Home » Blog » Life After a Small Business Bank Loan Denial

Life After a Small Business Bank Loan Denial

July 14, 2022
Phil Cohen
Human Hand Writing On business Check

Before your business decides to give a bank loan another shot, there are a few things you will need to in order to increase your chances of getting a loan. There are many reasons why you could be denied a bank loan. It is important to understand the reasons why your business may not be receiving a bank loan and how to change it.

We are here to help you and give you all the information you need to get the funds you need! If all else fails, there are alternative lending options that are available for your business.

What Banks Want to See From Businesses Applying for Loans

Cash flow statement

Consistent and sufficient cash flow is important to small business lenders. It shows your business has the funds to pay back the loan in a timely manner. Businesses with a history of poor or inconsistent cash flow could easily be denied a bank loan.

Income statement

Also known as a profit and loss statement or an earnings report, income statements help lenders determine whether your business is profitable enough to receive a bank loan. Businesses without profitability potential are a liability to potential lenders.

Balance sheet

Balance sheets list everything that your business owes and owns, including the value of all your assets and any debts that you have yet to pay off. If your business is struggling to manage these costs or you are drowning in outstanding debt, it is unlikely that you will receive bank financing for your small business.

Tax returns

Banks often look at the past 2 or 3 years of your business’s tax returns to ensure your financials are in order. Providing that you’ve filed and paid your taxes, issuing copies of your returns should be relatively easy.

Credit score

Credit scores are always a factor when it comes to small business financing. Lenders will often look at both your personal credit and business credit, so businesses should always monitor their score. Federal law allows individuals to obtain at least one free credit report each year from either Experian, Equifax, or Trans Union.

Paying bills in a timely fashion will help maintain a good credit score. Bank loans are tough. If your credit score is under 700, landing bank financing will prove trying.

Business plan

A rock-solid plan goes a long way. Have a clear outline of exactly what you’re plans are for the bank financing. Banks and other lending sources want a detailed plan of how their money will be used to ensure your business continues to grow. Remember, in order to lend money, banks want proof of profitability.

Even with all of these financial documents in order, banks may still deny your business a loan for a variety of reasons such as changes in your industry or other economic realities. Fortunately, there are other funding options out there that can help small businesses in need.

profit icon

Alternative Business Funding Options

1. Unsecured business loans

If your small business doesn’t qualify for traditional lending, unsecured business loans are a quick option. It’s easy to qualify –even with a low credit score. The best part about unsecured business loans is that you will never have to put up collateral in order to get the loan. Unsecured business loans are also fast. Your business can get the loan it needs very quickly compared to working with a bank.

2. Invoice factoring

Being denied a bank loan isn’t the end of the world. Invoice factoring companies advance your business your open invoices. Your customers then pay for the invoices at their leisure. This process leaves your business debt free because your customers will be paying the money they owe directly to the factoring company. Payroll funding for small business owners gives you the working capital needed to maintain payroll, invest in marketing efforts and more.

Factor Finders has strong relationships in industries across the board.

Questions? Give us a call or fill out our online form.

About the Author

Phil is the owner of PRN Funding and sister company Factor Finders. He has been an authority in the factoring industry for over 20 years, serving on the board of directors for several factoring associations.

Learn more about Phil Cohen