If your SMB loan was rejected, you’re not alone. 82% of business hopefuls get rejected.
And it’s not always you. Small businesses are risky ventures.
Only about 50% of small businesses survive past their fifth year. Loan companies look at that and say, “We might not get our money back.”
Thus, banks are extremely careful about which entrepreneurs they lend their money to.
But a loan denied isn’t the end of the road. Here’s what you can do if your SMB loan was denied.
Ask All The Questions (Why Was Your Loan Denied?)
While four out of five SMB loans get rejected, almost half of those people get rejected a second time. Why? Because they don’t ask the right questions.
They just “move on” thinking they’re not worthy. But the reality of their situation isn’t so esoteric.
Figuring out why your loan application was denied will help you succeed a second time. Here’s why you might have been rejected.
Is Your Credit Score Too Low?
This is the most common reason an SMB gets rejected. This isn’t a mortgage, where the bank can just take your home if you can’t make your payments. They want to see you’ll be faithful in paying back the loan.
And if your personal credit score is too low, it might mean you’ve missed something in your own financial history.
Get a credit report (you can get them free twice a year without penalty). Figure out how to fix your credit score, and try again.
Are You Too Green?
You’ve probably heard the phrase “bad credit is better than no credit.” In the business world, it would be “bad business experience is better than no business experience.”
Even if you’ve started a business and failed, that’s better than never having tried. And if you’ve been in business, but aren’t reporting your vendor payments to the credit agencies, you might not look like you’ve been in business to a bank.
If you don’t have much experience running a business, you can still find a lender — it might just take some extra time and shopping around.
Is Your Niche Risky?
A risky niche is one in which there is a high failure rate. Restaurants are a risky venture because of high competition. Vice industries like gambling are over-regulated and difficult to start up.
You can find lenders who specialize in these industries. Just do your research.
Update Your Applications and Reapply
An SMB loan can involve a ton of paperwork. Maybe you missed a crucial document.
It’s like that old saying, “If at first, you don’t succeed, try, try again.” It might take several application attempts and maybe a few readjustments to get your loan approved.
Take your time on the application. Be sure you have other eyes on the application. You could easily miss a mistake and not even know it.
The lender isn’t going to voluntarily take their time to explain why your SMB loan was denied. It’s your responsibility to figure it out.
If you’re ready to upgrade your business, apply now for an SMB loan.