It’s discouraging when a lender denies a request for a small business loan. With nearly 32 million US-based small businesses, 63% of those companies did not apply for financing in 2020 because they were afraid of a denial, according to Federal Reserve data. Out of those that did seek financing, 30% were denied and 26% only qualified for a portion of the funds they requested.

Here are five problems that could be keeping you from getting a small business loan:

1. Bad business credit: According to a National Small Business Association survey, 20% of small business owners turned down for financing due to a low credit score. Business credit details how your business has managed credit accounts in the past and if you’re likely to repay debts on time in the future. Review your business credit reports prior to applying and if needed, consult with your finance professional to make plan to build business credit moving forward.

2. Bad personal credit: Small businesses are typically closely tied to their ownership so it stands to reason that a lender may want to review how you manage your personal credit. A low person credit score could be a deal breaker for certain lenders, but you may be able to qualify for a business loan for bad credit. With these loans, higher interest rates and fees are almost a guarantee, meaning working toward improving your credit is an additional necessity.

3. Amount of time in business: It’s generally easier for established businesses to secure financing compared to startups. Denials can happen for early-stage businesses simply because there is a lack of credit history, with some even having a minimum number of years in business as a qualifier. If you need to seek funds for a newer entity, there are still options to consider. Be certain to look at the loan requirements where time in business is concerned and don’t spend time applying for loans you are ineligible to receive.

4. Insufficient cash flow: Without sufficient cash flow, your business could have issues making the monthly payments on a new loan. Limited and inconsistent cash flow is a red flag for most lenders. Improving invoicing processes can ease cash flow struggles. For our clients, we send out invoices on time to receive payments on time. We can also advise when to implement a late payment fee policy for slower payers, or provide consistent follow-up procedures for invoices showing past their due date.

5. Application errors: Business loan applications can be tedious due to the amount of paperwork lenders require. However, each piece of information and documentation is necessary for lenders to assess your risk level. Thoroughly reviewing your loan application, and double checking the details improves your chances of approval if all other criteria are met. Providing tax returns, business licenses, bank statements, and other documents requested helps remove obstacles that could prevent you from qualifying from a loan.

There are always alternatives to a traditional business loans including business credit cards, grants, and investors. To see what funding best suits your business, meet with a qualified and experienced advisor for options best suited to you.