Declined loan requests are one of the cases in business when expectations can lead to serious disappointments.
After believing against all the odds, it can be heartbreaking when your loan application finally gets rejected. That’s why you need a plan B for when things turn sour. Therefore, as you toil to gather credentials and prepare your application process, always think about what happens if you fail— and plan for it.
Borrowing with this kind of mentality and preparedness can help you pick up your pieces and act swiftly in the case of a denial. So what can you do if your loan request is turned down?
- Find out the reason you were rejected
Many entrepreneurs don’t bother to follow up on rejected loans, or at least, ask the reasons behind a denied request. As a consequence, they miss the chance to learn their mistakes, re-apply and a second opportunity to try. You need to ask “why” because business loan applications can be rejected for more than a dozen reasons— from simple things like missing credentials to serious compliance matters.
- Check with another lender
Sometimes a rejection only means you are applying for a loan in the wrong place. Remember, banks are not so willing to work with any business they find risky. Plus, some lending institutions prefer business from certain industries than others.
All these factors explain why it is okay to consider another lender if your current talks end in a deadlock.
- Business Credit Score is everything
Business credit, like personal credit, is monitored by credit bureaus which scrutinize an entrepreneur’s money habits and give a rating that all banks and financial institutions use to gauge a person’s creditworthiness.
Habits like timely bill payments, not delaying or missing loan repayments, and maintaining a fair general credit status can lead to a good score. In essence, the credit score gives a lender an idea of your credit background or history so they can decide whether you qualify for a loan or not.
To increase your chances;
- Train and focus more on building credit
- Avoid working with money-lenders who report to credit bureaus
- Do not use personal loans to finance your company because it won’t count under your business credit score
- Avoid too many unnecessary loans that may lead you into an endless debt cycle.
- Look for and correct mistakes in your report that could be ruining your credit score
Following these best practices can ensure you build good credit over time.
- Try a different loan product
You can never run out of options in the market where lenders compete to offer a range of products that appeal to the various business borrowers.
If a bank loan request is not yielding results then maybe a merchant cash advance is your next best shot. Or you can consider equipment financing if you were borrowing to buy equipment for your premises. The Small Business Administration also offers a range of loans to microbusinesses that qualify.
In short, alternating between loan products can ensure you always get the right financing at the right time.
Final Words
Lastly in you get rejected; relax, take a break, and reflect on what you can do to perk up your chances before sending the next application.