Authored by Phil Cohen
You got denied a loan. Now what? That’s a hard question to answer. Loan denial isn’t the end of your funding options. Whether it be applying for another traditional loan or looking into other funding options, your business has options to pursue after a loan denial.
However, before you can move past your initial denial, you must find out what caused it and how it will affect you moving forward. If you don’t understand what set you back in the first place, you’re not going to be able to move forward with better accuracy.
How to Continue on After Loan Denial
Talk to Your Lender
The first step in moving past a loan denial is figuring out what thing or things disqualified you for it in the first place.
You could have been denied because you didn’t meet the basic requirements for the loan. Maybe you didn’t have great credit. Whatever reason, it should be disclosed to you. If you weren’t told why you were not given the loan when you first got your denial statement, call the agency providing the loan and ask to speak to the person that oversees such things. The reason the lender gives you for denying the loan will show you what direction you and your company need to be moving in order to successfully get funding.
If the lender does not immediately give an explanation on why your loan was denied, you can request it. Their answer will give you what you need to know to correct your mistake and seek future funding.
Analyze Your Credit Report and Score
The next step, whether your funder told you your credit was an issue or not, is to request your credit report and score.
Looking deeper into your credit report can show you how you appear on paper to potential lenders. Credit is a large factor in getting approved for traditional lending methods. Companies like Equifax, Experian and TransUnion are great for finding, downloading and understanding your credit report.
Looking deeper into your credit report can provide you with clarification on why your loan may have been denied as well as how to better your finances for future loan opportunities. Equifax, Experian and TransUnion are the three major credit reporting agencies. Examining your credit report can reveal that you owe on things you may have already paid off or even credit cards you never opened. If this is the case, you can file a dispute with each individual credit bureau and have the issue fixed.
Develop a Plan
Now that you know why you were denied for a loan and understand your credit report, it’s time to take the proper steps to ensure you won’t get denied for funding again.
Your plan strictly depends on why you were denied for the loan. For instance, if your credit score is low, work on paying off your outstanding balances. Set goals and stick to them. If you were denied because your company hasn’t been in business long enough, consider an alternative form of funding like invoice factoring.
What is Invoice Factoring?
Invoice factoring, also known as accounts receivable factoring, is the process of selling your company’s active invoices to a factoring company in exchange for a cash advance.
Results are not instant. It may take longer than expected to be able to get funding through a line of credit. Thankfully, that’s not the only funding option out there for companies.
Apply Through A Different Lender or Explore Other Funding Options
You have two final options after getting denied for a loan: re-apply for a loan through your traditional funding source and hope that it works the second time or seek funding through a different, less traditional funding source.
Reapplying for a Traditional Loan
If you are taking this route, wait a bit before applying again. It’s important to keep in mind that when you apply for a loan, the lender conducts a credit check. This check could count as another hard inquiry on your credit score and lower it even further. Also, remember that loan eligibility can differ based on the lender and their requirements. Inquire with several different lenders before settling on one to apply with.
Exploring Other Funding Options
There are other opportunities for funding outside of traditional bank loans. If your company is B2C, consider looking into getting a line of credit.
If your company is in the B2B space, consider invoice factoring.
Factoring isn’t debt, it’s a cash advance. You’ll never have to worry about repaying a loan with interest. The reserve is all the payment you’ll have to deal with. In addition, factoring approval is based on the credit strength of your clients, not you or your business. As long as your customers are other businesses with decent credit, you’ll be eligible to factor your invoices. Invoice factoring is extremely fast, incredibly easy and gives you control of your own money. Factor as much or as little as you want, it’s up to you!
How Does Invoice Factoring Work?
Invoice factoring is simple.
The first thing you have to do is contact us. We’ll ask you a few simple questions about your business, it’s income and your invoices. Then, we’ll use that information to match you with a factoring company that best fits your business. Factor Finders works with some of the best factoring companies in the nation, so rest assured knowing you’ll be paired with a reliable, quality factor.
From there, the factoring company will run your business through a quick approval process — quick as in you can be approved for factoring that same day.
Once approved, just continue to run your business and serve your customers as usual. The only thing you have to do differently is submit your invoices from the work completed to the factoring company. The factor will check to make sure the work was done or service was provided, then will advance you up to 95% of the invoice amount. The rest will be held as reserve.
When your client pays the invoice, the factoring company releases the reserve to your business minus a small factoring fee.
That’s it. It’s that simple.
Are you interested in learning more about invoice factoring? Do you have questions?
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