Bank Credit

I’ve Been Rejected for a Commercial Loan… What Next?

Being rejected for a commercial loan from a bank can be a demoralising experience, but it’s one you shouldn’t take personally or allow to dampen your enthusiasm. After all, any successful business owner is going to need a pretty thick skin, especially when it comes to matters of finance.

If you’ve been turned down by a bank for a business loan in the past, here are five steps to ensuring you get the green light next time around.

Find out why

There are a whole host of reasons why a bank might not be willing to commit to a commercial loan: cash-flow issues, a lack of collateral or reasons entirely unrelated to your business itself, such as a risky market or an unfavourable current climate. When the bank informs you your application has been rejected, it’s unlikely they’ll elaborate on why – so be sure to ask them and get to the bottom of the matter.

Check your credit rating

One of the biggest reasons why a bank might not approve a commercial loan not mentioned above is a poor credit rating. Even if your business has a respectable rating, if your own personal one is lagging behind, it could affect your application. Request a credit report, look into and chase up any discrepancies and do your utmost to improve that figure going forwards, by paying off bills, credit cards and other outstanding debts on time.

Look into alternative options

A traditional loan might be the most well-trodden route to financing your company’s launch or expansion, but it’s not the only path open to you. Do your research and investigate the possibility of attracting funding via other means, such as the money-generating practice of invoice factoring or the increasingly-popular phenomenon of crowdfunding.

Consider your own assets

If you aren’t prepared to put up your own assets (such as a house or car) as collateral for your loan, you’re betraying a lack of faith in your own vision. If you don’t believe your project can succeed, why should a bank? Look carefully at what you own and evaluate the risks and benefits of introducing your assets into your next commercial loan application. It could make all the difference.

Don’t bank on the banks

The banking industry isn’t the be-all and end-all when it comes to securing a commercial loan to bolster your business. Consider enlisting the help of a commercial finance broker, who have the knowledge, expertise and experience to assess all of the options open to you and find the source of funding most appropriate for your unique situation.