{"id":4673,"date":"2021-10-25T05:04:06","date_gmt":"2021-10-25T05:04:06","guid":{"rendered":"https:\/\/www.indifi.com\/blog\/?p=4673"},"modified":"2024-02-29T10:33:05","modified_gmt":"2024-02-29T10:33:05","slug":"reasons-indian-businesses-faces-rejection-for-small-business-loans","status":"publish","type":"post","link":"https:\/\/www.indifi.com\/blog\/reasons-indian-businesses-faces-rejection-for-small-business-loans\/","title":{"rendered":"Reasons Indian Businesses Faces Rejection for Small Business Loans"},"content":{"rendered":"\n<figure class=\"wp-block-image size-large is-resized\"><img decoding=\"async\" loading=\"lazy\" src=\"https:\/\/www.indifi.com\/blog\/wp-content\/uploads\/2021\/10\/business-loan-rejection.jpg\" alt=\"\" class=\"wp-image-4675\" width=\"506\" height=\"382\"\/><\/figure>\n\n\n\n<p>An entrepreneurial journey is a multifaceted one. One of the many considerations an entrepreneur must make is that of funding the venture. <\/p>\n\n\n\n<p>While avenues for funding startups, small and medium enterprises are many, the Federal Reserve\u2019s Small Business Credit Survey conducted in 2021 shows that the acceptance rates for business loans are a mere 57%. Here are few ways to <a href=\"https:\/\/www.indifi.com\/blog\/different-ways-to-raise-funds-for-business\/\">raise funds for businesses<\/a>.<\/p>\n\n\n\n<p>Bank lending is usually the most sought out option for small businesses to fund their ventures. Given this, we consider the reasons behind <a href=\"https:\/\/www.indifi.com\/business-loan\" title=\"https:\/\/www.indifi.com\/business-loan\" target=\"_blank\" rel=\"noreferrer noopener\">business loan<\/a> rejections and what you could do to up your chances of not being met with one.&nbsp;<\/p>\n\n\n\n<p>Also Read: <a href=\"https:\/\/www.indifi.com\/blog\/factors-affecting-eligibility-small-business-loans\/\" target=\"_blank\" rel=\"noreferrer noopener\" title=\"https:\/\/www.indifi.com\/blog\/factors-affecting-eligibility-small-business-loans\/\">Factors That Affect The Eligibility For Small Business Loans<\/a><\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_67_1 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title \" >Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.indifi.com\/blog\/reasons-indian-businesses-faces-rejection-for-small-business-loans\/#1_Credit_Score\" title=\"1 Credit Score\">1 Credit Score<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.indifi.com\/blog\/reasons-indian-businesses-faces-rejection-for-small-business-loans\/#2_Leverage_The_Degree_of_Debt\" title=\"2 Leverage The Degree of Debt\">2 Leverage The Degree of Debt<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.indifi.com\/blog\/reasons-indian-businesses-faces-rejection-for-small-business-loans\/#3_Turnover\" title=\"3 Turnover\">3 Turnover<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.indifi.com\/blog\/reasons-indian-businesses-faces-rejection-for-small-business-loans\/#4_Cash_Flow\" title=\"4 Cash Flow\">4 Cash Flow<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.indifi.com\/blog\/reasons-indian-businesses-faces-rejection-for-small-business-loans\/#5_Collateral\" title=\"5 Collateral\">5 Collateral<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.indifi.com\/blog\/reasons-indian-businesses-faces-rejection-for-small-business-loans\/#6_Life_Of_The_Business\" title=\"6 Life Of The Business\">6 Life Of The Business<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.indifi.com\/blog\/reasons-indian-businesses-faces-rejection-for-small-business-loans\/#7_Business_Planning\" title=\"7 Business Planning\">7 Business Planning<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/www.indifi.com\/blog\/reasons-indian-businesses-faces-rejection-for-small-business-loans\/#8_Purpose_Of_The_Loan\" title=\"8 Purpose Of The Loan\">8 Purpose Of The Loan<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/www.indifi.com\/blog\/reasons-indian-businesses-faces-rejection-for-small-business-loans\/#9_Industry_Of_The_Operation\" title=\"9 Industry Of The Operation\">9 Industry Of The Operation<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/www.indifi.com\/blog\/reasons-indian-businesses-faces-rejection-for-small-business-loans\/#10_Loan_Amount\" title=\"10 Loan Amount\">10 Loan Amount<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/www.indifi.com\/blog\/reasons-indian-businesses-faces-rejection-for-small-business-loans\/#11_The_Wrong_Lender\" title=\"11 