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.

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Cash flow funding is a solution to the problem. There are various forms of finance which can help businesses better manage their cash flow and avoid the downward spiral into debt. Alternative finance providers offer direct solutions to help companies balance the books, without high interest loans. The right cash flow funding solution depends on the type of business and its finance needs. Here are the main types of funding available for cash flow purposes.

Merchant Cash Advance

This type of finance is perfect for any business which takes card payments – shops, pubs, salons, cafes, B&Bs, car dealers. It is a fast and short term finance option for businesses, allowing them to lend cash based on their monthly turnover from debit and credit cards. If you have been taking card payments for more than four months then you are usually eligible for an immediate cash advance of up to £500,000.

Invoice Finance

Another way of raising fast funds to improve cash flow is by invoice factoring. If you need the money for the service you’ve provided sooner rather than later, an invoice financier can pay up 90% of the invoice immediately. This allows businesses to free up capital that is locked away in unpaid invoices. It shortens the billing cycle and can help you keep on top of bills and staff costs, rather than having to wait 30-60 days for invoice payments.

Asset Finance

There are always finance solutions, even if you are operating at a loss or you don’t have security to put up against a loan. Asset finance is suitable for agricultural businesses, manufacturing companies or any other organisation which has expensive assets such as machinery or equipment. The funding is borrowed against business assets, from equipment to vehicles. You can also use asset finance to fund a new essential purchase, by leasing or hire purchase with flexible payments.

Getting a grip of cash flow can be really difficult, as you know what expenses you have but often money coming in is beyond your control. Don’t suffer in silence, get in contact with Genie Finance to discuss the range of cash flow funding options.

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At Genie Lending we often provide alternative finance to shops and pubs, to improve cash flow and keep them running day to day. Here are some general tips specific to the industry which could help you get a grip on cash flow.

Don’t overstock

Keep a thorough record of everything you sell every week and every month. Do you have anything leftover which you’re struggling to shift? There’s a fine line between overstocking and ordering too little, and you’ll have to experiment to get it right. Ultimately however, you’ll probably save more money by ordering too less – don’t overstock your store room. This could free up some much needed cash rather than it sitting unwanted in the back!

Increase prices

If you’re not raising enough revenue, it may be time for a price hike. Obviously you don’t want to send your customers elsewhere, so it’s important to keep an eye on the competition and check what similar businesses are charging. Even raising prices by as little as 10p could improve your sales with little inconvenience to your loyal customers.

Shop around

There’s always a better deal to be had if you take the time to shop around for your goods. Whatever you need to buy for the business, see if you can find it cheaper elsewhere before choosing the most convenient supplier.

Merchant cash advance

If you take card payments, then your business will be eligible for a merchant cash advance, which can free up some of the income from those payments. It’s a type of short term finance which uses debit and credit card receipts as a form of security. The amount you can borrow will depend on your average monthly turnover.

Reduce labour costs

A good place to start when trying to reduce outgoings is with labour costs. Try and cut hours where you can, or work more hours yourself so you don’t need to pay as many staff.

Struggling with your cash flow? Speak to one of our experts today to see how we can help.

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Re-evaluate your invoice terms

Bring all of your incoming and outgoing invoices together to identify the problem. If customer payments don’t have to be made for 30 days, yet your supplier invoices need to be paid is 21 days, then you have nine days where you have to stay afloat on nothing. See if you can negotiate longer payment terms with your suppliers and give an incentive to clients who pay invoices early. You could go one step further and create penalties for late payments. This could bridge the gap and solve minor issues.

Increase your prices

An easy way to boost your revenue is to carry out a small price hike. If you have to invest in stock on a regular basis, a small increase can seriously improve cash flow. Of course customers are never happy with paying more, so only do this if you think the business can fend off competitors who may undercut you.

Use the business credit card

Pay for more products and services with a credit card, and you’ll get an extra 30 days to pay it off. If you’re waiting for a big payment to be transferred then this is a simple plan.

Hire an accountant

If you don’t already use the services of an accountant, now is the time for a positive investment. As financial experts they will be able to analyse cash flow and give advice for a better system which works for the business.

Apply for Finance

If you need a bigger solution to bridge an ever growing gap in cash flow, then you may need some extra help. A business loan might not be the answer, but there are a range of new ways to borrow which can instantly reduce the cash flow strain. Invoice finance and merchant cash advance solutions are perfect for helping businesses to keep running without getting into unmanageable debt.

Worried about cash flow? Talk to one of our financial advisors today.

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