Applying for business financing is time consuming, but it is necessary to keep your business growing and running smoothly. If your application for a business loan was denied, it can be disappointing. However, don’t give up just yet because it’s still possible to get approved for a business loan in the future.
In this article, we will explain what you can do if your business loan application was declined. Once you take these steps, you might be able to qualify for the financing your business requires.
If your business loan application was rejected, it doesn’t mean you can’t ever apply again. Many business owners apply for a loan only to get declined and have to apply again in the future.
Before you start the loan process, you should ask the lender why your application was denied. Common reasons for being declined include the following:
Once you meet the requirements, wait until you meet the standards before starting the loan application process. That way you can increase the chance that your loan application will be approved.
Lenders evaluate personal and business credit scores when deciding to grant a loan or not. They do this so they can get a clearer picture of your finances.
Make sure you are aware of your credit scores because many people are not. Improve your score by applying for credit cards in the firm’s name and avoid funding your business through personal loans.
Find a lender who will be more receptive if your loan application was declined by a bank. There are countless online lenders who are more willing to work with startups or small businesses than traditional lending institutions.
If your business is struggling with working capital, a term loan may not be your best bet. You may find the lender is willing to provide you with a smaller line of revolving credit instead. Lines of credit are generally easier to qualify for than term loans given their short-term nature.
The SBA also has several programs for funding. However, owners should note that business credit scores still matter. Typically, the SBA requires applicants to have least a 140 out of 300 score to qualify for a 7(A) loan.
If you’re not able to get funding with the options above, try angel investors or taking loans from friends and family. They are more likely to trust you and could be willing to invest in your business, even if financial institutions aren’t.
A declined business loan application is not the end of the world. If your application was declined, you can try obtaining a different loan product from the same lender. Or, you could seek alternative lenders, such as outside investors or online banks.