Few things can be as devastating for a new business owner as seeing their loan application getting rejected. For some, this could be a question of life or death. It is often when businesses are starting that they need the capital the most too, and so many of them end up failing because of lack of capital.
That doesn’t mean that the situation is hopeless, however. You now have more options than ever at your disposal, and there are also things that you can do to make yourself more attractive to lenders. Here are a few things you can do if your business loan application has been rejected.
Improve or Establish Your Credit
The first thing you will have to do is improve or establish your credit. The goal here is to create positive financial activity that can be reported.
If you’re a sole proprietor, it would be wise to consider incorporating or building an LLC. This will allow you to keep your personal and business credit separated. You should then get your DUNS number and EIN and start opening accounts.
If your credit is ruined, then get a secured business card. You need to use it responsibly as well. Open as many accounts with suppliers using your DUNS number. Make sure that you keep good relationships with them and that they will report your activity.
Reevaluate Your Reasons for Taking a Loan
In many cases, loans are rejected because of your intentions. Lenders will prefer to lend money for expenses that will benefit your bottom line. If you want money to refit your office, for instance, you can expect most lenders to turn you down. No matter what the case may be, it’s always better to ask the lender why you were rejected so you know what you should do to have a better chance next time.
Look at Alternative Lenders
Another thing you should do is look at alternative lending options. All lenders have different rules for who they lend money to, and some will place less importance on your credit score than others.
Several business lenders exist to assist with cash flow problems, and, while they will consider your credit, they will also look at the state of your books. This could be helpful for a business that has a lot of activity but hasn’t had the time to be fully established yet. Taking a loan from an alternative lender and using it properly can also help you build your credit.
Offer Collateral
You also have the option of offering collateral if all else fails. If you have anything of value, it could be used as collateral. It all depends on what the lender is willing to accept. This can be things like real estate, equipment, vehicles, or even inventory. Don’t assume you have nothing to give and look at your assets to see if there’s anything you can confidently put up.
These are all things that you could do immediately if you’ve been turned down for a business loan. There’s always hope, but you also have to be ready to look at your habits and how you treat your credit.
