Are you an entrepreneur or small business owner in need of capital? You may think that banks are the way to go if you require a loan, but they’re only one option. For those of you who might not meet the strict criteria for a traditional loan from a bank, there is good news: there are other sources of funding out there!
The internet has made it easier than ever to secure capital for your business. These days, online lenders, or “non-bank” lenders, offer alternative financing options for small businesses that can help you accomplish your goals. Most of these lenders provide a modern touch, too, which can be a breath of fresh air after dealing with the paper applications and prolonged process of bank lending.
Non-bank lenders are also more flexible when it comes to credit requirements. They’ll use data-driven algorithms to determine the risk profile of applicants, which makes them ideal for someone with strong business financials who’s looking for fast funding. However, this technological approach to business financing isn’t perfect, and there have been situations where entrepreneurs are given unfavorable terms despite exceeding the minimum eligibility requirements because of a computer-driven error.
However, at ABUNDANCE FINANCIAL, there is a way around the prolonged bank underwriting processes and the AI errors with online lenders. Unlike a traditional bank lender, we partner with various marketplaces of non-bank lenders that encompass 75+ different lenders under one centralized platform, and you can receive multiple competitive offers with one streamlined application. These non-bank lenders don’t replace their team with technology and every member of their team is equipped with the resources that complement their natural talent and skills. They leverage years of lender relationships to secure terms that AI can’t, which allows entrepreneurs nationwide to find the RIGHT lender for their specific circumstances faster than ever.
If your bank refused your request for a small business loan, don’t be discouraged – here’s everything you need to know about finding capital after a bank or credit union denies your small business loan request.
Why Would a Bank Deny Your Small Business Loan Request?
Banks can deny a small business loan for a variety of reasons, including credit score concerns, industry restraints, and your inability to meet their eligibility requirements.
One of the most common causes of a small business loan application denial is that your business credit score doesn’t meet the minimum score required by the lender. Banks are notorious for upholding high credit score requirements, and if you can’t fit the bill, you could spend weeks or months waiting for a decision—only to receive a denial. The criteria will vary from lender to lender, but make sure that you understand exactly what they’re asking for to avoid wasting time on an application you won’t qualify for.
A bank could also deny your application because of your industry type. They could see your industry as inherently risky, or they might not know enough about your sector to determine your level of risk. For example, banks routinely deny applications for restaurants due to their high failure rate and potential for cash flow constraints. They’re also hesitant to finance newer industries, like cannabis, because of the stigma and their inexperience with the sector. In other words, banks don’t like to take risks, and if your organization poses even the slightest chance of default, then you can expect an uphill battle to reach an approval.
Other eligibility requirements, such as your time in business and annual revenue, can also stand between you and the capital you need to take your business to the next level. Some banks prioritize one requirement over the other, but in either case, you’ll need to meet or exceed their criteria to ensure you’re able to receive your funds in a timely manner.
All of this combines to form a very stressful and ambiguous situation for the entrepreneur seeking to accomplish their goals. However, if you’re faced with a denied application, you shouldn’t lose hope, as there are many other funding sources you can tap into.
Alternatives to Bank Financing
When a bank denies your application, you may feel discouraged and think that your dream of growing your business is over. However, this isn’t the case, as there are plenty of alternatives to the traditional small business bank loan. Here are five of the most common alternatives to a bank loan:
Online lenders gained popularity with the emergence and dependence on the internet. Rather than take yourself down to the bank you do business with you can apply for a business loan online and receive an offer much faster than with a traditional lender. However, the expedited process and ease of use come with one major disadvantage—higher interest rates.
Many entrepreneurs will get caught up in the cost of capital, but what’s important is what your business will look like after you’ve used the funds to grow. A higher interest rate becomes negligible if your increased revenue, productivity, or efficiency will offset the cost of your financing, so make sure to keep your eye on what truly matters rather than short-term issues.
Business Credit Cards
Business credit cards can be a great way to quickly access cash when you need it. You can make one-off purchases quickly and manage the payments over time, which can ease the pressure off your cash flow. Some cards come with lucrative rewards programs, too, so be sure to research and compare your options before applying.
Business credit cards come with a set limit, and you won’t be able to borrow in excess of that limit. If you were seeking to borrow a substantial amount through your small business loan application, then a business credit card might not yield the amount you hoped for. However, it’s a powerful tool for entrepreneurs in any industry, and you should consider this option on top of other financing options as well.
Newer businesses may need an influx of cash to get off the ground. But, with no relevant business history, securing a loan to support your growth is very difficult, so you may have to leverage your personal savings to accomplish your goals and establish a customer base before you become profitable. Many entrepreneurs try to avoid using personal funds to support their business, but if your options are limited, it can be a beneficial means to an end if managed correctly.
