In today’s highly competitive business milieu, a loan denial can carry significant consequences for any organization that needs speedy access to additional working capital. Many small business owners are just now discovering they must expand to survive, and that they need access to reliable alternative lending solutions to avoid shuttering in the near term.

While a business loan application denial invariably presents business owners with a set of new challenges, these obstacles aren’t always insurmountable. The first step after a denied loan approval is to understand why your application was rejected.

The rejection letter will tell you how to start repairing your credit profile. You don’t want to risk running multiple hard credit inquiries the next time you apply. If your approach here is faulty, you could worsen your score to only find out you’re still unqualified for the desired loan.

Applying for business financing differs considerably from the process a standard wage earner endures after applying for a conventional bank loan, so it’s important to prepare accordingly.

If you’ve been running your company for a significant time, surely you’ve seen your ups and downs, and you know that your projected revenues are just that -predicted income and unassured.

Given that banks are in a position of taking substantial risk granting business loans, it’s not uncommon to find your loan application denied because you don’t meet all the necessary criteria for approval. When this happens, it can be disheartening, to say the least, and it might impact your existing growth strategy.

Fortunately, there are a few reliable steps you can take, which we’ll discuss below, that can improve your personal and business credit profiles so that you find better results in your next loan application.

If you’re wondering what to do if the bank turns down your loan, here’s a bit of advice on what steps you should take after your business loan is denied:

Start by understanding the underlying issues with your application

We’ve touched on this briefly in the introduction, but the first step after a business loan application denial is always to understand why the bank issued it in the first place.

When a loan application gets rejected, a competent lending consultant will likely advise you verbally on why your loan was kicked out of approval status. This notification is usually accompanied by a formal bank letter that reiterates these specific details.

You might discover that your debt-to-income ratio is too high, you don’t have enough seasoning on your business, or the proposed collateral assets values are too low. If you lack previous experience as a business borrower, some of the reasoning you’ll find in the denial may require further explanation. But, generally speaking, these details are usually straightforward enough for the typical business owner to understand.

One of the advantages of working with New Bridge Merchant Capital is that we do everything within our means to ensure that you’re qualified for the loan products you are interested in before formally submitting an application to underwriting. If it appears to our team that you’re not quite ready, we’ll work with you to establish an action plan that gets you back on track to receive a full approval.

The reasons a business loan was denied are often as numerous as they are diverse. However, our team of small business finance specialists can help you understand how to successfully prepare for getting your next loan application approved.

Start taking action to address the faults in your rejected application

Once you’ve discovered the bank denied your business loan application, proactively addressing the reasons for the denial you can control is crucial. Starting this process sooner rather than later is the key.

It’s worth pointing out that your loan could’ve been denied for reasons outside of your control, such as declining economic conditions or your wider industry recently destabilized. In these instances, there is little else to do but wait until circumstances improve, or you can pursue alternative lending solutions.

With that mentioned, concerning the faults within your application, there are a few that might simply fall outside of your control. If business seasoning is an issue, this would be a matter of waiting out the necessary time interval. Or, if documented cash flow is the problem, you can always adjust your invoice procedures so that you’re getting the funds owed faster and it’s easier for a third party to understand how much your business earns.

In most circumstances, your denial comes down to a less-than-favorable credit profile. If your application was rejected for a low credit score, the best practice is to start working on improving your personal and business credit scores now.

There are several ways to go about this process, many of which we’ve touched upon in previous articles. Without going into too much detail here, one of the most effective approaches for improving your credit score fast is by paying down your existing debt.

Ensure you’ve applied for the right loan product

If your business loan application was denied for factors outside of your personal control, company seasoning, for example, there’s a chance you could have applied for the wrong loan product.

In situations like these, communication with the financing institution is critical. After discussing your situation in-depth, you might discover that you qualify for lending products more suitable to businesses like yours.

Traditional small business lending and alternative specialized financing approval guidelines can differ considerably. Work with your lending professional at the bank to determine if there are any alternate paths to pursue after a denial.

Start a new loan application

Once you’ve addressed all the red flags in your bank rejection letter and increase your chances of approval, you’ll be ready to reapply for business credit.

Start by gathering all the relevant documents, assembling them neatly and coherently, in a way that doesn’t invite doubts or additional questions from the bank’s underwriting department. Work closely with your lending officer to ensure you have everything in order before formally submitting the loan application.

Finally, make sure that your plans for using funds from the business loan are intelligible and that the loan will add value to your business, enhancing its future profitability. You’ll also need to demonstrate a sufficient capacity to repay the proposed loan amount under the established payment terms.

Presenting an effective business plan and marketing strategy goes a long way in assuring the bank that you have all your bases covered and can repay the loan.

Need to speak with a business credit professional after a denial?

The team of business finance experts at New Bridge Merchant Capital has helped dozens of companies like yours improve their personal and business credit profiles so they can get back and track to accessing low-cost borrowing again.

We’re happy to discuss the details of your recently denied loan application and provide further insight on getting yourself approved in the next go-round.

If you’re struggling to secure business financing, connect with a lending specialist at New Bridge Merchant Capital online today or call our dedicated customer line now at 844-228-0593.