Underlying Factors Why Banks Do Not Give Loans
loans servicing is a risk to any financial institution that is why extreme caution is taken while giving out a loan to an individual or a corporate body. In such loan creation by banks to the public, certain conditions not been met by the intending borrower would hinder the loan issuance.
Such factors that could hinder or prevent a bank from giving out a loan to the borrowers include:
Lack of consistent cash flow.
It is believed that these two factors mentioned above are common and self explanatory. Now let’s move to the uncommon factors that some people might not know about. This includes:
Insufficient Operating History:
This majorly occurs amongst businesses that want to collect loans from the bank without sufficient track record of performance history of the business or company. This factor would most likely discourage a bank from giving out loans to such businesses.
If you operate a small scale business whereby you do not make any reasonable profit or the bank perceives such industry would decline in future would most likely not give out loans to such industry to avoid loss.
Banks would not give out loans to industries that might be affected by an economic unfavorable condition that might hinder the business from paying back the loan in good time.
On the other hand, if banks or financial institutions were non-existent, what other source can a business get loans from except from Family and friends?