Your business may qualify for local, state, or federal business grants based on your personal characteristics, industry, or other factors. One of the most prominent benefits of government grants is that you usually won’t have to pay back the funds—what’s better than free money? But, of course, the lack of repayment makes this option highly attractive for entrepreneurs, which makes them very competitive.
The availability of these grants is also an issue, but it’s easily solved with a little proactive research. If you’re interested in securing government funding for your business, research the available grants in your local jurisdiction, state, or industry consistently to stay one step ahead of other entrepreneurs seeking the same option.
Crowdfunding is when a large group of people pool their money together to support projects and businesses. Before the internet, this was done at large events or through word-of-mouth networking, but online crowdfunding platforms have gained immense popularity over the last decade. Whether you’re using SeedInvest Technology or Kickstarter, you can potentially leverage these resources to secure the funds you need to accomplish your goals, but you’ll have to make sure that people see your plan and are interested in chipping in.
No matter what type of business you’re running, there are always options when it comes to finding capital. Bank loans aren’t the only way to access capital and grow your business—there are plenty of alternatives that can help you get the cash you need in a timely manner. Be sure to research all your options and choose the right one for your business before taking the plunge.
ABUNDANCE FINANCIAL Can Help You Streamline Your Search for Capital—Even if the Bank Denies Your Application
Finding capital isn’t as easy as you’d think, especially if you’re looking to borrow a sizeable amount. Most entrepreneurs will stop at their bank first, but a denied application can leave you feeling discouraged and unmotivated to continue your search. Fortunately, there’s a vast alternative lending world available to you, and ABUNDANCE FINANCIAL can help you find the best small business loan for your unique needs.
The knowledgeable Business Finance Advisors leverage a 75+ lender marketplace to help find the RIGHT lender for our client’s unique needs. After all, there’s no one-size-fits-all approach to business financing, which is why we take the time to learn about you, your business, and your goals to ensure we’re able to find a solution that fits your business. You fill out one digital application and receive multiple offers, all while our team advises you on which option will yield the best results for your bottom line.
Don’t let a bank application denial deter you from reaching your full potential, especially with a powerful partner like ABUNDANCE FINANCIAL in your corner. With us, you can find capital that fits your business—not your bank—and use the funds to cultivate sustainable growth in your business. We work with almost every industry, have experience with the intricacies of each, and can establish a relationship for you to leverage as you grow. When you need capital, trust the experts at ABUNDANCE FINANCIAL!
What Do Banks Look at When Approving Business Loans?
Banks and credit unions will review your business’s financial information to determine your eligibility for business loans. They’ll evaluate your credit score, time in business, annual revenue, outstanding liabilities, business plan, and more before coming to a decision. If they find that your business meets all their qualifications and they don’t see you as a risk, they’ll approve your loan request and supply your funds promptly.
They may also review your intended use of funds for some loan products, like term loans. It’s a good idea to come prepared with a business plan for this reason, as you can significantly shorten the process by having everything ready for their review.
What Disqualifies You From Getting a Business Loan?
Your business loan application can be denied for a number of reasons. Banks will deny you if you don’t meet their eligibility criteria or if you have a troubled financial background. For example, you’re less likely to reach an approval if you have previous defaults or a criminal record within your background. You can also be disqualified if the bank doesn’t agree with your intended use of funds for some loan products.
Do They Check Your Credit for a Small Business Loan?
Yes, most lenders will check your credit before approving you for a small business loan. The FICO score requirement you’ll need to meet will differ depending on the type of business loan, the amount you’re seeking, and the lender you’re doing business with. If you have less than stellar credit, it might be worthwhile to consider proactively strengthening your credit score to increase your chances of an approval.
By partnering with ABUNDANCE FINANCIAL, who partners with these various marketplaces of non-bank lenders, there are soft credit checks done to avoid damaging our client’s credit scores during a credit check. Plus, if you’re seeking to finance equipment, you don’t need to have a high credit score as long as you can show more than 1 year in business and $120,000+ in annual revenue.
What Credit Score Is Needed for a Small Business Loan?
Every lender has different credit score requirements that will differ depending on the type of small business loan you’re seeking, but it’s recommended to have a score of 600+ before applying. Your chances of reaching an approval only increase as your credit score gets stronger, so it’s recommended to proactively strengthen your score before starting the application process.
At ABUNDANCE FINANCIAL you only need a 580+ FICO score to qualify for most small business loans. We have financing options available for all businesses, and if you’re unable to meet our criteria, we can refer you to another lender that can help.
So, if you have read all of this and want some funding to grow your business, maybe it is a great time for us to connect. Reach out to me for more information by entering your information below. Let us help your business grow!!