What Can I Do If My Business Loan Is Not Approved? (2024)

FAQs

Why can't I get approved for a business loan? ›

Common reasons for loan rejection are not having a long track record in business, deteriorating business conditions in the industry where you operate and poor cash flow. If the lender is concerned about something you can control, correcting the situation and then reapplying may be the best course of action.

Reasons you may be disqualified from a small business loan include a low credit score, poor cash flow, no collateral, significant debt, a bad business plan or having a business in a risky industry.

There are many negative consequences. For one, your business and potentially personal credit scores will drop significantly. Your lender could also demand full repayment of the loan immediately and apply a penalty interest rate. The lender will then pursue you for repayment in one way or another.

Consider reapplying when you've addressed any lender concerns. If you were denied an SBA loan, you'll need to wait 90 days before reapplying. Make sure to improve the area of your business that led to the loan denial in the first place.

With a fair credit score of 580-669, you'll meet most minimum credit score requirements for a cash advance, invoice factoring, or equipment financing.

Paying down debts, increasing your income, applying with a co-signer or co-borrower and looking for lenders that specialize in loans within your credit band could increase your approval odds.

While SBA loans offer valuable support for struggling small businesses, certain hurdles may affect eligibility. Factors like poor credit, lack of collateral, reluctance to use assets, past government loan defaults, or a criminal record can pose challenges.

What is the easiest SBA loan to get approved for? Loans under the 7(a) program have a higher acceptance rate. And since most 7(a) loans are for $50,000 or less, it may be easier to get approved for a small amount with an Express loan.

Business loans help you expand operations, cover payroll, pay for supplies, and manage cash flow. When you have poor or bad credit, finding a lender can be difficult, but there are many loan options available with credit scores as low as 500.

What happens if an LLC can't pay back a loan? ›

Depending on if you signed a personal guarantee and the structure of your business, you may be personally liable for business debts. If your business can't repay the loan, your personal assets could be at risk.

The SBA Will Initiate Collections

If liquidating your business and personal assets isn't enough, your lender will file a claim with the SBA. The SBA guarantees all partner lenders 50% to 80% of the loan, even if you don't pay. In case of default, the SBA will pay up to 85% of the loan amount.

With an Offer in Compromise, you can settle your SBA debt for less than the full amount owed. It's a viable option if you cannot pay your SBA debt in full. For example, paying your SBA loan guarantee might cause financial hardship. The SBA will consider several things when deciding whether to accept your settlement.

Many statistics say that large banks approve SBA loans at rates as low as 20-30%, while smaller banks approve SBA loans at around 40% or less. All this to say: SBA loan approval rates hover at half or below all loan applications that are submitted.

An offer in compromise (OIC) is an agreement that allows you to settle your debt. You draft a lump sum settlement or payment plan that you're willing to enact and if accepted, your lender and the SBA will resolve your debt — even if it's less than what you owe.

While getting a business loan can be difficult since most require strong personal and business credit scores, reliable cash flow and at least two years in business, there are alternatives available to obtain the cash you need.

Normally, businesses must meet SBA size standards, be able to repay, and have a sound business purpose. Even those with bad credit may qualify for startup funding. The lender will provide you with a full list of eligibility requirements for your loan.

First and foremost, your business must be for-profit and operate within the United States or its territories. Non-profit organizations are not eligible for SBA loans. Additionally, you must have exhausted all other financing options, including personal assets, before turning to an SBA loan.

The primary reasons businesses are denied a new business bank account include the business being too new, documentation being missing or unverifiable, or credit issues on either business or personal credit reports.