TWO NEW REASONS WHY YOUR CORPORATE LOAN APPLICATIONS ARE REJECTED.

Post-pandemic, banking methods, especially loan approvals have gone through a severe upheaval. Right now, having healthy bank statements, or showing a profit are not the only things that make a business bankable.?A lot of companies have a very good track record and are doing pretty good business despite the Pandemic slowdown in 2020 and 2021. Yet, most of them have had their loan applications turned down by financial institutions.

The following are the main reasons for it.

1.????LOAN MORATORIUM - The government gave a blanket loan Moratorium during the beginning of the Pandemic for a period of 6 months from March 2020 –September 2020. Most Financial Institutions had extended the Moratorium for another 6-12 months based on “Client Request”.

Now, most business owners did opt for this option as it immensely helped with their cash flow at that time. However, now after 2 years, the Financial Institutions are of the opinion that if you had opted for the extended Moratorium then your business is NOT doing well. Hence a reason why your new loans are rejected.

2.????LOAN GUARANTORS – Another issue that we have been encountering is that some Business Owners have guaranteed loans for other companies or people, pre-pandemic. Unfortunately, after the Pandemic, these loans have gone to NPL due to death or dissolution.

?Without the clearance of these previous loans, financial institutions cannot process any new loan applications. These types of issues have snowballed in the last couple of years. I have personally consulted companies going through family disputes, or companies that have had the misfortune of the demise of key people during the pandemic. In such cases, financial institutions are hesitant to offer business loans, without being confirmed about their returns.

Of course, there are solutions to each of these problems, but they would need to be handled by industry experts. My advice would be to discuss this with your consultant in case your company is facing such issues.

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