The Wrong Lender\">11 The Wrong Lender<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/www.indifi.com\/blog\/reasons-indian-businesses-faces-rejection-for-small-business-loans\/#12_Failing_To_Meet_The_Criteria\" title=\"12 Failing To Meet The Criteria\">12 Failing To Meet The Criteria<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"1_Credit_Score\"><\/span>1 Credit Score<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>According to Fundera, 36% of the small businesses denied a portion of the business loan applied for due to a poor credit score. A benchmark rate for a credit score is usually 30%; however, it may differ from lender to lender. Here are 5 pro tips to <a href=\"https:\/\/www.indifi.com\/blog\/fixing-poor-cibil\/\">fix poor Cibil score<\/a>.<\/p>\n\n\n\n<p>This makes it essential to check your credit score with a reputed, credible credit rating agency. It is possible to have a low credit score associated with a successful venture. It is possible to take specific basic steps after assessing the score to improve it.\u00a0<\/p>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter size-large\"><a href=\"https:\/\/client.indifi.com\/customer-login?source=creditScore&amp;utm_medium=blog\"><img decoding=\"async\" loading=\"lazy\" width=\"500\" height=\"91\" src=\"https:\/\/www.indifi.com\/blog\/wp-content\/uploads\/2024\/01\/Check-Credit-Score-for-Free-500x91.jpg\" alt=\"\" class=\"wp-image-6697\" srcset=\"https:\/\/www.indifi.com\/blog\/wp-content\/uploads\/2024\/01\/Check-Credit-Score-for-Free-500x91.jpg 500w, https:\/\/www.indifi.com\/blog\/wp-content\/uploads\/2024\/01\/Check-Credit-Score-for-Free.jpg 716w\" sizes=\"(max-width: 500px) 100vw, 500px\" \/><\/a><\/figure><\/div>\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"2_Leverage_The_Degree_of_Debt\"><\/span>2 Leverage The Degree of Debt<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Although leverage is a cost-reducing financing tool, too much leverage may affect a business&#8217; propensity to lend to your venture since it implies pre-existing debt obligations. Here are few factors that <a href=\"https:\/\/www.indifi.com\/blog\/factors-that-affects-business-loan-application\/\">affect application of business loan.<\/a><\/p>\n\n\n\n<p>Considering a credit score of 30%, potential lenders typically consider it safe to lend if you use no more than 30% of the total credit available to you. <\/p>\n\n\n\n<p>Paying off previous debts, borrowings, and business loans may help, which is essential in improving your credit score.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"3_Turnover\"><\/span>3 Turnover<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Usually, business loans put in a condition of an inevitable, necessary turnover a business must generate quarterly, half-yearly, or yearly. A benchmark amount of turnover attests to the viability of the enterprise.&nbsp;<\/p>\n\n\n\n<p>Also Read: <a href=\"https:\/\/www.indifi.com\/blog\/5-best-and-fast-small-business-loans\/\" target=\"_blank\" rel=\"noreferrer noopener\" title=\"https:\/\/www.indifi.com\/blog\/5-best-and-fast-small-business-loans\/\">5 Best And Fast Small-Business Loans<\/a><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"4_Cash_Flow\"><\/span>4 Cash Flow<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Assessing the lender&#8217;s creditworthiness usually entails conducting due diligence on certain documents representing the venture&#8217;s financials. Some of these may be to establish the record of cash flow maintenance. <\/p>\n\n\n\n<p>Lack of cash flow may appear as an inability to repay the loan timely. Cash flows reflect the ability to meet other expenses and liabilities once operating expenses are covered and signify the firm&#8217;s liquidity position. Here are few ways through which you can <a href=\"https:\/\/www.indifi.com\/blog\/how-to-repay-business-loans-adopt-these-methods\/\">repay business loans<\/a>.<\/p>\n\n\n\n<p>Although sufficient liquidity can also be proven through other short-term assets in place, cash flow serves as an indicator of liquidity since cash is the most liquid asset an enterprise can possess.<\/p>\n\n\n\n<p> Cash flows can be improved by maintaining proper invoicing, setting up emergency funds, and devising wise short-term investment strategies that regularly bring in returns in the intermediate periods.