There’s almost nothing as discouraging for an entrepreneur as seeing your business dreams halted by a denied business loan. You might feel rejected and have no idea what to do next.
Don’t let a denial hold you back from pursuing your business goals. Here are five steps you can take to ensure that your next business loan is approved.
Step 1: Find out why you were denied.
The first step to any problem is to identify the root cause. Why were you denied in the first place? You need to find out the answer to this question first. It won’t be too difficult a task since lenders are required by the federal law to let you know why you were denied credit at the first place. A letter of explanation from your lender will allow you to address those specific concerns before seeking funding again in the future.
Step 2: Check your business and personal credit reports.
Upon being denied a small business loan, one of your first steps should be to check your personal credit report. Be sure to check your credit report with all three major reporting agencies — Experian, Equifax and TransUnion.
If you find any errors on your credit report, reach out to the agency to have the information corrected immediately.
Step 3: Take steps to improve your business’s financial standing.
The internal financials of your business, particularly the strength of your annual revenue, cash flow and business savings is also considered while approving your loan.
So, consider seeking a lower amount of funding in order to increase your chances of approval until you can build up your business’s financial standing. This way, you can also take advantage of the lower down payment requirements that are frequently offered.
Step 4: Consider alternative loan products.
A denial from one lender on one loan application does not mean a “no” from every other option out there. Lenders have different approval standards.
Banks and mortgages use different criteria for application approval based on their business objectives.
So, there is a big chance that you may still be able to obtain a small business loan without making major changes to your credit or your business finances if you explore other options.
Step 5: Apply carefully the second time.
Just because you got turned down once does not mean that you are never going to get approved for a loan again. Do not get discouraged by one denial of credit. Apply again and get a second set of eyes on everything that you have to submit so that you don’t have to face another round of denial. Many business owners face a loan denial but it is by no means the end of your business financing journey. Follow these simple steps to solve the problems of funding your business loan needs.