Aurimas Šmita, SME Bank business client manager

Having fifteen years of experience in the financial sector, I can name many reasons why small and medium enterprises receive a smaller amount of financing than expected or fail to receive any at all when contacting banks. Here are some of the insights that could tip the scales in favor of the business.

Loan hunters

“Loan hunters” – that is how we call those who sometimes ask for any amount of money for any purpose. When deciding whether to finance a client or not, the most critical question is whether the request is reasonable. That is also what our partners – like INVEGA – ask, too. Another crucial aspect is the client’s perception of how to use the loan properly and safely to get the biggest possible return and, of course, how they will repay it.

So, to begin with, answer the following questions: at which stage of the development is my business now? How would financing contribute to the improvement of current operations and further development? What problems would it help solve? Usually, enterprises face a lack of working capital. This happens when receivable and payable amounts and savings are not managed properly. Working capital financing solutions (short-term loans, credit line, account credit, factoring) will help balance uneven cash flows, stabilize the continuity of the company’s operations, and ensure a successful business.

An investment loan is a long-term loan aimed at financing business development and investment projects. However, you should evaluate all possible scenarios, foresee any risks, and safeguard your continuous operations to minimize the risks for credit insolvency.

Disorderly papers, false information, and lack of attention

When evaluating a client, we always use open data. The modern databases and registries help us shape a pretty accurate view of the state of business and its creditworthiness. There have been cases where, upon submitting the applications, the clients try to hide information about the final beneficiaries, shareholders, financial obligations, and overdue debts.

You should always be honest in such events and call the financing institution to discuss and explain the situation. Providing false or inaccurate information or trying to hide it can influence a negative decision by the bank and either deprive you of a loan at all or reduce its size. Finally, any hidden information becomes apparent eventually, and both you and the bank’s employees end up wasting plenty of time. By submitting all information upfront – even when it isn’t favorable to your business – you will save time and receive customized offers that will help you solve the existing situation.

And finally, financial hygiene. Negative capital rates, unprofitable operations for years, overdue financial obligations, an unreasonable decline of sales revenue, or high debt rates – all these limit the business’ opportunities to borrow money. Take care of the financial health of your business, and let’s solve any questions together. At SME Bank, we provide free consultations for our clients and do our best to find the best financing solutions.