Monday , 2 October 2023

Steps Your Business Should Take When the Banks Say No

If you’re looking for ways to improve or grow your business, a loan could help you access the finances you need to make this happen. Doing your research to decide on suitable banks, lenders, and loans that would best suit your business is essential. There are a variety of loans out there that can benefit you if you find yourself in financial difficulties, like short-term loans, 24/7 loans, and business loans. Sometimes, your financial situation could mean that your chosen lender declines your application. Here are a few things your business could do if your bank turns you down.

Consider why they said no

The first thing to do if your application is declined by your lender is to reflect on why this might be the case. Identifying what you need to improve on will put you in a better position in the future. There are a few factors that can have a negative impact when qualifying for a loan, such as having too much debt. Lenders will not want to take a risk if they think you won’t be able to pay them back. A poor credit report or history of missed repayments will work against you when applying for a loan. You could also look at how long your business has been operating – if it is less than 6 months, it is likely that you will not be approved.

Try another lender

Maybe you’ve tried to apply for a loan with your bank and they’ve turned you down. Doing your research and finding lenders that offer loans that are more suited to your situation could be advantageous. You can search online, use affordability calculators, and see what is available to you. Just because one lender has turned you down, it doesn’t necessarily mean that the others will. If your application has been declined because of the reasons above, it might mean that your interest rates are higher if you do get approved for a loan, as lenders may see investing in your business as high risk.

Improve your credit score

If your business loan application has been declined, it could mean that your credit score doesn’t meet the criteria. If you’re looking to improve your credit score, there are a few ways that you could do this, such as making repayments on time – if you have a credit card, ensure that you’re paying it off regularly. You could also check for any errors in your credit score and report any mistakes that you come across. If you’re not quite ready to apply for a loan but you’re thinking about your options for the future, you can make sure you’re in the best position you can be before applying by keeping up repayments on any standing loans you may have, making sure you have a steady income, and generally keeping your finances in order, will work in your favour.

Pay off your debt

If you’ve applied for a business loan and have been turned down, it might be because you have too many outstanding debts already. Maybe you’ve taken out a loan in the past that you’re still repaying, or you’re financing equipment. Checking how much you have on your company credit card, making regular payments to bring this down is essential and can help your credit score in the long run. If you can pay off existing debt, you can show banks and lenders in the future that they can trust you to make your repayments.

Avoid potential problems

When applying for a loan, whether it’s a first-time application or you’re trying a different lender to secure a loan after you’ve been rejected – there are a few things that you can do to make sure this loan is approved successfully. When you’re waiting for your loan to be approved, try not to make any big purchases as this can hurt the ratio of debt-to-income. As well as this, your lender will need to know the source of the income that is going into your account, so you can speed up the application process by limiting the number of accounts you use before and during the approval process. Another small thing that you can do to help your odds of being approved is to respond to your lender as soon as possible. Even if the information is difficult to obtain, keeping in contact increases the odds of you being accepted – it allows you to keep the rate that you’ve been offered and speeds up the process of application.