The many reasons for being rejected at a bank

The explanations from our side are so diverse that we came to the conclusion: It really is very easy to get rejected at a banking institution!

The most common reasons for rejection of funding

• Systems: Especially for financing requests under €1m, this problem is present. (Note: These are 95% of all SME financing applications). Your business and available information is put through an automated process. If your company just doesn’t fit into the standardization of that process you’re out. Rejected! A material assessment of an account manager doing a business and financial analysis is no longer there. Or you may be told, e.g., “Our system indicates that you cannot proceed in the credit process because your MT940 file does not show sufficient cash generation.” “But I purchased a lot of inventory last year!” “Doesn’t matter dear entrepreneur I am not authorized to deviate from the system.” Other “knockout” criteria: No 3-year final annual figures, no positive equity, a decrease in equity in the last fiscal year or a change of shareholding.
• People: There are many fine bankers, but too high a percentage from that group are limited in education, experience and skill. They are also increasingly distant from the world of entrepreneurs and their markets. That also makes sense, by the way. They spend much of their day dealing with rules and systems instead of talking to entrepreneurs and really getting to know their business.
• Sector Policy: In the covid period, it became very clear. Some industries are going on “red.” Even if you are the very best in the industry! The policy then is: No new loans in that sector! The real estate industry is another example. You cannot finance leased business premises or project development with a bank. Even if the collateral and cash flow is as good as ever.
• Rules: There are MANY of these at banks and they also vary from one bank to another. For example:
  • A goodwill financing < 1 mio will not be considered. Too much labor.
  • A complex legal structure in combi with a small financing < 1 mio will not be considered because of Wwft regulations and KYC policy and the labor required for it.
  • You have a BKR registration so then it may not be processed.
• Turnaround times: A 3-month process is quickly becoming the practice these days. In many situations, this equates to rejection. There is often not that much time.

Chances are one of these reasons applies: so it is easy to get rejected.