What To Do if Your Loan Application Was Declined

Small business financing is often necessary to help grow and expand your business. If you recently applied for a small business loan but received an application decline, you may not know what to do or where to go next. Read our guide to learn how to improve your chance of approval the next time you apply for a small business loan.

Step 1: Review Your Application Details

If possible, review your financing application to ensure that your personal details are correct. Although mistakes are generally rare, data entry errors can lead to a loan decline. If you noticed any mistakes, contact the lender and complete a new application.

Step 2: Review the Loan Requirements

Business loan qualifications can vary by the loan and/or lender. It’s a good idea to review all the loan qualifications before applying. If you haven’t already, make sure that you qualify for the specific type of loan you applied for.

Step 3: Check Your Credit

Both your personal and business credit scores can affect your ability to qualify for a business loan. Late or missed payments, using too much revolving credit, poor cash flow and other factors can negatively impact your score. If you need to improve your credit, making on-time payments and limiting revolving debt are two of the best ways to improve your score over time. To improve your chances of approval for a small business loan, aim for as high a credit score as possible. Read our guide to learn more about improving your credit score.

Step 4: Reconsider the Principal Amount

When evaluating an application, lenders inquire about your revenue, cash flow and other financial information to make sure you can reasonably afford repayment. If the amount you apply to borrow is too high, lenders may decide that payments are out of reach. If possible, consider reducing the loan principal you request and reapply.

Step 5: Consider Alternative Loans

One loan application decline does not necessarily mean that you don’t have access to small business credit. Depending on your application details, you may qualify for a different type of loan or with another small business lender.

Step 6: Reapply 

Whether you choose a different lender or want to try again for the same type of financing, you can always apply again. Keep in mind that creditors generally perform credit inquiries when you seek credit. While soft credit pulls do not affect your credit, a hard credit pull can impact your score. The effect, however, is temporary and usually minimal as long as you don’t apply too often in too short a time.