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Business Credit, Finance & Accounting, Financial Management, Small Business Loans

Bouncing Back After Being Declined for a Small Business Loan

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Learning to deal with rejection is a big part of becoming a successful small business owner – not every customer wants to buy from you, not every new product idea will succeed and not every market is the right fit for what you sell. But rejection can be especially painful when it comes from a bank that is declining your application for a small business loan. Small business owners often have big plans that cannot come to fruition without access to working capital. Getting turned down for a small business loan can be frustrating and discouraging – but it doesn’t have to be the end of your business success story!

Here are a few tips for what to do next after getting declined for a small business loan:

  1. Ask for feedback. Talk to the bank loan officer to find out more about the reason why you were declined. Is your business credit score too low? Do you not have enough sales history or have you not been in business long enough? What does the bank usually look for when approving loans? The more information you can get about why you were declined for a loan, the more equipped you will be to bounce back and get the funds that you need.
  1. Get your business credit score. Most people are familiar with the concept of a personal credit score and getting a free annual credit report, but did you know that your business has a credit score too? However, one difference with business credit scores and credit reports is that they are not free – you have to pay a fee to the credit reporting agencies in order to get your business credit information.

Get up-to-date information about your business’ credit report and credit score at Dun & Bradstreet, Equifax or Experian. When checking your business credit report, make sure there are no mistakes – sometimes there are mistakes on your credit report that you can work to get removed or corrected, which can improve your credit score.

Also look at your overall credit utilization – out of all of your business credit cards or existing business lines of credit, what percentage of your credit is currently being used (in the form of outstanding balances or nearly maxed out credit cards)? For example, if you have a business credit card with a limit of $10,000 and you already owe $5,000 or more on that card, that is a red flag to banks that your company might not be a good credit risk. Work on making all of your debt payments on time, and try to pay down your existing debt first in order to boost your credit score.

  1. Look for funding from platform lenders instead. Even if your business gets rejected by a traditional bank, there are still a variety of ways to get small business financing to help your company grow. The big bank loan landscape is changing, and a traditional lender might not be the best fit for what your small business needs. One of the most exciting innovations in small business lending of the past few years has been the rise of platform lenders like Kabbage, which help small business owners get working capital with flexible lines of credit and speedier approval processes. Platform lenders use technology to make the lending process more convenient and accessible – the whole approval process happens online, and you can often get cash in your account in a matter of minutes. And platform lenders look at a wider variety of factors to determine whether you can borrow from them – not just your credit score. Platform lenders operate online and truly “get” how online retailers and other small businesses work. This is often a great advantage of platform lending for online businesses, small retailers and other independent entrepreneurs that struggle to get loans approved by traditional banks.

Instead of taking it personally or feeling discouraged when a bank rejects your loan application, think of it as an opportunity to do things differently. You can still get the working capital that your company needs, and there are platform lenders now available that might even be a better fit and understand your company better than a bank would have.

Have you ever been rejected for a small business loan? How did you decide what to do next? Leave a comment and let us know!

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Kabbage Team

Kabbage is here not only to provide access to the small business funding you need, but to also help you grow your business through free marketing tips, webinars, tools and more. Is there something you'd like us to cover or want to get your small business featured on our blog? Send us a note at content@kabbage.com.