Whether you are an established businessman looking for expansion or you are a new business owner just trying to cover all the routine operational expenses, accessing additional financing can be challenging. Lending options offered by the U.S. Small Business Administration (SBA) are one of the most common ways to cover such ventures due to their flexible repayment terms and relatively low-interest rates.
However, securing an SBA loan can be hard for business owners with limited or no borrowing history. If you have also gone through rejection with your SBA loan application, perhaps you need some guidance to improve your chances for next time. Business people who do not get approval for an SBA loan may refer to the 4 steps listed below.
Ask for an Explanation
It’s common to see business owners turning down more than once. And most of the time, they don’t know why their application was rejected. Whether it’s a banking finance company or a non-banking institution that rejects your SBA loan application, it’s important to know the reason for non-approval.
Re-applying without knowing the reason for the previous rejection will end with a similar result. Perhaps you are in the wrong industry or have a weak credit score, or just need collateral. Get an explanation about the rejection and how you can correct it from the banker reviewing your SBA loan application.
Improve the Application
We understand that some things are out of your control like years in business etc. But most items can be improved in your next application. SBA loans demand a lot of paperwork such as legal documents and financial statements. Additionally, you may also have to show them a robust business plan. Either go for a non-banking finance company such as REIL Capital for a paperless and online application or keep all the details and explanations with you to ensure approval of the loan application.
Understand Business Credit Score
It is quite normal for businesses to get a rejection on the basis of a weak business credit score. While some don’t know this reason, many don’t even understand it. To improve your business credit score, you should know all the factors affecting it. It gets very important to have a good business credit score to get an SBA loan.
Business credit scores are affected by several things including the length of time in business, outstanding debt, payment history with suppliers, industry risk, and company size. If you have a low business credit score, pay your suppliers and vendors on time, pay your credit accounts regularly, and try keeping your debt utilization low.
Keep an Eye on Alternative Funding Sources
You may have to accept the bad news that you cannot get an SBA loan but the good news is that it’s not your only option. If a financial institution rejects your application because you haven’t been in business for long, explore what the alternatives are. Look into the range of small business loans offered by several finance companies.
Conclusion
So we went through the steps you should take after your SBA loan application is rejected. Cash flow problems reportedly end up closing 82% of total small business fails. Additional working capital can be quite beneficial. Still, it’s not always easy to get SBA loans unless you are applying through REIL Capital. For more information regarding SBA loans for your small business, click here now.
