Have your bank rejected your small business loan application? If YES, here are 10 smart steps you must take immediately to turn the table around successfully.
It’s really not a big deal if a bank rejects your loan application or turns you down and most definitely, it is not the end of the world or the end of the loan application process for that matter. It only becomes the end when you give up, accept defeat and stop trying.
That a bank rejected your loan application doesn’t mean that you cannot try again. However, you should be cautious about jumping from one bank or financial institution to another in a bid to get your loan approved. That may in fact do more harm than good. Instead, you should make efforts to understand why your loan is being rejected and make necessary adjustments. Here are 10 action steps to take when a bank rejects your loan application-:
10 Steps to Take When Banks Reject your Business Loan Application
1. Find out why your loan application was denied-: First, you have to find out why your application was denied. The bank is expected to explain reasons for denial in writing. We have already discussed some of the top 10 reasons why your loan application may be denied and some of the major reasons include insufficient income, bad credit history and inconsistency in the information supplied.
If you notice that there has been an error maybe in the filing of the loan form, then you can easily correct this. But if it is a more complex case such as bad credit report, then you may have to take some time to rebuild your credit report before applying again.
2. Improve your next application-: Next, you should take steps to improve your chances of getting approved the next time you apply by -:
- Obtaining your credit report to figure out ways with which you can repair your credit and rebuild your credit report.
- If you are very much in debt, then you should look for ways to reduce these debts. There are credit repair agencies that you can contact to help you manage and reduce your debts.
- Have some savings. Evidence of savings is a good way to increase your chances of getting a loan so you should try as much as possible to build your savings before applying again.
3. Seek for expert advice-: Another step to take in a bid to ensure that your loan application is not rejected the next time you apply; you may engage the services of a financial expert who would help you in packaging your loan application so as to increase your chances of getting your loan approved.
4. Reduce the amount you requested for-: If your income cannot justify the loan that you want to take, the bank may reject your loan. If this is the reason why your loan was rejected, then you can ask for a lesser amount.
5. Offer collateral security-: Basically, the bank is interested in protecting its funds and wants to ensure as much as possible that the funds do not fall into the wrong hands; hands of people who wouldn’t pay back or give the bank a hard time before paying.
But if the bank is assured that it will be able to get its funds back, then you won’t have problems getting your loan approved. In order to convince the bank that its funds are save, you can offer a collateral security to the bank which could be sold off to repay the debt in case you default.
6. Review your business plan-: If you are applying for a loan for your business, it would be wise to go back to the drawing board and review your business plan. Some people present carelessly written business plans to the bank with the mindset that the business plans do not really matter.
The truth is that your business plan matters and is one of the things that would be used in evaluating your application therefore, you must ensure that the business plan is well thought out and written. Make sure the financial part of your business plan is in order and if you think that you wouldn’t be able to write a good business plan on your own, hire someone who is a professional and experienced to write or review the business plan for you.
7. Re-apply for the loan-: Once you have tackled all the problems with your former application, then you can reapply for a loan again.
8. Report discrimination-: If you feel that your loan application is being rejected as a result of unlawful discrimination, then you have a right to seek legal redress against the bank.
9. Try another bank-: Some banks usually have strict lending policies than others. If you discover that you are dealing with a bank that is stricter in its lending policy, then you should consider trying another bank which may be more lenient.
10. Explore alternative financing-: If you have tried all yet failed, you shouldn’t give up. Instead, you should try alternative sources of funding. Some alternative sources of funding that you can try include-:
- Credit unions and Cooperative societies-: Credit unions and cooperative societies often lend money to their members at a low interest rate and they are not usually as strict as banks in their lending policy. However, they would expect you to be a member for a certain number of months, usually six months and expect that you would have some amount saved with them before you qualify for a lone.
- Seller financing-: If you are searching for loan to buy a business, you can ask for seller financing options whereby the seller would offer you loan to buy his business or offer you a chance to pay the money installmentally.
- Investors and Partners -: If it’s a business you are trying to fund, why not look for people who can partner up with you or invest in the business?
- Government grants-: Another way to raise money is by applying for government grants. Government grants are usually interest free plus you wouldn’t be expected to refund the money.
- Crowdfunding-: Lastly, you can explore crowd funding options on the internet as a way to raise the funds that you need.