Factors that can Affect Companies from Getting Forbrukslån


Small business debentures are not easy to get or secure. Listed below are some things that may be preventing individuals from getting the money they need to run their company’s operation – bad credit history, as well as low cash flow, can prevent small and startup enterprises from securing necessary loans.

Before owners apply for these types of debentures, they need to make sure their financial documents are in order, as well as understand when financial institutions like traditional banks, credit unions, or lending firms need them. A sound business plan makes the company attractive to lending firms, providing owners with a better chance of securing a debenture.

These loans can be very important when launching startups or expanding existing companies, with money usually used to secure inventories, purchase tools and equipment, hire workers, cover a host of other expenses, and rent operational spaces. But these debentures can be pretty hard for new organizations to get. People need to be aware of these roadblocks that can keep individuals from getting approved for small business loans.

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Bad credit history

These reports are considered one of the best tools lending firms use to find out whether the borrower is credible or not. If the report shows a lack of past diligence when it comes to paying back different debts, the borrower might be rejected for a debenture.

According to experts who have worked with tons of small or startup enterprises, a lot of them have bad credit because of illnesses, divorce, or other unexpected or extenuating circumstances. There are times when very good individuals have credit problems for reasons out of their control.

Unfortunately, that is a real barrier when it comes to entering the world of small and startup enterprises. It is pretty hard to qualify for these types of loans with credit scores lower than 700. A score of 720 looks like the magic number, above which a person’s likelihood increases drastically and below which it decreases drastically. If the score is under 700, experts recommend that people focus on fixing it, if they can, as soon as possible.

Start by checking enterprise and personal scores to make sure that they are accurate. If borrowers find any errors, they need to correct these errors before starting the debenture application process. Borrowers can order free credit reports every year from credit-reporting agencies. People need to contact these agencies for accurate inquiries to check credit scores.

Additionally, people need to build a strong personal score as well as drive down debts before applying for business loans. The better a person’s personal finances are, the more likely they are to get approved for excellent debenture options. A lot of these credit needs some form of down payment, and it is usually varied depending on the borrower’s financial history, as well as the collateral put up for the debenture.

Based on this info, most credits range from zero percent to twenty percent down payment for the debenture. Suppose the credit is still far from ideal after the borrower takes these simple steps. In that case, they need to consider a non-conventional financing alternative – which tends to place less importance on scores – before giving up on availing of loans. Individuals and angel investors interested in backing any business in exchange for shares in eventual revenues can be very cautious to help get the business off the ground.

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Limited cash flow

Cash flow is the measure of how much money a company has on hand to pay back its loans. It is usually the first thing financial institutions look at when gauging the enterprise’s financial health. Insufficient cash flow is a problem that most lending firms cannot afford to overlook.

That is why it is the first thing companies need to consider to find out if they can afford a debenture. Thinking carefully through the cash-flow equation is like preventive medicine for the company. People can wait until their organizations get sick, or they can do things to help them prevent it from getting worse.

One of the preventive measures experts recommend is to calculate the cash flow at least every three months. If companies take this step, they may be able to optimize their cash flow before getting help from potential lending firms.

To find out how big of a credit payment a person or organization can afford, divide the net operating income by the company’s total annual debts to calculate its debt service coverage ratio. Individuals will have a ratio of one if their cash flow is equal to their monthly debenture payments.

Though a ratio of one is acceptable, lending organizations prefer a ratio of 1.35. It demonstrates they have a buffer built into their finances. Suppose the organization is not sure of its current financial capacity or position. In that case, it can talk with financial planners to help them gain the perspective the company needs and create action plans to address any issues in specific areas.

Lack of solid business plans

Having plans and sticking to them is more attractive compared to spontaneity in this industry. It also provides individuals with a good chance of getting business loans. Financial institutions want to see that organizations have well-thought-out plans for their enterprise.

Applying for debentures with no plans or with half-baked ones will not bode well. It is not uncommon for small or startup organizations not to have formal plans – or any plans at all – but they will still need to put in the work and time to develop a comprehensive plan before ever walking into the financial institution’s office.

If an organization does not have a documented plan with financial projections and information, its chances of receiving the significant debenture they want will dwindle. Standard business plans include summaries of the company, products, financials, and market.

Suppose the business is not sure its plan is persuasive enough to get the attention of lenders. In that case, they can consider looking for good advice from business plan specialists who can review it and offer good or bad feedback. Individuals should also be prepared to explain how they plan to use the funds the company wants to borrow.