Top 10 reasons banks won’t loan money to your business











Do you know the difference between education and experience?

Education is when you read the fine print;

experience is what you get when you don’t.

Pete Seeger




Denver Business Journal  David Goldin, Contributing Writer  Nov 5, 2014, 12:31pm MST

It’s nearly impossible these days to keep a small business running with money drawn from your own pocket. Whether it’s purchasing inventory, hiring new employees, or opening additional locations, any type of expansion requires extra working capital.

The fact that it’s becoming increasingly difficult for small business owners to secure funding through a bank makes it even more challenging. There are a variety of reasons why banks are declining loan requests from small business owners.

We’ve broken down the top 10 reasons, followed by some thoughts on why these reasons don’t apply to alternative financing.

See Also

1. Lack of consistent cash flow

Banks tend to favor SMBs that have a steady revenue stream and consistent cash flow coming in every month. SMBs that can’t demonstrate this consistency are denied loans significantly more often than not.

2. Insufficient collateral

For SMBs, lack of sufficient collateral excludes them from obtaining financing because loan applications usually include a request for a viable piece of collateral in order to complete the transaction and receive funding. That’s not a problem for large businesses that own property or other big ticket assets, but it can be an insurmountable hurdle for SMBs.

3. Debt-to-income ratio

Banks are wary of lending to businesses that have existing debt with other lenders. In many cases, they won’t even consider lending to a business that has already taken financing. Since many SMB owners seek credit from multiple sources, especially during the start-up phase, this can be a major strike against them when applying for a loan or cash advance from a traditional bank.

4. Customer concentrations

Banks are often skeptical of businesses that report a significant bulk of their sales from only a select number of customers. Lenders, in general, like to see diversity in a business’s clientele as opposed to the same customers. For example, a local pub or restaurant that relies mainly on its “regulars” for steady income can present a perception problem with traditional banks.

5. Insufficient credit

In the wake of the recent recession, banks have increased their credit score standards, but many small businesses have credit scores that are still suffering from the aftermath of the financial crisis. In most cases, a business will need a credit score of at least 720 even to get a foot in the door for a bank loan. That’s too high for many SMBs.

6. Personal guarantees

Personal guarantees from business owners are requirements from banks, but that also makes the owner personally responsible for paying back the loan. That’s a precarious position for those struggling to stay on top of expenses every month.

7. Insufficient operating history

Banks give preferential treatment to businesses with lengthy and significant track records. After all, they don’t want to fund a business that has been operating for a while, but hasn’t sustained a certain amount of success and credibility. Banks demand a solid track record of generating profits over a specific time period in order to receive funding. Without that solid operating history, a SMB will make likely be rejected for a loan.

8. Economic concerns

No pun intended, but banks are always concerned with their own interests. They simply will not lend money to a business if they feel that the current economic conditions are unfavorable for getting the money back in a timely manner. This puts an unfair burden on SMBs to maintain revenues and keep costs down when the economy takes a bad turn.

9. Insufficient management team

Banks will reject SMBs that don’t have strong top-level leadership with a noticeable chain of command, since that can bring up concerns about the organizational integrity and long-term success of a business.

10. Weakening industry

Operating an SMB in an industry that a bank deems as “weak” or in decline will hinder the chances of receiving financing from a traditional bank.

Consider alternative financing

So, when a bank declines a loan request for your small business, what is the solution? One of the best available options is alternative funding.

Alternative funding, which comes from non-bank entities that specialize in lending funds to small- and medium-sized businesses, exists in several different solutions that allow lenders to create flexible terms for owners who need access to capital for growing businesses. These are some options:

Merchant cash advances

This is a business cash advance program that provides you with a sum of capital by purchasing a set amount of your future credit/debit card sales. Instead of making fixed monthly payments, MCAs work with your natural cash flow, automatically deducting a small percentage from your credit/debit card sales until the cash advance is repaid in full.

Business loans

These non-traditional loans are designed to make financing accessible to a range of small businesses. Loans in the industry vary in amount. For example, a mom-and-pop shop may need $5,000 or a rapidly expanding business might be looking for $500,000.

Inventory purchase programs

Designed to help small businesses with one of their most critical and basic expenses: inventory. This innovative inventory-financing program lets merchants buy inventory at no upfront cost, while an alternative lender will fund 100 percent of the purchase order.

Family and friends

Although it isn’t considered alternative funding in the standard sense, borrowing money from your family and friends is one of the easiest ways to help business owners receive extra working capital for their businesses. It could be considered the most tried-and-true option available, as owners are dealing with people they know and love, and personal relationships are solidly in place.

