My loan was denied. Why?
In this series of 19 short articles, StratPad’s founder discusses the fundamentals of starting and running a small business.
Today he tells us the number one reason why loan applications are denied.
Q: My loan was denied. Why?
A: The number one reason that loan applications are denied is because the business plan doesn’t include a statement of cash flows or that the cash flow projections are very poorly done. And I think this is one of the biggest scare factors of small businesses who are thinking about building their business plan.
I would just say to pause right there. You do not need to be a financial expert in order to create a business plan, but you do need to get a financial expert. So go and get a bookkeeper, go get an accountant, and have them help you work through the statement of cash flows and the projections, and that will increase the likelihood of you getting your loan by something in the neighborhood of a factor of 5 or 7 or higher.