April 22, 2021
Declined Business Loan Application? The Steps to Take Next
Due to this, if your application for a business loan was denied, it can be extremely disheartening. However, don't fret, because it's still possible to get approved for a business loan in the future.
In this post, we’ll explain what you can do if your small business loan application was denied. After taking these steps, you may be able to qualify for the financing your business requires.
7 Steps to Take If Your Business Loan Application Was Declined:
1. Determine Why Your Loan Application Were Denied
If your application for a business loan was rejected, it doesn’t mean you can never apply for a loan again. Many business owners apply for a loan, only to get declined and have to apply again in the future. However, before you start the loan process again, you should ask the lender why your application was denied. Common reasons for getting declined after applying for a business loan include:- Collateral issues: In many cases, the lender will ask the applicant to submit collateral for a secured loan. If you can't afford to submit collateral, this could be the reason your application was declined.
- Time in business: Some lenders aren’t willing to extend credit to businesses with less than two years of operating history.
- Debt to income ratio: If your business has a high debt to income ratio, you may need to pay down debt prior to applying for a loan amount. Lenders often don't want to lend to businesses with low cash flow due to outstanding debt.
- Poor credit: If you have a low credit score, you might not have met the lenders requirements, thus your reason for getting declined. Before applying again, check your credit report to ensure that you meet the credit perquisites.