Being turned down for a bank loan as a business owner can be a very frustrating experience. If you are a start-up or SME this can be especially disappointing, as you may need the money to invest in your business. When you are refused a bank loan, there are steps you can take to understand why this happened, and other options to consider. For more information, continue reading. We look at what you can do if you are refused a bank loan.
Initial steps
The first step to solve the problem is to find out why you were refused a bank loan and turned down. There can be many reasons why the bank made this decision. It could be a small issue such as address verification being inconclusive. Or, it could be a more serious problem like a bad credit rating. This is the most common reason for banks turning down loans.
Check for errors
If you are refused a bank loan, the bank should tell you which credit reference agency they used. You can then contact the agency for a copy of the file, to check for any mistakes. If you do spot an error, contact the credit reference agency and ask them to amend it. If there isn’t a mistake on your credit file, then it means you were rejected for a different reason. This may because you have a lower income, so the bank isn’t certain that you will have the capacity to pay back the loan. Or, perhaps your credit rating is too low for the bank to accept.
Look for other options
All banks have different guidelines when it comes to giving out loans. If you are refused by one bank, try applying to another. Often, regional and rural banks have less stringent criteria, which may improve your chances of getting a loan.
Pay off debt
You may have been refused a bank loan because you are already in debt. If this is the case, considering clearing some of your outstanding loan amounts and debt before looking for another.
Stop applying
Sometimes, continuing to apply for bank loans can be harmful. When refused, take a step back and think about the reason you were refused, and if you can solve this. Every request to your credit rating agency from your bank can negatively impact your credit rating.
Refused a bank loan? Where to find out more
There are many other alternatives to a bank loan if you’re looking for finance for your business. Instead of buying equipment and vehicles, you could try leasing them or you could look at alternative finance options that will help you grow your business from strength to strength. We can help, take a look at our business finance section to find out more. Or get in touch if you’d like to discuss how we can help. We have access to alternative finance providers and can help with short-term business loan to help you achieve your business expansion goals.
