Your business is growing and you have a ton of ideas to take things to the next level. Your five-year plan is on track and you are confident that success is in your sights. All you need is some extra funding and world domination is just around the corner.

Unfortunately, other business owners have been in this position, only to see their business loan application refused. It’s not a nice feeling, especially if you were counting on the money to pay for equipment, inventory, or just to get the business up and running.

Applying for a business loan is not always cut and dry. The days of eager lenders handing over cash for nothing are long gone. The banking sector took a huge hit in the wake of the global economic recession and these days, lending criteria are a lot tighter. Because of this, it is essential that you prepare for a loan application. Filling in the paperwork, submitting the application, and crossing your fingers aren’t the best ways to approach the matter. To give you a helping hand, here are six reasons why your business loan application is likely to be refused.

Poor Credit History

Have you checked your credit rating lately? If the answer is “no”, it is time to scrutinize your credit report to make sure there are no mistakes on there. It only takes one error to scupper a loan application. Fortunately, errors can be corrected.

If you do have bad credit, approach a lender that specializes in providing loans to companies with poor credit. These loans are more expensive, but if you make regular loan repayments, it will help to restore your tarnished credit rating.

Too Much Credit

Business credit cards, overdraft facilities, lines of credit at suppliers, and other types of credit all act against you, even if you don’t use them.

Lenders are wary when they see a business with a lot of accessible credit. They worry that you might get into debt in the future, which makes you a high-risk applicant.

To sort the issue, cancel unused credit cards and reduce the amount of credit you have available. This will also protect the business from fraud.

No Credit History

Is the business brand new? If so, this makes it harder to secure business loans. You are an unknown quantity. The lender will not know if you are a safe bet, so they might turn you down rather than take a risk. It is unfair, but that’s life.

Once you have been trading for 2-3 years and have built up a credit history, it will be easier to secure business funding.

You have Made Too Many Loan Applications

Be careful not to make multiple loan applications, as this will count against you with lenders.

Your Business Details are Incorrect

Simple mistakes, like writing down the wrong business address, could scupper your loan application before it even gets off the ground. Lenders check business details to make sure the loan application is not fraudulent, so don’t make any silly mistakes.

You Don’t Tick the Right Boxes

Sometimes, a lender turns down an application for no other reason than the fact the applicant doesn’t tick the right boxes. You may not be aware the lender has a policy in place, but some prefer to target specific sectors, such as tech startups or young entrepreneurs from ethnic minorities. The best way to avoid approaching the wrong lender is to do your homework or consult a financial advisor.

Do not despair if your application is turned down. There are other lenders out there, so polish your business plan and have another go.