Loan Application Rejection
It is always quite distressing for a business owner to experience a loan rejection while sourcing for cash to support their business.
In an ideal world, enterprise realization succeeds upon access to investment opportunities, in addition to availability of funds. Most small and medium businesses (SMEs), depends mostly on banks and other monetary establishments for business finances.
It is notable to say that there is a conscious deviation from conventional lending institutions to financial digital lending platforms.
Apart from conventional banks, there is a rise of different lending platforms who are in the financial industry. It’s far remarkably easy for an individual or a business person to apply for loans in any financial lending institution in Nigeria.
Yet, the achievement of your loan application may not be automated as this relies upon on various of things. A loan application may be rejected for numerous motives, and we would highlight through them, so you can do away with them to boost your possibilities of getting a loan.
Table of Contents
Top common explanations why your loan application is rejected.
1. Terrible credit history
Do you understand when we talk about Credit history? What does it mean? I know some readers would be curious to know what it means.
Credit history is a document report of all the preceding/previous loans an applicant has applied for in the past. It takes under consideration; an evaluation of how the loan charges were paid back.
It is a primary point of focus of a lender, to make a connection with your credit history. By in so doing, the lender has information on the range of loans you’ve gotten before they continue with allotting another loan to you.
This idea might look odd due to the fact that many Nigerians won’t be familiar with the approach, specifically first-timers. It’s striking to mention that the credit score plays a tremendous function for the approval of your loan.
Preferably, while a loan is declined without a motive, you are advised to check your credit records to ensure that you don’t have any outstanding loans.
Having a knowledge of your credit score rating before applying for a loan will enlighten you if you have a negative credit or no credit in any respect.
In that case, you could be sure that your loan application can be denied due to the fact you pose a lot of risk. You can study greater about credit score in Nigeria right here and exactly what it requires.
Loan Application Rejection
2. Inadequate collateral
Financial lenders in form of banks or digital financial lending corporations are no longer persuaded to risk lending out money to businesses/agencies/persons without an accurate form of repayment.
If you decide to loan some amount of money from a bank, there may be a tendency to request for a physical possession or any equivalent asset that they can hold on to if a loan isn’t repaid eventually.
What should be done in such circumstances?
You need to create a collateral file that lists everything you could place up as collateral.
You could include each business and private belongings you own. Subsequently, you can decide to offer your property or car as a means of collateral.
Loan Application Rejection
An applicant’s earnings, account stability or declaration of account may not validate the approval of his loan. An applicant’s loan can be denied or rejected as a result of over-indebtedness or unpaid loans.
It is amazing to say that any financial lender can be able to verify when an applicant has some outstanding loans simultaneously.
Approving another loan for an indebted customer is a risky decision for the lender, and they would not be ready to take such risks.
4. Low Profits/Revenues
As it has been explained earlier, financial lending institutions are in the business of approving loans to make profits for their business.
Applications been tendered by various customers is easy to denote that their business might not own the capacity to pay off their loan. With this view, some application may not be granted.
Note: For every customer who may want to apply, in case you apply for loans which are measured to be too enormous for you or your business enterprise, the proposal can be denied.
5. Frail Marketing strategy or suggestion
Potential investors will not likely consider your loan application if you come up with a low business proposal. To make certain the approval of your loan application at submission, you just need to follow a little rule.
Ensure that your business plan is explicit and detailed. This helps your targeted investors to picture an understanding of your target clients with your research.
What makes it better is that it proves you have got a clear assertion with desires in mind, and includes a premeditated estimate of sales and income predictions.
Your business proposal also reports that asides from your proposed plan, you have a prepared resume, monetary statements, bank statements, earnings tax returns and legal documents like articles of incorporation etc.
All of those motives might not be clear to an applicant on the point of denial because they were not the conditions that they predicted.
Still, if they are always an important criterion to lenders whilst determining if they should grant a loan request or not.
It is significant for you to also carry out research before applying for a loan.
If you do not use the appropriate information concerning yourself while applying for such loans, your application can also be rejected.
Been updated with the news as they happen can also help you to be properly informed about recent developments.
Loan Application Rejection!