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Will My Small Business Ever Open?

John McMalcolm

December 23, 2014

According to data released by Biz2Credit, the approval rate for small business loans at large banks was 19.6 percent in May this year, which means that more than 80 percent of small business loan applications were rejected.

If you are one of those whose small business loan application is denied, you should not let your disappointment stop you from starting your small business.

There are a number of things that you can do to get funding for your new business after you are denied credit.

Find Out Why Your Loan Application Was Rejected

While some loan rejections are justified, others may be a result of errors.

Reassessing your loan application can help you better understand why you were denied and spot possible errors that may cause your lender to reconsider your application.

According to federal law, lenders are required to provide specific reasons for loan rejections in writing. Some of the common reasons for small business loan denial include insufficient income, low credit score, inadequate collateral and overly large loan amount.

If your small business loan application was rejected because you requested an overly large loan amount, you can increase your chances of getting your loan approved by lowering your desired loan amount.

In the event that you were denied because of inadequate collateral, you should reexamine the appraisal of your collateral to make sure that it is not undervalued.

Having a poor credit score is a problem that cannot be quickly solved, but you may be able to get the lender to reevaluate your loan application if you can find errors in your credit report.

Examples of these errors include purchases you did not make, purchases made by unauthorized people, improperly identified items, amounts that differ from actual prices, incorrect purchase dates and math errors.

According to an article entitled "What Happens If I'm Denied Credit?", you are entitled to get a free copy of your credit report within 60 days of the date of your loan denial letter.

Get a Second Opinion

Some small business loan providers have divisions for reevaluating loan applications. You can submit your credit report to them to get a second opinion.

After they correct errors in your credit report, they will send a copy of the corrected report to your lender.

Follow up with your lender by asking some questions of your own.

Apply for Another Loan

If your small business loan application was rejected because of poor credit score, you can try to get a loan from a lender that offers bad credit business loans.

These loans do not require you to have a high credit score, but they usually come with higher interest rates.

Compare loans offered by a few reputable lenders to get the best deal.

Getting a small business loan is not an easy task these days. Even if your loan application is rejected, you should not stop trying.

You can significantly increase your chances of securing your desired loan by following the tips above.

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