Half of Business Loans Rejected Due to Poor Planning
Poor business planning is leading to loan rejections among small firms, research by Sage has revealed.
In Sage’s survey of 1,000 small firms, 42% of small-business owners admitted they had no business plan in place at all, while just one in ten said they had used one to secure finance.
With the poll showing that one in five loan applications had been rejected during the past 12 months, Sage said the results indicated that firms were failing to present themselves in the best light to banks and other lenders.
Jonathan Cowan, head of commercial marketing for Sage’s small business division, said business owners needed a “fully robust and up-to-date business plan” in place to secure funding, but that entrepreneurs were often too busy to put the details together.
“Most business owners have a plan at the beginning but it appears to fall off the radar as they get more and more immersed in day-to-day concerns. However, failing to have a business plan dramatically increases an SME’s chances of joining the high number of businesses that fail in their first five years,” he said.
Clive Lewis, head of entrepreneurship at the Institute of Chartered Accountants England and Wales, agreed that the lack of a business plan would hinder a small business’s chances of getting finance.
“It suggests a lack of good financial management. Without one, you’re unlikely to get your loan approved, especially if you’re talking about borrowing in excess of £25,000,” he said.
“Having a plan in place not only demonstrates to lenders that you’re on top of things financially, it shows that you’re able to step back and think objectively about your company.”
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