Many business owners apply for a business loan and end up being denied, never knowing why. Surprisingly, one of the most common reasons for denial has more to do with the actual application than the creditworthiness of the company. A lot of applicants never make it to the financial review process simply because their application triggers fraud concerns with the lender.
Apply for a Business Loan Without Fraud Concerns: Consistency is Key
Discrepancies of any kind set off red flags for lenders. When something doesn’t add up, they don’t look too far for answers. In contrast, they simply deny.
Application denials for this are common because inconsistencies reek of fraudulent activity. Just the appearance of fraud, any inkling, is enough for most lenders to deny.
Consistent Business Information
Your business name and other information must be consistent. If you list it one way on your application and it is different anywhere else, denial is imminent. That means, even an ampersand in one place and the word “and” in another can mean denial.
When you apply for a loan, the information you put on it must be verifiable. Lenders might search with the Secretary of State to verify ownership. As you can imagine, if the business information on the application does not match the Secretary of State records, they may very well deny it automatically.
If they decide to investigate further, they may ask for tax returns, even if they already have financials. The catch is, even if they originally ask only to verify information, due diligence dictates that they look at all of it. This may not work in your favor.
The more you make, the more you pay. As a result, businesses do not want to show they make money. Yet, if your tax return shows a large loss, it results in a denial. If your information is verifiable in the first place, it may not be necessary to give lenders tax returns.
Do yourself a favor and don’t try to lie about income. There are plenty of ways to verify, and credit providers will do that. You can be sure they can and will verify everything. Not just income either. The truth is, this goes for any information. That includes ownership percentage, date of opening, and of course financial information.
Personal Information Matters
Some are surprised to find out that personal information comes into play when you apply for a business loan. It has to be verifiable as well. Resist the thought that you may be able to fudge on personal information when you apply for a business loan. They will know.
Do Not Buy a Credit Privacy Number (CPN) to Try to Hide Bad Credit
A legitimate CPN is available by working with an attorney to file a claim with the Social Security Administration. That is, if you have a compelling claim. Bad credit is not a compelling claim.
Some claim a CPN will offer fresh credit history. As a result, companies use sketchy ways to get numbers to sell. Unfortunately, these 9-digit numbers may be dormant social security numbers or numbers that belong to children. By purchasing one, you could unknowingly end up in an identity theft scam.
Also, using any number other than a Social Security number where an SSN is called for is a violation of two federal laws.
Your best bet is to resist the temptation to use a CPN.
Apply For a Business Loan the Right Way
It’s not hard to avoid denial if you just apply for a business loan the right way. First, make sure all of your information is consistent everywhere. Then, ensure that when you provide information on a loan application, it is verifiable. Last, be honest. Don’t use numbers other than your Social Security Number or EIN. In the end, this is your best chance at getting your application through the initial process and to the financial review. The best part? This is just one of the business loan secrets we can share with you.