What to Do When You’re Denied for a Business Loan
Everyone experiences disappointment now and again, but if you’ve been turned down for a business loan, the issue is not just hurt feelings, but it may feel like your company’s plans have been hijacked and your goals are on hold. This doesn’t necessarily have to be the case, since you can always try again to secure financing somewhere else. However, while you are regrouping to make another attempt, it is important to consider what went wrong the first time before having another go at it.
- Get Information
Find out from the bank, lender or broker the precise reason for the rejection. It is estimated that 45% of small businesses are turned down for financing because of poor business credit, and this may be the cause. You can’t raise your credit rating overnight if it is spotty, but there are steps that can be taken to improve a business credit score. If the business loan application was rejected because of the amount requested or other factors, try adjusting the application to improve the chances for acceptance. Asking for more or less or waiting 3 to 6 months to show stronger financials and a more robust cash flow might mean acceptance down the road. In addition, your business might be in its early stages, and after a year or two of proven success, you may be able to secure financing more easily
- Consider Alternatives
Banks are more cautious about lending than they once were, so it might be useful to consider other avenues for your business loan. Take a look at what alternative lenders have to offer you. Many of these companies may be willing to take a chance with a new business or one with less than perfect credit.
- Improve Your Financial Picture
It may be a matter of time and effort before you are given a business loan. Evaluate every aspect of your business and cut costs where necessary and strengthen cash flow. Once your financials have gotten into shape, it may be time to make the rounds once again in an effort to secure the right loan. Approaching the process with a strengthened financial profile may cause you to be thankful you were rejected the first time, because it may allow you to secure a loan with lower interest rates and premiums than you would have received if the loan had been approved the first time around. It is always an advantage to approach banks and lenders with a healthy financial profile.