How To Reduce Loan Denials When Applying For Business Credit

Reduce Loan Denials-californiashelfcorporation

Loan Killer #1 :

Your Business Seems Risky by name or by industry

Loan Deal Killer #2:

Records Consistency

Reduce Loan Denials-californiashelfcorporation

Loan Deal Killer #3:

Issues with Your EIN, SIC and NAICS Codes, Corporate Entity, and Licenses

  • To obtain funding for your company, you must first establish a legal entity (corporation or LLC).

  • In most cases, filing a corporation or forming a limited liability company (LLC) gives you more corporate integrity and limits your liability.
  • Don’t file a sole proprietorship.
  • Verify that your entity is licensed in the same state as your business address to escape needless red flags from lenders.
  • Your company must have a Federal Tax ID number, also known as an Employer Identification Number (EIN).
  • Your EIN is needed to open a bank account and create a business credit profile.

  • Verify that your company is identified with the same EIN by all state offices, banks, and trade credit vendors.
  • The IRS website also allows you to use SIC and NAICS codes.
  • Industries are categorized by SIC codes (Standard Industrial Classification) and NAICS codes (North American Industry Classification System).
  • Be honest when choosing these codes for your business.
  • If your business handles several lines of products or services, choose the least risky of the group for the NAIC or SIC code(s).
  • Make sure you have the proper business licensing for your corporation.
  • Contact State, County, and City Government offices to check if there are any required licenses and permits to operate your specific business.
  • If your business needs a business license, a permit or a professional license to operate, not obtaining it will lead to denials from lenders.

Loan Deal Killer #4:

Business Address Issues

Reduce Loan Denials-californiashelfcorporation
Reduce Loan Denials-californiashelfcorporation

Loan Deal Killer #5:

Lack of Attention to Business Phone Numbers and 411 Listings

Loan Deal Killer #6:

Non-Professional Website and Email

Reduce Loan Denials-californiashelfcorporation

Loan Deal Killer #7:

Business Bank Account Carelessness

  • When first opening the bank account, always keep the next step in mind, such as building business credit.
  • The older your company’s banking history, the greater its borrowing capacity.
  • Lenders deem the incorporation date and the continuous time in good standing as a critical measure that the company is valid. Lenders avoid companies that are dissolved or recently reinstated.
  • Lenders prefer you open a bank account in their bank. When you obtain financing, expect to open another bank account.
  • Some lenders value the incorporation date. If the amount of the loan is over $100,000, other lenders look at the day the business first opened a bank account.
  • Your bank rates your business on your balances. Higher-rated businesses are more likely to get loans.
  • When applying for bank loans, you should maintain a $10,000 average in your business bank account for a least three months to obtain a Low-5 rating.
  • This way, most conventional banks view your shelf corporation as a good underwriting risk.

  • If you do not have a low-5 rating, you can get business credit and alternative loans, but you will not be able to get a conventional loan but at least you can Reduce Loan Denials.

Loan Deal Killer #8:

Not Getting Your Personal Financial House in Order

Reduce Loan Denials-californiashelfcorporation

Loan Deal Killer #9:

No Business Credit

  • A company’s business credit is a test of its ability to pay its bills.

  • If you do not develop credit for your company, your scores will be poor or nonexistent, destroying your chances to Reduce Loan Denials.

  • To begin creating business credit, register with Business Experian and Business Equifax.
  • Business Experian will assign a Business Identification Number (BIN).
  • They will share your information with the Small Business Financial Exchange (SBFE).
  • The SBFE will share your business information with D&B.
  • D&B will issue a DUNS.
  • A PAYDEX score is calculated using your DUNS number and at least three purchase impressions.

Loan Deal Killer #10:

Poor Business Credit

Reduce Loan Denials-californiashelfcorporation