Starting a business has always been your passion. You have worked days on end building a robust business plan, and now it’s time to make your dreams a reality. You approach a lender with your business plans, only to find that the lender has rejected your small business loan request.
Or you may have been running a small business successfully for the last few years. You are thinking about growing and expanding your business. You approach a lender requesting for extra business funding, only to find that your loan application wasn’t sanctioned.
Watching your business plans get halted because of lack of funding is heart-breaking. And nothing is as devastating as watching your entrepreneurial dreams stumble because a lender rejected your business loan application.
If you find yourself in any one of the scenarios described above, worry not. Don’t let a loan rejection stop you from pursuing your business goals.
Here’s what you should do next: Find out the Reason for Rejection
You may be unable to persuade the lender to reconsider their decision. That doesn’t mean they cannot help you any further. Send an email to the loan officer who processed your application, asking him the reason for rejection.
This way, you’ll know which criteria you failed to meet. This information is key and helps you in rectifying the issue before you reapply.
Here are some common reasons for business loan denial and ways to rectify it:
This is one of the most common reasons for business loan rejection. Make sure that you check your latest credit score before you apply. If your credit ratings are poor, you can take the right measures to boost it before applying. Alternatively, you can consider digital lenders like Indifi, who consider other business parameters apart from your credit ratings to sanction your loan.
2. Problems with Cash Flow
The cash flow of your business is used to evaluate your repayment capacity and your creditworthiness. Having positive cash flow assures lenders that you can repay the loan on time, whereas inadequate cash flow impacts your loan eligibility.
3. Lack of Collateral
Traditional lenders like banks don’t offer loans to businesses that cannot submit collateral. If you have just started your business and don’t have collateral, you can consider an unsecured business loan from digital lending platforms like Indifi. Using unsecured business loans, you can avail the required funding without any collateral.
4. The Wrong Lender
Getting your business loan denied from one lender doesn’t mean it will be denied by all. Generally, traditional lenders like banks have higher eligibility requirements. If your business loan was rejected at a bank, you can consider alternative business loan lenders like Indifi. With easy eligibility and quick processing, you are more likely to receive the required funding at digital lending platforms.
Furthermore, digital lenders like Indifi offer several benefits compared to traditional banks. A wide array of business funding options, quick processing, minimal paperwork, competitive interest rates, flexible repayment schedules — make digital lenders the preferred choice for small businesses and startups.
What to do Next? Points to Consider before Reapplying
If your business loan is rejected, make sure to find out the reason for denial and then use the strategies listed above to rectify it. Be careful in your next approach — consider alternative lenders, be aware of the eligibility criteria of the new lender, have the right documents, and make sure you fill the application form accurately.
Don’t repeat the same mistakes you made in your first attempt. Just because, your business loan was denied once, it doesn’t mean it will be denied repeatedly. Use the strategies listed above and take the right choices, in your next approach.