Not Enough Collateral
Financial institutions seek to minimize risk and one primary way to ensure if you cannot repay the loan, they can take assets in order to sell them to make themselves whole. This is the last thing a bank wants to do, but necessary none the less.
Lenders discount the collateral you have, meaning if you are buying a building for $1,000,000 they may only count the property value to them at $750,000. They use this discounted value to form a loan to value ratio (LTV). A lender LTV will take an LTV of 75% or less.
If you are short on collateral you could:
- Pledge personal assets utilizing a personal guarantee.
- Utilize a loan guarentee program.