What To Do If Your Business Loan is Not Approved
Written by: Rebecca Game
Words that all business owners dislike hearing from a lender
are, "Sorry, we just can't approve your loan." It's frustrating
when your business loan is not approved, and it may feel like
your business ideas are now a hopeless venture. Rather than
letting those feelings of despair overcome you because your
business loan was not approved, though, step back and examine
- Don't take it personally.
While some lenders can approve or decline a loan based on the
business owner's character, there are other factors involved
when your business loan is not approved, such as credit scores,
income, debt ratio, and the risk of the business. When a
business loan is not approved, it is most commonly due to one of
these four reasons.
- Be gracious.
If your business loan is not approved, be sure to thank the
lender for reviewing your loan application and proposal. Don't
leave on bad terms. You never know what the future holds, and it
could mean that you'll cross paths again, especially if your
loan approval was considered "borderline." Just because the
lender said "no" today, it doesn't mean that your business loan
won't be approved in few years, or even a few months.
- Ask the lender to review the details as to why the business
loan was not approved.
Without getting defensive, seek information from the lender
stating why the business loan was not approved. This information
will be one of your most valuable tools when applying for your
next loan. The more details you can get from the lender, the
more prepared you can be for the future. There may be instances
where you can correct the loan proposal or application when your
business loan is not approved, and eventually get approved for
your business loan with that same lender.
In the instance that your business loan is not approved, it's
time to not give up, but rather, to become resourceful. There's
more than one way to get the money you need for your business.
- Review your loan proposal in detail.
When your business loan is not approved, it's time to go back to
square one and look at your presentation pieces. After reading
through the details, put yourself in the lender's shoes. Would
you approve a loan to someone like yourself with the loan
proposal you're reading? If there is inadequate or incomplete
information in your proposal, such as a business plan that lacks
direction and goals, rewrite that information for your next
application. A business loan is not approved often because the
lender is not clear as to how the business will operate and
succeed. Additionally, examine your credit reports carefully.
Request copies of your reports from Experian.com, Equifax.com,
Marks and errors on your credit report should be resolved
accordingly before applying for a loan again. If the marks
against your credit rating cannot be removed from your credit
reports, be prepared to tell the second lender that you approach
not that you are aware of these marks, and give they reason why
they are there. Offering these explanations to the lender show
that you are a responsible enough person to live up to these
errors, and a trustworthy enough person to tell the lender about
these marks before they find out for themselves.
- Examine the lender that you approached for the loan.
Is this lender one that specializes in business loans? Do they
cater to small businesses and start-up businesses? Do they offer
personalized service? If you approached a larger lender for a
loan and your business loan was not approved, that could be the
reason why it happened. Smaller banks and credit unions allow
you the opportunity to work face-to-face with the decision maker
who will approve or decline your business loan. Larger banks and
financial institutions do not offer you the opportunity to state
your case directly to the decision maker, which can increase
your chances of not being approved. In the event that you
approached a large bank, focus your second attempt on a smaller
bank or credit union if your business loan is not approved. If
you currently have accounts or a reference from someone else
regarding a smaller bank, try that one first. Just because your
business loan is not approved with one lender, it doesn't mean
that another lender won't approve your application.
- Consider another type of loan if your business loan is not
Small business loans can sometimes be difficult to obtain no
matter where you turn or to what type of financial lender you
turn to, and in these instances, consider other sources if your
business loan is not approved. For example, if the loan amount
needed is $10,000 or less, consider applying for a signature
loan. If the loan is for a sizeable amount, or more than
$10,000, and your business loan was not approved, consider
refinancing your home in order to receive cash out for business
purposes, or offer other collateral for a personal loan. Home
equity loans can offer the lowest interest rates, but don't
forget to consider all other types of loans initially. Take your
time, and weigh all factors carefully.
- Contact the Small Business Administration.
The Small Business Administration offers guaranteed loans to
businesses meeting their criteria, and specifically, the SBA has
loan programs especially for women-owned businesses. Contact
your local SBA offices for information, or visit www.sba.gov.
The key to overcoming this financial obstacle if your business
loan is not approved is to become creative in these areas. There
is more than one way to obtain a loan, and if you truly have a
viable business idea, you should be able to find funding as long
as you've done your homework and developed an effective and
detailed business plan and loan proposal.
About the author:
Rebecca Game is the founder of Digital Women ®, an online
community for women in business. A 30 year entrepreneur and
dedicated to helping other women find business loans. Visit her
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