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"5_Collateral\"><\/span>5 Collateral<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Investors usually look for tangible assets as securities for providing business loans. These assets serve as guarantees in case a venture fails to repay its business loan.<\/p>\n\n\n\n<div class=\"wp-block-buttons is-content-justification-center is-layout-flex wp-container-1\">\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link wp-element-button\" href=\"https:\/\/www.indifi.com\/collateral-free-business-loans-india\"><strong>Apply for Collateral Free Business Loans<\/strong><\/a><\/div>\n<\/div>\n\n\n\n<p> The lender can then recover the lent amount by liquidating assets serving as collateral. If a business does not have its assets, the entrepreneur may have to offer personal assets as collateral. <\/p>\n\n\n\n<p>In the case of collateral absence, it seems viable to look up unsecured business loans. However, they usually come with higher rates of interest.&nbsp;<\/p>\n\n\n\n<p>Also Read: <a href=\"https:\/\/www.indifi.com\/blog\/need-money-fast-4-options-for-small-business-owners\/\" target=\"_blank\" rel=\"noreferrer noopener\">Need Money Fast? 4 Options For Small Business Owners<\/a><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"6_Life_Of_The_Business\"><\/span>6 Life Of The Business<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Availing a business loan involves establishing creditworthiness and repayment capacity. Having a decent presence in the chosen industry within a niche hints at the continued operations of your business. <\/p>\n\n\n\n<p>In addition, sanctioning business loans require due diligence to be conducted on the part of lenders. If a venture cannot produce previous records that allow lenders to undertake the necessary analysis, business loans may be denied to the venture. <\/p>\n\n\n\n<p>The newer the business, the riskier it appears to the lender to provide funds.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"7_Business_Planning\"><\/span>7 Business Planning<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>A business plan showcases a spirit on the part of the entrepreneur to continue the business. Business loan providers look at strategies to continue the business indefinitely since the lack of one puts repayment obligations into question at any juncture.<\/p>\n\n\n\n<div class=\"wp-block-buttons is-content-justification-center is-layout-flex wp-container-2\">\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link wp-element-button\" href=\"https:\/\/www.indifi.com\/business-loan\/know-your-pan\"><strong>Apply for Business Plan<\/strong><\/a><\/div>\n<\/div>\n\n\n\n<p> Assessing market factors, taking prudential decisions based on uncertainties, and chalking out a path for the venture to sustain may sanction a business loan for your enterprise. <\/p>\n\n\n\n<p>The plan must appear promising to the lender and generate enough returns to serve as an incentive to be associated with the business.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"8_Purpose_Of_The_Loan\"><\/span>8 Purpose Of The Loan<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Many facets are associated with an enterprise that requires funding\u2014the purpose of business loan matters when making the application. Lack of clarity on this may cause a lender to offer immediate rejection on the business loan. It is crucial to state the purpose of lending clearly. <\/p>\n\n\n\n<p>Business loans are usually available for financing expansion, purchasing essential equipment, and developing a new product. It is equally important to ensure that you apply under the correct type of loan with clarity regarding the purpose.<\/p>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter size-large\"><a href=\"https:\/\/www.indifi.com\/business-loan\"><img decoding=\"async\" loading=\"lazy\" width=\"500\" height=\"91\" src=\"https:\/\/www.indifi.com\/blog\/wp-content\/uploads\/2024\/01\/Instant-Business-Loan-in-3-Days-500x91.jpg\" alt=\"Instant Business loans for Startups\" class=\"wp-image-6695\" srcset=\"https:\/\/www.indifi.com\/blog\/wp-content\/uploads\/2024\/01\/Instant-Business-Loan-in-3-Days-500x91.jpg 500w, https:\/\/www.indifi.com\/blog\/wp-content\/uploads\/2024\/01\/Instant-Business-Loan-in-3-Days.jpg 716w\" sizes=\"(max-width: 500px) 100vw, 500px\" \/><\/a><\/figure><\/div>\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"9_Industry_Of_The_Operation\"><\/span>9 Industry Of The Operation<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Economic and market factors often affect investors\u2019 decisions. Specific agriculture-based sectors, manufacturing industries, or specifically restaurants are usually deemed risky by traditional lenders. <\/p>\n\n\n\n<p>If your business loan application gets rejected on the pretext of operating within a complex industry, you can approach an industry-specific lender.