Most business owners never hear the real reason their financing or equipment lease application gets declined. Lenders rarely spell it out. They simply say the file does not meet guidelines or the risk is too high. Behind that polite wording are specific red flags that push an application into the decline pile long before anyone reviews the story behind the business.
Here is what actually triggers a decline, even for good companies with solid potential
1. Inconsistent Financial Statements
Lenders compare year-over-year numbers line by line. When total revenue grows but cost of goods sold falls unrealistically, or when net income jumps without explanation, lenders assume the numbers are inaccurate or manipulated.
Authoritative reference: Canada Revenue Agency on proper bookkeeping standards
2. Unfiled or Outstanding CRA Obligations
Unpaid GST, payroll remittances, or late corporate tax filings are major deal killers. Lenders know CRA sits ahead of them in priority and can freeze accounts without notice.
Authoritative reference: CRA Collections and Compliance
3. Weak Working Capital and Liquidity
Even profitable businesses can be declined if cash is tight. Low liquidity tells lenders the business may not withstand an unexpected repair or slow month.
4. Debt Stacking Without Structure
Multiple loans, merchant advances, or short-term refinances signal instability, even if payments are current.
5. A Weak or Missing Business Plan
A business plan that lacks cash flow forecasts or growth logic tells lenders the owner is operating reactively.
Reference: BDC on business planning
6. Equipment Mismatch
If the equipment being purchased does not logically fit the business model, lenders often decline the deal.
7. Thin or Unstable Bank Statements
Lenders read bank statements for patterns such as low balances, NSFs, or revenue swings.
8. Existing Judgments, Collections, or Legal Issues
Unresolved legal or collection issues immediately freeze an application.
9. A Personal Guarantee Risk That Is Too High
Weak personal credit or recent late payments create significant lender hesitation.
10. The Story Does Not Make Sense
Lenders want a coherent narrative about who the business is, why the equipment is needed, and how repayment is supported.
How CanaWealth Helps You Remove These Red Flags
CanaWealth rebuilds the financial story before it goes to a lender by cleaning up your Financial Statements, identifying red flags, creating forecasts, packaging applications, and negotiating with lenders and creditors.
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