When it comes to working capital a business bank account is required for all types of business funding, most lenders will deny your application if you provide personal bank statements instead of your business bank statements.
If you still have not opened a business bank account for your business, here are some links of online business banking institutions that allow you to open one online:
https://www.axosbank.com/Partners/Strategic-Partnerships
There are many benefits to having a business bank account, in this article, we’ll go over the top benefits of opening a business bank account for working capital & why some lenders might deny your business loan application.
Small Business Stories Podcast: Reasons Why Lenders Won’t Fund Your Business
Small to mid-sized businesses that show a significantly low cash flow & inconsistent revenue stream is likely than most to get denied for business funding. Lenders go based on the strength of the business through monthly cash flow as a means to consider your organization being high risk. Usually, three months of business bank statements with daily transactions is enough to know if you qualify for working capital.
Sometimes depending on the loan type product, some collateral is needed in applying for working capital, usually bigger organizations that own real estate and large ticket assets don’t have this issue. When it comes to smaller businesses in start-up stages it becomes more difficult because most small businesses have very little to show due to the very little time they have been in business.
Most lenders will give more incentive to businesses that show a track record of being in business for a lengthy amount of time showing an increase in growth and overall sustainability. Lenders do not want to fund start-up businesses that have not demonstrated not only a significant amount of time in business but consistent successes and credibility in the marketplace.
For the most part, all lenders are always going to be concerned with their own best interests. If they feel the current economic conditions may be heading in the wrong direction, it means it will be a higher risk and unfavorable in getting their money back.
Being in an industry that’s being disrupted by new or better products & services or technologies can have a direct impact on your business being approved for business funding. Everyone knows the story of Blockbuster & taxi cabs that ravaged by Netflix & Uber, since then most lenders are keeping a close eye on the market place and making sure the industry you’re in won’t default overall.
Over the years especially after the 2008 economic collapse, banks and most lenders have changed their credit score requirements. The unfortunate thing is that many small businesses are still suffering from the financial crisis and some lenders are not even looking at your file unless you have a minimum of at least 720 credit scores, and that is very high for most small businesses. Not all lenders are as strict as smaller firms that are willing to make you an offer with at least a 640. Best case if you don’t meet those requirements I’d suggest getting a merchant cash advance that way you can build some business credit over time.
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