Small business SBA loans are highly sought after financing options for both young entrepreneurs and veterans. They come up with relatively low-interest rates, lower down payments, and flexible repayment terms. Moreover, you can use funds for many different purposes, from purchasing fixed assets to refinancing debt, buying real estate, bolstering working capital, and a lot more.
However, this small business funding is highly selective – lenders consider many important things when approving your SBA loan application. If you’re a business owner with limited borrowing history, securing SBA financing can be challenging.
Fortunately, if you don't qualify for an SBA loan, you can quickly get back on track, or secure capital elsewhere by following a few vital steps.
Steps to Take If Your Small Business SBA Loan Application Is Declined
Find Out Why Your Loan Application Wasn’t Approved
There are several reasons why you may not be approved for a small business SBA loan. For example, your business may relatively new, you may have a poor credit history, or you may not have enough collateral. Depending on the lender and SBA loan program you’re applying to, your denial letter will come either from the lender or from the SBA directly.
Whether you plan to apply for an SBA loan again or seek an alternative funding option, you’ll improve your business’ chances of success if you determine the reason behind your loan rejection.
To get your loan SBA loan application approved after a denial, you’re legally entitled to a written letter of explanation. When you approach a bank or a financial institution, try to understand the lender’s requirements. Ask your lender why your application was rejected and how can you increase your chances of securing an SBA loan. Understanding why you were denied can enable you to choose what way to seek after in the future.
Strengthen Your Small Business SBA Loan Application and Reapply
Improving your small business loan application is another great way to secure an SBA loan. While you can’t change some of the requirements of this loan type – for example, your length of time in business – you may be able to strengthen other important things quickly so that your application is approved in the future.
You need various documents to apply for an SBA loan including a business financial statement, personal background, loan application history, and more. Also, you’ll likely need to provide the personal and business credit score, a solid business plan, bank statements, personal and business income tax returns, business debt schedule, and collateral.
It’s always a smart idea to collect all the important documents and ensure that everything is completed correctly before applying for a small business SBA loan. Besides, understand your personal and business credit score and try to improve it. If you have a poor credit score, you can improve by checking your credit report regularly, decreasing your credit utilization, paying your vendors on time, and getting better business loans. Lenders will observe this meticulousness, and it could influence whether you get approved for financing.
Consider Alternative Financing Options
If you don’t want to go through the complicated application process, or you might not be willing to wait for months to reapply for an SBA loan, choosing an online alternative lender could be the best solution.
You may need to submit endless documentation and the latest financial & bank account statements when applying through a traditional bank. Fortunately, there are a plethora of alternative lenders that can help you secure a small business SBA loan easier and faster. Besides, you can try invoice financing, hard earn money loans, or business credit cards if you were denied for an SBA loan.
Final Thoughts
Remember, a rejected small business SBA loan application is not the end of the road. If your it was denied, you can try securing a different financing option from the same lender. Or, you could go for an online alternative lender. It’s suggested to use an online lending marketplace when getting an SBA loan for your small business. These innovative and intuitive platforms help you find and compare the best SBA loan offers, sold by multiple lenders, so you can choose a loan that best fits your current financial needs.