Why applications to fund businesses are rejected

FAILURE to show that they are capable of repaying loans is one of the main reasons why applications for funding businesses are rejected by banks, experts advise.

Standard Bank head of small business enterprise Marius le Roux said on Friday that every application is assessed on merit.

He said applications were declined for various reasons, including a poor credit history, a lack of affordability as well as a lack of security, among other factors.

"Remember that banks prefer to finance operating assets and working capital, so if the business is undercapitalised it might be difficult to raise a bank loan," Le Roux. said

He said a lack of financial controls and the availability of up-to-date financial performance results, such as financial statements and management accounts, are also a barrier.

"The bank must be satisfied that the business will be able to repay the loan," Le Roux said.

"Providing a loan to a business that is unable to repay will be to the detriment of the business."

Le Roux pointed out the following tips for funding:

• Ensure you have a business plan that provides insights in the nature, need, cash flow and management of the business.
• Clean up your credit record. Before applying for a loan, do everything you possibly can to settle your old debt and clear your name.
• Ensure that you provide the bank with necessary information to enable them to make an informed decision.
• Build a relationship with your bank - having an existing relationship with the bank and a solid track record will certainly help in your efforts to secure a business loan.