3 Things You Can Do if You Are Turned Down for a Business Loan
Getting financing as a budding business is an uphill battle. As a matter of fact, the vast majority of new small businesses who seek traditional financing get rejected. This could be because of a poor or nonexistent credit history, lack of collateral, cash flow issues, etc. This doesn’t mean, however, that getting rejected is the end. There are plenty of things that you can do as a business owner to find other options while increasing your creditworthiness. Let’s take a look at some of the things you can do if you were rejected for a business loan.
Understand the Bank’s Point of View
You have to understand a lender’s perspective when contracting a loan. You shouldn’t take things personally, and understand that lenders are generally very risk-averse.
Give the banker a call and ask politely why your application was rejected. Also ask how you can improve it next time, and how you can make your business more attractive. If they mention risk, ask them if offering some collateral could help. Showing your commitment will make a big difference, and using collateral will reassure the lender that they’re protected.
Look at Alternative Lenders
You shouldn’t stick to traditional banks only when you’re a small business. As a matter of fact, many would advise against it altogether. Banks are usually after big established businesses that show steady growth. Even with the best plan in the world, your business is still not proven, and bankers are not the kind to gamble.
However, there are tons of alternative lenders that will look beyond your credit rating and history to decide whether you can qualify for a loan. Services like Advanced Point Capital will take other criteria into consideration to gauge the health of a business. Things like positive cash flow, for instance, could sway the decision in your favor, and supersede your credit. So, don’t be afraid to look around, and look for lenders who are more favorable to, and targeted towards small businesses.
Improve Your Business Credit
The best thing you can do if you’ve been turned down for a business loan is to work on building or ameliorating your credit rating. The first thing you have to do is make sure that you pay all your bills on time. As a matter of fact, pay early. Paying early will be reflected in your credit rating. And don’t be afraid of credit lines. Open as many as you can with vendors who report activity to credit agencies, and respect the terms.
Make sure that you keep an eye on your credit score using online tools, and make sure that you’re registered with a referencing agency. The less information there is about you, the more difficult it will be to establish a credit history.
As you can see, there are tons of things that you can do if you were turned down for business credit. Just remember to keep your options open, and commit to being financially responsible if you want to become a better candidate in the future.