Banks, they were the cool guys back in the day, giving you money to get things done and also helping you to set up your plans.

Nowadays they tend to operate in a pretty different way, it seems that they have a Declined quota that they need to fill, so they can get that free blender at the end of the month, but, did you ever asked: why do they reject small and medium business owners?.

Here we have some reasons why your local bank that you have a long-lasting relation declined you.

 

1- Low FICO score.

Remember, FICO is a company that analyzes your buying and payment behavior and in that way, they can determine if you are good or bad for that new car credit you want to get and, if you get it, that will determine your rate, term, down payment and monthly payment.

Now, a lot of things can kill some points in your Fico, like you going to best buy to get some batteries for your remote control and end up applying for a store credit to get that 60 Inch flat screen so you can watch the playoffs or every time that you forgot to make the car payment a day before; small thing like that affect your credit score in the long run.

But this can be fixed, small things can help out to keep your score in the highs, some of the best things that you can do are:

• Set up all utility bills as autopsy, in this way you will not forget to make that payment and also you will keep your water running and your Wi-Fi always on!.
• Always keep track of your score and don’t waste it, just inquire when you are really looking for something.
• Don’t shop it around, when you do this your FICO drops dramatically and the financial institutions you apply with don’t get that sense of confidence to work with you.

 

2-Low to none credit history.

Established trade lines are pretty important, that means that companies trust you and also that you are abiding by the payments that you agreed upon. Also, your tradelines can show since when you have some sort of credit.

So, on Basics, this is what your tradelines show:

• Financial records in terms of the amount credited or debited.
• Dates on which accounts were opened.
• Credit limits.
• Types of accounts.
• Balances owed.
• Payment histories.

This is like being a boxer, it all depends on your record, so they can give you that shot for the title; Having trade lines will give you a better shot in getting approved and also will help on determining the risk the bank will take on lending you.

Now a couple of trade lines don’t make a huge impact but some of them make a world of difference, some of them can dictate if you are eligible and some of them can boost your credit.

The best advice that we can give out; Keep track of your payments, don’t open a trade line just for the sake of it and don’t default on them, even if it’s the smallest trade line, it’s better to have some few but solid trade lines that are current than a lot of department store lines of credit in which payments are past due.

 

3- Paperwork and wrong information.

This is pretty simple, yet, a lot of people fail to get this straight and when we deal with owner-operators or commercial drivers license users this is a pretty common reason to get declined.

When you fill out an application make sure that you are putting the correct information, every financial institution is different but if they ask you for that information in the app and that paperwork, rest assured, it’s because they want to make the process fast and simple.

Smooth sailing it’s what you want to do, so a piece of advice; Be honest and cooperate with the paperwork, every bit of information will determine if they can get you a solid approval and believe me when I say that putting false information will get you an instant decline, plus a dent in your credit, use your FICO points wisely.

 

4- Be reasonable on what you want to get.

This is actually pretty common, you want to get the best, top of the line new truck but this can actually result on a declined app.

Expectation Vs Reality, one of the biggest dilemmas in human history, and this is the case, you need to set yourself proper expectations based on how much money you can put for the down payment, the insurance for that vehicle and of course, the monthly payment.

The math is simple as an owner-operator, you need to make money and this needs to pay for itself and leave some additional cash as a profit, it might not be with the truck that you desired but this will make your business grow until you can have that top-notch fleet.

 

5- Keep a healthy and regular cash flow.

Cash flow is an important player in the financing game, and if it’s not steady it can raise some red flags on the lender’s side, this is mostly because they want to make sure that you pay them on time and that at the end of the day you won’t have any past due.

Some businesses that are sole props or owner-operators have the cash, but they do not deposit all of it into their account and that leads on an issue, they cannot prove the real cash flow they have, this is a risk either for the lender and for the person that is looking to get that loan.

What we recommend: Always deposit in your account so that can show your ledger and also can show that you are generating the sufficient cash to get approved, in this part of the game, deposits are everything.

 

If you follow this steps I can assure that it will be a breeze next time that you want to finance a vehicle