I was reading the results of a survey conducted by the Business Development Bank of Canada (BDC) that highlighted three main reasons why companies seeking financing were not able to obtain the loan they wanted. In my experience working with businesses to secure debt financing I agree with the reasons and would suggest an additional reason that supersedes them all.
Here are the reasons businesses were not able to obtain the financing they wanted as provided by respondents to the survey:
1. Company situation (e.g. size, number of sales, ratios, capital, level of risk)
2. Not enough personal guarantees
3. Entrepreneur did not agree with the terms (was not satisfied)
Reason number 3 was interesting as most business owners work hard to try and get a Term Sheet or a Commitment Letter from a bank or lender but then when they receive it usually do not have a point of reference for knowing whether or not what they are being offered is reasonable. Believe it or not, many businesses will use their personal mortgage interest rate as their point of reference which is a really poor context as business loans are provided on a completely different basis.
The number 1 reason I believe business loans are not approved is because borrowers are poorly prepared. Many borrowers do not know how their math compares to what a bank or lender would want to see in addition to not having the appropriate paperwork in order so that a bank or lender can easily review it.
This was the main reason behind the launching of our online tool www.mlenow.ca to help businesses prepare for the business loan they think they need and then using a unique scoring system match them up with banks or lenders that may be able to approve their request.
Getting a business loan can be easy – if you are prepared.
“The more that you read, the more things you will know. The more that you learn, the more places you’ll go.” ― Dr. Seuss
Click here to get prepared for your next business loan.