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Are you a startup or small business that needs a business loan to help fund your company’s needs? Many new businesses need funding to get started, but not everyone gets approved so easily. There can be many reasons for business loans to be rejected. There can be a lot of requirements for loans as well. It is also good to know that not every funding source has the same requirements. So, if your business loan application was rejected, don’t panic! Just take a deep breath and do these 4 things to improve your situation.
Find Out Why Your Business Plan Was Rejected
Before you give up because your business loan application was rejected, simply ask yourself why it was rejected in the first place. This will give you a better understanding on what you can improve, so that you can get approved in the future. So, it definitely can be discouraging to get that rejected message, but it doesn’t mean that you won’t be able to start your own business! Perhaps your business loan was rejected because you are a startup, you have bad credit, you don’t have collateral to offer, not enough time in business, too much debt or your trying to enter a weakening industry.
Improve Your Business Plan
Does your business plan have room for improvement? Not to say your business plan was not good, but maybe it just wasn’t the business plan that would “wow” the lenders. Business plans are typically written to attract and to provide insight on your company’s overall background. So, did your business plan contain all the business plan essentials? Every business plan should include an impressive executive summary, a detailed company description, a well-researched market analysis, a clear description of your products and services, your marketing and sales goals, a reasonable funding request, realistic and promising company projections and an appendix. All these contents should be well thought out and well written. So, go back and look for any improvements you may need to make. You could also investigate hiring a business consulting agency to review over your business plan and make any necessary changes.
Look into Your Other Funding Options
Did you go to a traditional bank looking for a business loan? If so, that may be why they did not approve your application. Traditional banks usually have tougher requirements and often do not even lend to startups or new small businesses. So, you could investigate your other funding options. There are business loan agencies that possibly could hook you up with a nontraditional lender for funding. You could get startup business loans or possible a business line of credit just to get started. A business line of credit might be a great option because you can have an open line of credit and spend the money as you need it. If you have a business line of credit, you are only going to pay interest on the money you spend, not the full amount available to you. A business line of credit it a lot like a credit card. You could also investigate startup grants and even possibly asking family and friends for assistance. They could be your first investors!
Improve Your Credit Score
Was your loan rejected because of your credit score? If your loan has been rejected, maybe you should work on your credit score? Your credit score should be at least 600 for a business loan. Let’s talk about some things that may improve your credit score. The first things you probably would want to improve because of its high level of importance would be the amount of debt you owe. If you are already drowning in debt, then perhaps you need to work on paying off the debts you already own. Having that debt hanging over your shoulder would be a red flag to lenders. You could also check to make sure your credit report is accurate. If there is a negative remark on there and you are unsure of it, call and ask about it. If there is an inaccurate negative report, clearing that up could drastically improve your score. Another way to improve your credit score would be to make on time payments. You can’t rewrite the past but going forward make sure your payments are always on time. If you have trouble remembering when payments are due, just set a reminder on you cell phone or set up your payments to automatically come out of your account. Applying for a new account is also a good way to improve your score. So, you have been rejected for the business loan, but perhaps you should apply for the bank line of credit.
So, to wrap things up, if your business loan application was rejected, you may want to look into seek capital for your startup business loan needs. Business consulting agencies can help you with most of your startup business needs. Some things just take time and of course money, so don’t feel like your first loan rejection is going to stop you from receiving the money you need to get your business going! From writing a business plan to finding third party funding, they can help you! Don’t be too concerned about loan application rejection, just look into all your other options!