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The Major Excuse Why Banks Refuses Loans To Small Businesses.

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The truth behind starting a small business is the challenges that will spring up and the obstacles that you have to overcome. Many entrepreneurs often run into issues that leave their businesses/companies in a state of jeopardy. One of the most common problems that must be encountered is appropriate financing to enhance proper and successful operation of the business.

Definitely, no one enjoys rejection. Be it a “no” from your spouse or your dream job, it sucks. Moreover, as a small growing business, you are constantly faced with the “no” answers especially when it has to do with you asking for a loan from banks without a tangible reason to back it up.

Many small business owners have constantly asked this heart-breaking question: why are small business loans turned down by banks? Let me tell you why!

First, banks don’t like starters like you. Banks termed it “HIGH RISKS”.

The meaning of the name giving to it is that there is a high possibility that something might interfere and make you incapable of paying back the loan talk more of the interest on top of it.

But if it happens that your bank thinks that offering you a loan is under the name “high risk”, that means your loan application must definitely be rejected. But you can also do something like illustrating or upholding something that diminishes the risk to a small level because there are barely few banks that would like to give loan to high risk businesses.

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The reason why banks give loan is that they make about 80% of benefits from the interest collected on every loan that is given to their customers. When customers pay their interest as required to the banks, they make more money and that is why they like to give a loan to a low customers.That is why some banks are always searching for big companies, multimillionaires and successful entrepreneur to give loans for their businesses.

To get a loan of any size you like is very easy to the banks when they find out that you are a very successful business person, it doesn’t matter whether you are a big company or private businessmen.

In some cases, banks do look for reliable and wealthy enterprises because they are seen as low risk customers. These enterprises we are talking about have shown a business that makes them money at all the time. They also have a name at their investments, which increases their level to pay back their loans to the banks.

But the reverse is the case here because you are a startup, a small business and you still have a long way to show them that your business will generate enough money to pay the loan back to the banks.

Before a bank will give you a loan, you have to show them that you are more under the name they give to some people as “HIGH RISK” ventures if not your application will be seen as a gamble game.

Don’t be discouraged with this fact, you can still source out good loaning options aside from banks because we all are in business and no one wants to intentionally go into losses.

 

About Rita Nnamani

Rita Nnamani is a passionate writer. She specializes in research writing for basic human needs. She writes on other blogs as a guest blogger.

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