By Sangeeta Sharma | Credit Advisor & MSME Coach
🎙 Based on Smart Credit Bytes – Episode 6
Why Your Loan Gets Rejected Even if Your Business is Good
You may have a solid business, strong sales, and a great product but still walk away from the bank with a rejection.
Why?
Because in the world of credit, numbers don’t speak alone patterns speak louder. And sometimes, the patterns in your financial profile wave a big red flag without you even realising it. After 11 years in MSME lending, I’ve seen these hidden red flags quietly kill loan applications.
Let’s uncover them, one by one.
Frequent Cheque Bounces
Even a profitable business can get rejected if its bank statement shows multiple cheque returns.
Why it’s a red flag:
- Signals poor cash flow management
- Shows lack of financial discipline
- Makes banks worry about future EMI payments
What to do:
- Maintain buffer funds in your account
- Track due dates for payments
- If a cheque return happens, fix it immediately and avoid repeat incidents
Declining Sales Trends
Your profit might be positive, but if sales are falling quarter after quarter, it rings alarm bells.
Why it’s a red flag:
- Indicates potential loss of market share
- Suggests future repayment capacity could shrink
What to do:
- Stabilise your revenue before applying
- Highlight any seasonal factors or one-time dips in your loan proposal
- Show a recovery plan with new orders or contracts
GST & ITR Mismatch
If your GST returns show one figure and your Income Tax Returns show another, banks start asking: “Which one is true?”
Why it’s a red flag:
- Suggests unreliable or manipulated reporting
- Creates trust issues before the application is even assessed
What to do:
- Ensure GST turnover and ITR turnover match
- If there’s a genuine reason for difference, document it clearly in your proposal
Sudden Large Cash Deposits
A spike in cash deposits just before applying for a loan looks suspicious.
Why it’s a red flag:
- Banks may assume it’s borrowed money just to show higher turnover
- Raises questions about transaction authenticity
What to do:
- Maintain steady banking habits throughout the year
- If large deposits are genuine (e.g., project completion), explain with supporting documents
Multiple Loan Enquiries in a Short Time
Every time you apply for credit, it leaves a mark on your credit report. Too many enquiries too soon = desperation in the lender’s eyes.
Why it’s a red flag:
- Suggests financial stress or inability to secure funds
- Lowers your CIBIL score
What to do:
- Apply strategically — only when your profile is ready
- Avoid sending applications to multiple banks at the same time
Final Thought – Turn Red Flags into Green Signals
In MSME credit, rejection isn’t always about your business strength it’s often about how your financial behaviour appears on paper.
As an MSME owner:
– Keep your profile clean year-round, not just before applying.
As a credit officer:
– Spot these warning signs early and guide clients to fix them before submission.
The goal isn’t just loan approval it’s building long-term credibility that opens doors to future funding.
🎧 Listen to the full discussion here:
👉 [https://open.spotify.com/episode/0AbaoxK2XBEV1m2V7YyoRv?si=80Y7q0XYQB6w6_dn9hg1fQ]
Need help improving your loan profile?
Contact me at sangeetasharma.cc@gmail.com or visit smartcreditwithsangeeta.com
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