Question

Entrepreneurship and Effective Small Business Management, Student Value Edition (11th Edition)

One of these businesses received a bank loan, and the other did not. Describe the differences between the two companies that led to one entrepreneur’s receiving the financing he needed and the other one’s failing to qualify for a loan.

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Answer 1

There are following different reasons that led to the one business getting loan and another business getting rejected.

1. Nature of business. Here, James and Sonia started a limited liability company that is the proper form of business and liability is limited to the business. It helped the bank to consider it under the program of patriot express loan. But, Andy Shallal never focused upon the selection of the right form of business. It created suspicious to the bank & it led to the rejection of loans.

2. Related work experience owned by the promoters of the business. James had the more experience of real estate business while working in the army. But, it was not the case for Andy Shallal. So, the Bank made a favorable decision for James & Sonia, but Andy could not get the loan sanctioned for his business.

Besides, the cultural difference of Andy Shallal (Background from Iraq) also could not help him in securing loans. It is the reason that mortgage of his home was one of the condition to get a loan in his personal capacity.