You’ve crunched the numbers and decided you need to raise finance to get to the next stage. You’ve brushed up your latest accounts, done some projections, downloaded your bank statements and applied to your bank. But no deal. Application rejected. Come back next year. If that’s you then you’re not alone. Brush yourself off and try these steps to get the finance your business needs:
1. Get answers
Contact the lender and ask for the reasons why they can’t help you. Ask them what you could do to go from a “no” to a “yes”. Any decent lender will give you advice at this point. This information is gold dust and will put you in a much stronger position so you can figure out how to improve your application or successfully apply to another lender.
2. Check your credit score
Yes, lenders look at your credit score. And yes, you can improve it. Some of the simplest steps you can take personally to improve your credit score are making sure you’re on the electoral role and checking your credit file to see if you have any unknown credit issues you can resolve. Check out these tips on improving your business credit score.
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3. Work on the business
We all work in the business – doing the day-to-day tasks that keeps things ticking over. But when did you last step back and work “on” the business? Two of the most common reasons for being refused a business loan are poor cash flow and insufficient income. Take some time out of the business. Review your terms of trade – could you improve your payment terms to bolster your cash flow? Review your pricing – could you raise your prices and improve profit margins, or offer discounts for bulk orders?
Need more inspiration? Read this guide on the 5 best ways to improve working capital.
4. Try a different lending model
We all know you can’t fit a square peg in a round hole, but that’s often what it’s like for businesses applying to their bank. However, there are lenders that quite like square pegs. There is no set criteria that lenders use, and so they all have very different approaches to assessing business loans. Some are led by credit scores; some are led by income streams; a few obsess over the asset being funded, while others focus on the security being offered. If you’ve had a business loan turned down by your bank, try a challenger bank, an alternative finance provider or a peer-to-peer lender.
Using a business finance comparison site like BIZL can help you quickly and easily work out which lenders are a good fit for your business. In fact, around a third of the businesses that we help have previously had a business loan declined by their bank. It’s not the end of the road by any means – you’ve just got to persevere and speak to the right lenders.
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