Reasons Why Banks Decline ‘Loan’ Request

On several occasions and daily basis, it’s been observed that Banks do Decline ‘Loan’ Requests from organizations, firms or probably individuals. Though, loans servicing is quite risky to financial institutions – that’s a basic fact to exercise adequate carefulness while giving it out to a person or group (corporate body).

 

In such loan creation by banks to the public, certain conditions not been met by the intending borrower would be reasons that will hinder the loan issuance.

 

 

Such factors that could hinder or stop a bank as financial institution from giving out a loan to the borrowers include:

 

  • Insufficient collateral.
  • Lack of consistent cash flow. 

 

 

Ye! It is widely believed that these two factors mentioned above are common and self explanatory. Now let’s move to theuncommon factors that some people might not know about. They include;

 

Insufficient Operating History: This majorly occurs amongst businesses that want to collect loans from the bank without sufficient track record of performance history of the business or company. This factor would most likely discourage a bank from giving out loans to such businesses.

Weakening Industry: If you operate a small scale business whereby ou do not make any encouraging profit or the bank perceives such industry would decline in future would most likely not give out loans to such industry to avoid loss.

 

Economic Situation: Banks would not give out loans to industries that might be affected by an economic unfavorable condition that might hinder the business from paying back the loan in good time.