Find out why
Banks decline for reasons that often have little to do with whether the business is sound: less than two years in business, a credit score below their line, not enough collateral, an industry they avoid, or a request too small to be worth their time. The reason decides where to go next, so it is worth asking.
Match the reason to the option
- Not enough collateral, or a term too long for the bank: an SBA lender, since the SBA's guarantee covers part of the loan
- Too new, or too small a request: an online lender or a line of credit
- An asset to finance: equipment finance, against the equipment itself
- Unpaid invoices: factoring or receivables financing
- Strong deposits, weaker credit: revenue-based financing
- An underserved community or a smaller business: a CDFI, a community lender with a mission to lend where banks do not
What to avoid
Applying to many lenders at once can mean many hard credit inquiries, each of which lowers the score that the next lender reads. Taking several short-term advances to make up for one declined loan is how many businesses end up with payments they cannot carry.
Where a broker helps
Knowing which funders take which kinds of business is a broker's job. One complete application, taken to the funders most likely to approve it, usually gets a faster answer than applying everywhere.