Rejected by the Bank? You Can Still Get a Loan
By Claire Parker, Staples® Contributing Writer
Getting denied for a loan by your own bank can feel like a slap in the face. No one likes loan rejection, especially from the very place that holds your money. But don’t let the bank’s rebuff send you into breakup mode.
Finding a small business loan option is possible. You just have to know where to look and what questions to ask. Think of it as dating around.
We asked the experts how to navigate the process of finding alternative sources of funding.
Rejected? Regroup.
Typically, there are three major reasons a business owner may be rejected by a bank. “The first is not enough time in business; banks want a track record of two to three years minimum. Also, if the business owner has a low personal credit score; banks want a personal credit score of 720 or better. And finally, monthly revenue is not $20,000 or better,” notes Brock Blake, CEO of Lendio, which helps match small business owners with lenders.
So before seeking another form of financing, get your house in order. “Make sure monthly revenues are $8,000 or better, have six months of business under your belt, and have no outstanding liens and no bankruptcies,” Blake advises.
Taking stock of income, credit history, collateral and personal finances may seem daunting, but these nuts and bolts are essential to proving you’re responsible enough to get funding. Blake suggests making a business-financing plan by answering a few simple questions:
- If I needed money for my business, could I get the money? Chart the resources you have and are willing to leverage to make your business grow.
- How quickly could I get money? Know the timeline you’ll be working with, and prioritize areas where capital is essential.
- Where would I get the money and how much? Research traditional and alternative sources of funding and how much you actually need.
Creating these strategies takes time, effort and probably a wake-up call, but it can be done. “Don't give up! If you believe in your business, you can get the funding,” says Robert Diestel, head of credit marketing and global payment strategy at Staples.
There Is a Solution
Many lenders offer flexible and innovative approaches to lending — such as micro loans, inventory financing, merchant cash advances and person-to-person loans — and variable terms that traditional banks don’t budge on. But always compare the annual percentage rates for whatever type of loan alternative lenders are offering to find the best option.
To help customers find flexible lending approaches like these, Staples has partnered with Lendio for a newly launched financing program. “Customers have expressed frustration with the current business loan process,” notes Diestel. “We're taking a bold step forward to help our customers access more capital to help small businesses grow and make more happen.”
Crowdfunding or crowdsourcing is another creative option these days for raising capital. There are several crowdfunding websites where companies can ask for donations or investment-based funding, such as Kickstarter.com, Fundable.com or Crowdfunder.com. Just be aware that if offers of equity in exchange for investments are on the table, you could lose later-stage funding opportunities from investors who don’t want to pay off those early backers.
If you prefer a more traditional option, there’s always the Small Business Administration. The SBA works with companies to secure financing and can back loans, which sometimes pushes traditional banks to approve financing when they otherwise wouldn’t. Calling a local chapter or scheduling a meeting with one of its partners — such as SCORE, Small Business Development Centers or Women’s Business Centers — is one way to leverage SBA resources in a new way.
In addition, personal credit cards can be a quick way to get capital for smaller needs. Consumer protection is available on personal cards, and you can build up good credit history if you use them wisely. Talk to your accountant about providing detailed expense reports when using a personal card for business so a proper paper trail is in place.
Put Your Game Plan to Use
Once you’ve a financial strategy and you’ve decided on a lending source, get going.
Cary Peterson, owner of Kohala Burger & Taco in Waimea, HI, secured a capital loan that allowed him to make improvements to his restaurant on the Big Island. “We worked through many options until we found the one that was right for us,” Peterson says. He ended up with a three-year working capital loan and is using the money to replace flooring and equipment, and upgrade the phone system.
“I needed to be able to have cash to work through the downtime we may incur as a result of making these improvments,” he says. Getting his loan to work for the business, then making money to pay off the loan increases his chances of getting financing opportunities in the future.
So hold your head high and know that funding can be found. “Don't give up or get discouraged,” adds Peterson. “The money is out there!”