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"10_Loan_Amount\"><\/span>10 Loan Amount<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Usually, the more money applied for, the greater the chances of a business loan approval. This happens as traditional lenders don&#8217;t consider the costs of serving lower amounts of loans worth it. <\/p>\n\n\n\n<p>In this case, you can either revise your valuation and ask for a more significant amount or approach other lending sources.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"11_The_Wrong_Lender\"><\/span>11 The Wrong Lender<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Getting your business loan denied from one lender doesn\u2019t mean it will be denied by all. Generally, traditional lenders like banks have higher eligibility requirements. <\/p>\n\n\n\n<p>If your business loan was rejected at a bank, you can consider alternative&nbsp;<a href=\"https:\/\/www.indifi.com\/business-loan\" target=\"_blank\" rel=\"noreferrer noopener\">business loan<\/a>&nbsp;lenders like Indifi. With easy eligibility and quick processing, you are more likely to receive the required funding at digital lending platforms.<\/p>\n\n\n\n<p>Furthermore, digital lenders like Indifi offer several benefits compared to traditional banks. A wide array of business funding options, quick processing, minimal paperwork, competitive interest rates, flexible repayment schedules\u200a\u2014\u200amake digital lenders the preferred choice for small businesses and startups.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"12_Failing_To_Meet_The_Criteria\"><\/span>12 Failing To Meet The Criteria<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Failing to meet the eligibility criteria set by a lender can lead to your business loan application being denied. Each lender establishes distinct requirements concerning credit scores, annual revenue, business tenure, and other pertinent factors.<\/p>\n\n\n\n<p>Before initiating the application process, it is crucial to thoroughly examine the eligibility criteria established by potential lenders. <\/p>\n\n\n\n<p>If you find that you do not meet the specified criteria, exploring alternative lending options may be advisable. However, if you are determined to collaborate with a particular lender, prioritize enhancing your business&#8217;s financial standing to meet the necessary qualifications for the loan.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>An entrepreneurial journey is a multifaceted one. One of the many considerations an entrepreneur must make is that of funding the venture. While avenues for funding startups, small and medium enterprises are many, the Federal Reserve\u2019s Small Business Credit Survey conducted in 2021 shows that the acceptance rates for business loans are a mere 57%. [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":4675,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[141],"tags":[],"_links":{"self":[{"href":"https:\/\/www.indifi.com\/blog\/wp-json\/wp\/v2\/posts\/4673"}],"collection":[{"href":"https:\/\/www.indifi.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.indifi.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.indifi.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.indifi.com\/blog\/wp-json\/wp\/v2\/comments?post=4673"}],"version-history":[{"count":10,"href":"https:\/\/www.indifi.com\/blog\/wp-json\/wp\/v2\/posts\/4673\/revisions"}],"predecessor-version":[{"id":7920,"href":"https:\/\/www.indifi.com\/blog\/wp-json\/wp\/v2\/posts\/4673\/revisions\/7920"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.indifi.com\/blog\/wp-json\/wp\/v2\/media\/4675"}],"wp:attachment":[{"href":"https:\/\/www.indifi.com\/blog\/wp-json\/wp\/v2\/media?parent=4673"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.indifi.com\/blog\/wp-json\/wp\/v2\/categories?post=4673"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.indifi.com\/blog\/wp-json\/wp\/v2\/tags?post=4673"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}