For many years, I have assisted many small business owners and real estate investors with locating the best financing options for their objectives.
Many small business loans get declined and I point to a few consistent mistakes I see more than any other,
1) Not having the financial reports for the business put together in an organized manner. Lenders are always going to want to review the past 2 or 3 years of completed business and personal tax returns and a current year profit and loss statement and balance sheet. Even now, two months into 2018, and some borrowers do not have their 2017 profit and loss and balance sheet done. Not being on top of your company financials provides a bad look to any lender. Ask for referrals of trusted accountants. The money spent for an accountant who can assist you with your quarterly financial reports could very well help greatly, resulting in lower borrowing costs.
2) Under reporting your income on tax returns – Lenders need to see the borrower and their company are making sufficient income to cover the payment the loan would require. By trying to down play your income to save on taxes, actually often ends up biting the loan applicant with a decline. The same can be said for reflecting very little cash or savings on a personal financial statement. I am surprised how many loan apps I have seen where the borrower is asking for $500k or $1mm and reflects $15k or $20k in savings after the borrower has told me they have 6 figures in savings, checking or investments. I can not stress enough the importance of showing ones cards upfront, this builds credibility from the start and improves ones odds of getting the loan request approved.
3) Not disclosing all material facts upfront – In some loan requests, we are close to loan approval when a credit check or background check comes back and something material was not disclosed previously, which results in a loan decline. I always ask my clients about any issues upfront, I can then address them head on with the lender. We have been able to get loans done to pay off tax liens, and judgments.