Your business loan application was denied. You invested time in the loan process because your business really needed the additional capital. Relax, it´s not fatal and there are steps you can take to move forward as noted below.
1. First Things First. Why Were You Denied?
Ask the lender why your small business loan application was denied. The lender is required by law to inform you as to the reasons that the loan was denied. It may be simply a matter that your business does NOT satisfy the basic requirements of the type of loan. For example, the lender may require that a business has a minimum number of years of operating history and your business is just too new to qualify. Your business may simply need to wait until all requirements are met for the lender to approve your loan application.
2. Improve Your Business Credit Score
A lender will evaluate your business credit history to determine whether to approve a loan application. (This is in addition to review of your personal FICO score.) The payment history of your business and bank financial statements will be used by the lender to determine the creditworthiness of your business. If you use personal credit cards as part of your business activities, you should avoid this by applying for business credit cards. These types of credit cards will help contribute to your business credit history.
3. Look For Another Lender
There are all types of business lenders: traditional banks, alternative lenders and private lenders. Each type of lender has their own loan requirements and market focus. Traditional banks are the least flexible, assumes lower financial risk and normally offer the lowest loan cost. Alternative lenders and private lenders are more flexible, assume higher risks and offer more costly business loans. If your business is small or has limited operating history, an alternative lender likely offers loan products better suited to you business profile and more likely to approve your loan application.
4. Was It The Right Financial Product?
An alternative financial lender offers a variety of product offerings that may better fit your business capital needs. Perhaps instead of receiving a lump sum of capital via a traditional term loan, your business can qualify for a smaller business line of credit, since the terms are shorter in duration. If your business accepts credit card payments, your business can qualify for a Merchant Cash Advance, where the payment terms vary with monthly credit card sales and are not fixed.
5. Apply for a SBA Loan
The U.S. Small Business Association offers programs to help startup businesses obtain funding through commercial banks by acting as a guarantor on SBA loans. Your business credit score will still be a factor in qualifying for a SBA loan, so it is always important to have a good financial history.
6. Knock On An Angel Investor Door
If your business is not able to get funding from a traditional or non traditional financial lender, you can seek capital from business and personal contacts. Since they know you and are likely to trust you, they may be open to investing in your business when other are reluctant to do so. It never hurts to knock on the door and ask!
The steps a business owner should take once a loan is denied are presented. The business owner should determine why the loan was denied. The business owner should consider alternative financial products and types of lenders. The business operating history, payment and credit score will affect the approval process for all types of financial products.
Please call us at (888) 213-3383 to help review which financial product best serves your business needs or Contact Us via Email.