Some people are simply embarrassed to explain why a loan is needed.
No banker who does not ask for it. If the necessary collateral is not available enough, you will be rejected as a small or a young company and especially as a freelancer in most cases. If you need to rely on your car, you have no choice but to buy a new vehicle. As a self-employed person, you also have the option of taking out a micro-loan.
Even if your company has been active on the capital market for a long time, your individual creditworthiness has a great influence. This philosophy is that if you do not have your own credit, you do not support it for your business. If an adverse credit rating prevents you from obtaining funding, you should review your credit rating and take steps to improve it.
If your company is relatively small or a start-up, you probably do not have a long credit history.
For many banks that do not want to take on the increased default risk due to specifications, this is often an exclusion factor. In the case of start-ups in particular, banks are looking for realistic forecasts of sales or earnings development based on comprehensible theories.
In many industries, they are often considered riskier by credit institutions. If your business operates in one of these industries and you have been turned down for a bank loan, you should inquire about specific lenders for your industry. Most traditional forms of finance require a certain degree of security.
If the required securities are not sufficiently available, you will be rejected as a small or young entrepreneur and in most cases as a freelancer. For almost all lenders, cash flow is considered to be a crucial factor for granting loans. Highly fluctuating cash flows (eg seasonal factors) are often an exclusion factor for most lenders.
It’s no coincidence that poor cash flow management is one of the most common causes of corporate failure. If you have difficulties in raising finance due to a lack of or very different cash flows, you should investigate how bottlenecks in liquidity are compensated. It makes sense to consider other options, such as invoice financing, that do not affect customer relationships, but still help you to quickly break through periods of drought.
Unfortunately, patchy documents are among the most common reasons for denying loans to the self-employed and small businesses. Often, insufficient or inadequate documents are automatically an important decision criterion for many banks, as they lack important and necessary backgrounds. It also includes freelancers and self-employed.