Being rejected from a business loan can be discouraging. However, it can also be a valuable experience to learn from – accepting failure is a key part of any enterprise and gives you the growth you need to succeed the next time. If you are running a small business, then you may be at particular risk of being rejected for several reasons. Regardless of the scale of your company, it is important to know why you have been rejected, and how you can move forward from it.
1. Figure Out What Went Wrong
Loan rejections often occur due to the credit of the business; a money lender needs to know you will be able to pay them back and on time. If your business account does not show a good track record, then you are possibly going to get turned away.
Your personal account and finances will also be brought into the equation for the same reasons. If your own credit is looking unhealthy, then it does not matter how excellent your company’s finances look – being turned away is still a possibility.
2. Fix It As Best As You Can
Your credit score is not easy to fix on a short-term basis. Not many lenders will grant you a loan if they have serious doubts about your ability to repay it, so you must work to improve your credit score. If you have any outstanding debts, then you have to prioritize paying them before proceeding.
Every lender is different, so the amount of work needed to fix the issue can vary. Banks generally look for a credit score of 700, though Small Business Administration loans usually require only 650 on your personal account. Alternative lenders are willing to go lower than that, but ultimately it will always depend on their confidence in you to turn around any financial downpour.
It would also help to make a down payment on the loan to show that they can trust you to pay it in full. On top of this, some issues with your credit score might actually be down to human error and incorrect reporting – so be sure to check through your credit report for any inaccuracies and amend these where needed.
3. Try Again
Do your best to repair your credit score and overall financial reputation – it would even help to ask lenders about the credit of your business or any red flags to amend. A rejection is not the end of the world, but make sure you don’t resort to disreputable or predatory lenders to get around it. If you work to prove that you can handle the loan, then you can still get the help you need.
With this in mind, Key Capital offers a wide array of financial solutions suitable for exactly these scenarios, including loans fit for small businesses.