Steps to Take after You’ve Been Denied a Small Business Loan
Startups and small business often fail to meet the stringent qualifications set by bank for business loans. As such, rejection of loan applications is one of the main problems that startup entrepreneurs face before their businesses peak.
As a business owner, having your business loan application declined can be quite devastating. However, you can’t let this weigh you down. Your next moves will have a big bearing on the direction that your business takes thereafter. So you need to make sure it’s a smart move and make it fast.
If you want to grow your business after a rejected loan application, here are some of the steps you can take.
Seek answers for the rejection from the lender
Although it is common for loan applications for startups to be rejected, the reason for the rejection differs from one case to another. You should therefore ask your nation 21 same day lender to give you reasons why your application failed.
The answers you get can be useful for the improvement of your business and future applications to improve chances of having the loan approved. General answers will not help you towards that end. You should therefore insist on very specific answers.
In addition to the reasons why the loan wasn’t granted, ask for further information. For example, you can ask how long you need to wait before you can apply again and referrals to other lenders that may accept your application as per their assessment.
Get and keep track of your business credit rating
If you have applied for a personal loan before, you know that your credit rating is important. For most lenders, your credit rating and history can be a deal breaker when assessing your eligibility for a loan.
Similarly, you can get a credit rating report for your business at a small fee. Once you do, ensure that all the details are correct and accurate. You then have to keep working on improving the credit score by keeping a healthy credit history.
When you apply for small business loan, the lenders will check both your personal and business credit rating. Maintaining high personal and business credit score and healthy credit histories will therefore go a long way into making you more creditworthy.
Streamline your business’s financial information
As you chart the way forward for your company, a lot of your effort should go towards improving your chances of having your future applications approved. You also want your business to qualify for high amounts of credit.
Having certain details of your business’s financials streamlined can be helpful in making your business more creditworthy. Some of the details you should work on include:
- Total list of assets and their worth
- Potential collaterals
- Long term and short term contracts
- Cash flow statements
- Tax details
- Existing loans and their repayment status
- The business’s future prospects
There may be other details depending on your specific industry.
You might qualify for another package
As you assess the answers provided by your lender, you may find that you qualify for a different loan product with the same lender. Maybe, for instance, the loan application that was declined was for a 10-year long-term loan whereas you could have qualified for a short-term loan with collateral.
The lender may also be offering other specialized loan packages e.g. installment loans for startups. If your lender appears to offer a different loan that you qualify for you should apply afresh.
Sometimes your business might not be in dire and urgent need of the money. In such situations you can take your time to put your records in order and reapply with a better chance to get it approved.
Other times, however, you need the cash more urgently and thus need to get the money from somewhere else. You can borrow from online lenders with less restrictions. Same applies to other lending companies.
Wealthier family members and friends are also a viable option. Unlike banks, they know you personally. They know your trustworthiness and the effort you have put towards setting the business to the level it is currently.
You cannot get that data on a loan application. They are therefore more likely to trust you with their money without much hustle.
Having your loan application rejected by a bank can dampen your enthusiasm in your business. However, you should not allow that to happen. After all, you are likely to get rejected in other situations by clients or potential business partners.
The rejection is an opportunity for you to demonstrate your ability to adapt and make your business creditworthy or improvise and get money from any other source. Whatever you do, your focus should be on achieving the plan you had when applying for the loan.