Securing funding can be a crucial aspect of running a business. Many companies rely on business loans to fuel growth, or simply get through a difficult period. However, loan applications don't always end in approval, leaving business owners wondering what to do next.
If your business loan was declined, it's essential not to lose hope, but rather take proactive steps to address the situation. We will guide you through the steps to take if your business loan application is rejected.
1. Understand the reason
The first and most important step is to understand why your loan application was declined. Lenders will typically provide a reason for the rejection, so it's essential that you get clarity on this. Common reasons for loan declines can include a poor business credit score, not having enough high value assets to use as collateral, inadequate cash flow, or an incomplete application. Once you pinpoint the exact issue, you can start working on a solution.
2. Review your business credit score
If your credit score played a significant role in the rejection, it's time to review your business credit profile. You can login to your Capitalise profile to see your business credit score and the risk factors impacting it, so you’ll know what you need to address to build a better credit score. You can also get your credit score reviewed with Capitalise, in 96% of cases this results in an improved score.
3. Seek alternative lenders
Just because one lender declined your loan application, it doesn't mean others will do the same. You can explore alternative lending options, such as a revolving credit facility, invoice finance or a business credit card. These lenders may have different criteria and be more willing to work with businesses that traditional business loan lenders have turned down.
4. Consider a smaller loan
If your original loan request was for a substantial amount, it might be worth considering a smaller loan. Reducing the loan amount can make it more manageable and increase your chances of approval. You can always apply for additional funding later when your business is in a stronger financial position.
Facing a loan rejection can be disheartening, but it doesn't mean the end of your aspirations. Instead, view it as an opportunity to strengthen your business, address weaknesses, and explore alternative funding options. By taking proactive steps and learning from the experience, you can increase your chances of securing the financing you need to achieve your business goals.