The caveat here is that money and personal relationships don’t always mix, and it’s critical that everyone involved communicates clearly about payment terms and expectations beforehand or else things can get messy.

Personal or business credit cards

In order to get the funding owners need, they can always buy now and pay later by using personal and business credit cards. However, this could have a big impact on credit scores and limits, and while it is a quick fix, it’s also one of the riskier options.

Overall, the first three alternative lending options are much safer play than the friends/family and credit card route. You’re dealing with proven entities that will work with you and bring a successful track record of helping businesses meet and exceed their goals to the table.

The alternative funding space continues to grow and become accepted by mainstream business. Alternative lenders are filing for IPOs, getting backed by some of the biggest companies in the world, and reaching previously unfathomable highs in the amount of loans being provided to SMBs. American small business sentiment is higher than it has been since before the financial crisis, and the support from alternative lenders has made a significant impact in helping the economy across the country.

David Goldin is CEO of New York-based AmeriMerchant, a provider of working capital solutions for businesses, including merchant cash advances and business loans. Goldin is also a founding member and president of the North American Merchant Advance Association, a trade association for the merchant cash advance industry.





A little about me and my expertise – video


commercial / investment real estate / Arizona land specialist


I go to great heights to sell or purchase your land,_Arizona_history


Facts of Arizona – year 1848 to 2013



Feel free to contact Walter regarding any of these stories, the current market, distressed commercial real estate opportunities and needs, your property or your Investment Needs for Comercial Investment Properties in Phoenix.



View my listings and my profile at:


What is a CCIM?


Join My Mailing List



Please go to my web-site and get all the newsflashes and updates in Commercial Investment Real Estate in Phoenix and Commercial Investment Properties in Phoenix daily



Check out my professional profile and connect with me on LinkedIn.


Follow me on Facebook:


Follow me on Twitter:



Follow Me on Google+


Walter Unger CCIM, CCSS, CCLS

I am a successful Commercial Investment Real Estate Broker in Arizona now for 20 years and I worked with banks and their commercial REO properties for 3 years. I am also a commercial landspecialist in Phoenix and a Landspecialist in Arizona.





we are at on the a rise of the cycle in Commercial Real Estate.  so there is only one way and it’s called we are going up and now is the time for you to expand, upgrade or invest in Commercial Properties in Phoenix.  The prices on deals I may get you will not be around forever.


If you have any questions about Commercial Investment Properties in Phoenix or Commercial Investment Properties in Arizona,  I will gladly sit down with you and share my expertise and my professional opinion in Commercial Properties in Phoenix or Commercial Properties in Arizona with you.Obviously I am also in this to make money, but it could be a win-win situation for all of us. 


Please reply by e-mail or call me on my cell 520-975-5207 or Office:480-948-5554


Thank You


Walter Unger CCIM

Associate Broker,  West USA Commercial Real Estate Advisers

7077 E. Marilyn Road, Bldg 4, Suite 130

Scottsdale, AZ 85254

Cell:      520-975-5207   

Office :  480-948-5554

Fax: (480-658-1172


View my listings and my profile at:             


a little about me and my expertise – video


commercial-investment real estate adviser-land specialist


What is a CCIM?



Delivering the New Standard of Excellence in Commercial Real Estate 


  • Commercial Real Estate Scottsdale
  • Commercial Real Estate Phoenix
  • Commercial Real Estate Arizona
  • Commercial Investment Properties Phoenix
  • Commercial Investment Properties Scottsdale
  • Commercial Investment Properties Arizona
  • Land Specialist Arizona
  • Arizona Land Specialist
  • Land Specialist Phoenix
  • Phoenix Land Specialist
  • Land For Sale Phoenix
  • Land for sale Arizona
  • Commercial Properties For Sale Phoenix
  • Commercial Real Estate Sales Phoenix
  • Commercial Properties Phoenix
  • Commercial Properties Arizona
  • Commercial Land Specialist Phoenix
  • Commercial Land Phoenix
  • Multifamily land Phoenix
  • Retail Land Phoenix
  • Industrial Land Phoenix
  • Land Commercial Phoenix
  • Land Retail Phoenix
  • Land Industrial Phoenix
  • Land Multifamily Phoenix
  • Industrial Land for sale Phoenix
  • Land Industrial
  • P
  • Investment Real Estate


Disclaimer of Liability

The information in this blog-newsletter is for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided “as is,” with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.