7 Reasons why you can’t secure funding for your business

7 Reasons You Can’t Secure Funding for Your Business

Are you frustrated after trying a number of times without success to secure funding for your business?

Have ever thought about why you keep getting rejections every time you approach people, investors or even financial institutions for funding to start or expand your business?

Do you know that perhaps it might be some things that you’re not doing right that’s working against you in your bid to secure funding for your business?

To Secure Funding for Your Business, There’s a Checklist

The fact is this. Whether it’s a loan, grant or even equity investment that you’re gunning for in order to fund your business startup or expansion, there are a number of boxes you must tick in order to merit funding.

If you don’t tick these boxes, there is no magic you can perform to get the funding you need for your business.

So, let’s say you’re approaching a bank or any other financial institution for funding for your business. Ask yourself the following questions and then you might find out why you’re getting the consistent rejections.

1. Have you separated yourself from your business (if you’ve started the business already)?

Many entrepreneurs have not separated themselves from their business. Thus, they haven’t  exactly placed a demarcation between what funds belong to them and what’s their business’.

Are you in that category? Do you pay yourself salary at the end of the month just like you pay your other staff?

Do you still have full access to the business’ inflows and can make withdrawals for personal use at will?

Have set up structures that restrict your access to the business’ inflows?

If you’ve not done this, then, nobody is going to invest in your business.

Nobody is prepared to give you their hard earned money to spend on yourself.

By the way, this shows high level of indiscipline. Such an entrepreneur can’t be trusted to pay back whatever loan he gets (with the associated interest).

So, going forward, let your books show that you’ve clearly put a distinction between your personal funds and those of the business.

Pay yourself alongside your staff and keep away from taking from the business’ inflows.

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2. Have you registered your business?

Have you formalized your business? Is your business registered with the Corporate Affairs Commission? Do you have all the documents showing that your business is fully registered

If you don’t, then you might as well forget about getting any funding from a financial institution.

Formalizing your business gives the institution the impression that you’re serious about your business. It also gives the bank some level of security in funding the business.

Whereas an unregistered business can fizzle out anytime, any day without a trace, a registered entity has some information lodged somewhere that can be used to track the business or its owners.

So, if you’re yet to register your business, do so as soon as possible. That’s if you’re nursing any hope of securing funding from a financial institution.

3. Does your business have a fair account history with a Bank?

The fact is that banks don’t and will never grant loans based on word of mouth. Never!

There must be documentary evidence reflected in your account performance that indicates that you’re reputable and can be trusted to manage a loan.

So, think about it! Is your account flow fair? How’s your inflow and outflow of cash lodgment?

It is only through your cash lodgement flow that the bank can determine that your business is growing.

It’s also through your account flow that the bank can spot a funding gap and intervene.

Therefore, if you don’t have a good account history, start now and make consistent cash lodgement. This way, you build your reputation.

This will tremendously increase your chances of getting funding when next you apply.

Read Also 8 Smart Ways of Raising Capital for Your Business

4. What has been your track record regarding servicing of previous loans?

If you’ve secured a loan before, how well did you perform in servicing it?

Are you a loan defaulter?

Then, it might be very difficult for you to get any loan in future.

The fact is that SMEs with excellent history of properly servicing loans have very good credit rating. They are thus almost always eligible for new loan facilities.

However, those with poor loan servicing record have very low credit rating. It is usually very difficult, if not impossible, for financial institutions to trust them to repay new loans.

It’s important to note that in granting approval for loans, banks consider an SME’s credit rating.

So, ensuring that your business has a good rating is a smart way of ensuring that you can secure funding for your business.

5. Do you have a sustainability plan for your business?

Do you have a good profit retention plan?

For instance, say your business makes a profit of about N400,000. Are you going to spend the entire profit? Or, you willing to roll back a certain part of the profit into the business to build your equity in the business?

How eager are you to consolidate your equity in the business through delayed gratification?

Are you one that is busy chasing capital instead of making capital?

Banks are never likely going to lend to SMEs that don’t have equity in the business.

Here’s the fact. Banks don’t fund projects 100%. No, they don’t.

So, if your don’t have equity, maybe in the form of retained profits, it would be very difficult for the bank to finance your business.

Therefore, building sustainability into the business is essential to increasing your ability to secure funding for your business.

You may also like 3 Proven Ways to Make Your Business Disruptive

6. Does your business have a long term outlook?

Financial institutions understand that most businesses, especially SMEs, have extended breakeven periods. Therefore, full loan repayment might not come so soon.

Therefore, if the business isn’t long term in outlook, then chances are that they won’t survive long enough to fully amortize the loan secured.

So, take a look at it. What’s your business portfolio?

Do you have long term plans? Are they visible in your business operations and processes?

Of course, your long term plan is evident in your spending habits, profit retention and partnerships you create.

If the bank for any reason believes your business doesn’t have a long term prospect, then, odds are your business won’t be considered for funding.

7. Do you have a proper talent management and retention strategy?

You might wonder why the bank would be interested in your talent management and retention strategy.

But the fact is, the bank knows too well that this is critical to the success of any business.

If the business isn’t successful, then, odds are that the loans won’t be repaid.

So, how are you managing the talents, that is, the Human Resources in your business?

Is your business so wrapped around you that once you’re not around, nothing happens?

Are your staff motivated and excited to work with you?


Are they working grudgingly or just working with you while waiting eagerly for a better opportunity to show up?

If this is the case, then you have to change your business management strategy.

Set out standard operating procedures that ensure that whether you’re around or not, the business can proceed soundly.

This is what will convince the bank or any other institution you’re approaching for funding that you’re very likely going to pay back the loan.

Consider all the abovementioned. Ensure that you’re properly positioned before approaching the next prospective investor or funding institution.

Do this also even before applying for the next grant.

Good luck!

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