbed SMEs who are turning to alternative finance – the market is thriving and supporting a range of businesses, investors and individuals. In 2015, it grew 84% according to Nesta, to £3.2 billion. Many alternative finance providers offer a multitude of advantages to small businesses in addition to being more accessible. The SME-friendly loans are forms of fast cash – sometimes applications can be approved and the money transferred the same day. Some forms of finance can also offer lower interest rates and more flexible repayment terms because you’re not tied to a bank.

Want to find out more about non-bank loans? Speak to our experts at Genie Lending today.

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