Top 5 decline reasons

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1. Insufficient Collateral or Security This is the most common reason for rejection. Even though the government guarantees up to 90% of the loan, lenders still need solid security for their 10% share. If your business lacks enough tangible assets—like equipment, inventory, or property—or if personal guarantees are weak, the lender sees too much risk.

   
   

2. Poor Credit History (Personal or Business) A low credit score, past defaults, or unpaid debts raise red flags. Lenders rely heavily on credit reports to predict repayment behavior. If your personal credit score is below around 650, or the business has a history of late payments, approval becomes much harder—even with the CSBFP guarantee.

   
   

3. Weak or Unrealistic Business Plan and Financial Projections Lenders want proof your business can generate enough cash to repay the loan. If your plan lacks detail, market research, or realistic revenue forecasts, it looks speculative. Overly optimistic numbers or missing break-even timelines often lead to an automatic decline.

   
   

4. Inadequate Cash Flow or Ability to Repay Even with a good plan, if current or projected cash flow can’t comfortably cover loan payments (typically needing a debt service coverage ratio above 1.25), the loan won’t be approved. Startups especially struggle here if they’re still burning cash without a clear path to profitability.

   
   

5. Lack of past relevant experience or fail to provide history of 10% capitla injection. Lenders want confidence that you can run the business successfully. If you have no prior experience in the industry or can’t show a track record of managing similar operations, they view it as high risk. Additionally, the CSBFP requires you to contribute at least 10% of the project cost in cash or assets (called “owner’s equity”). If you can’t prove this injection—through bank statements, invoices, or asset valuations—your application will be declined outright. This equity shows commitment and reduces lender exposure.