What to Do If the Bank Turns You Down for a Business Loan

by / Monday, 02 March 2015 / Published in Uncategorized

You are at the bank sitting across the desk from your lender as he riffles through your application along with a medley of financial documentation you were asked to provide. After what seems like hours, he finally glances up at you and slowly moves his head from left to right a couple of times. It is at that moment when you realize you just received the nod of disapproval. Yes, you have officially been denied a business loan. If personal rejection is painful, financial rejection must be excruciating. After all, if you were seeking a loan in the first place, chances are those funds were desperately needed.

You may not believe that a silver-lining can actually emanate from the dark cloud of denial, but look at this as an opportunity to right your financial wrongs and perhaps get an even better loan the next time around. In order to correct those mistakes, your first mission is to find out why you were turned down. Make sure the lender is straight-forward and direct with the answer. You need to know if the deciding factor had to do with your credit score, income level, or any number of reasons a person can be denied a business loan.

While you are conducting investigative research into the reason for your denial, the next step you may want to take is seeking out alternative options for funding. With the current state of the economy being as turbulent as it is, more and more agencies are emerging that take into consideration the fact that entrepreneurs can fall on hard times, which unfortunately can negatively impact their financial profiles. Online lenders, for example, customarily have a different set of standards that may not be as rigid as a traditional bank. These standards make the possibility of getting a loan feel much more attainable.

Another conceivable solution is looking into taking out a microloan. These types of loans come from non-profit organizations that help small businesses when conventional banks deny them a business loan. The average microloan is approximately $13,000, however, microlenders have been known to approve applicants anywhere from $1,000 to $50,000. Microloans act similarly to working capital loans as the money may only be used for business expenditures and not for personal assets.

Lastly, this option may not be the most popular, but surprisingly, it is one of the most successful and effective solutions to date. Before reapplying for another loan, consider asking a friend or family member for financial assistance to gain the capital you need. The approval rate is high and the application process takes no time at all.

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