What Should You Do If Your Small Business Loan Gets Declined?
A business loan has a lot more screening layers compared to any other loan. Therefore, having a loan application declined is not a major anomaly. It can happen to the best of businesses. And therefore, you must not get discouraged if this happens to you. If you are applying for a commercial loan and the lender declines, these are a few steps you must take to ensure that it does not happen again.
1. Analyse your Loan Application
Your loan application involves a very detailed and lengthy form. Therefore, oftentimes, we overlook some minor errors that can lead to application rejection. To ensure that the issue is not some minuscule technicalities, have a thorough look and have your accountant go through the form as well.
2. Review Lender Requirements
Each lender has a different set of criteria to qualify for a loan. Therefore, sometimes it is easy to get confused between multiple lenders and have a mix-up. To reconfirm that you have understood the lender's requirements, it is important that you go through their income statement requirements, cash flow requirements, documentation needs, etc. and that you fulfil them all.
3. See your Credit Score
The credit score of your business, as well as your personal credit score, has a role to play in the loan application screening process. As a result, you must check both of these credit scores and rethink your strategy accordingly.
4. Rethink your Loan Amount
The loan amount cannot be more than a certain amount of your annual income. That is why lenders ask for elaborate proofs of profit and loss statements as well as balance sheets, cash flow statements, etc. So if you think the loan amount can be reduced, consider it. This will take a huge load off you by streamlining your finances and reducing the overall interest rate.
5. Figure out Alternatives
Loan applications are complicated. Therefore, you can always consider different alternatives and different lenders. Some lenders are more business-friendly than others. In contrast, other lenders have much stricter criteria. There are cooperative lending societies as well that support small businesses or sometimes female business owners. Others support small local businesses.
After going through all the above steps, such as going through the application, their criteria, and readjusting your principal amount, you have a higher probability of qualifying for that commercial loan than before. In any case, a good accountant can always help you through the entire process.
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