Business loans are one of the first options for new entrepreneurs or business owners who are just starting a business. However, it is not always easy to secure business loans as several factors may be involved; factors such as the business’s income-cost ratio and the amount of debt the business has may come between the business owner and desired business loans. And so, many times, it is not unusual to hear back from banks or lending institutions, only to find out that your business loan application has been declined. When this happens, do not be discouraged.



Business loan applications are usually declined for a lot of reasons. It may have to do with your low credit scores or your business’s income-to-spending ratio or even internal issues of your financing lender. However, no matter the case, it is always important to not be discouraged and remain focused on securing funding for you business even after your business loan application has been declined. No matter how many times the application has been declined, there may still be hope and other avenues to securing a business loan in the future. However, there are some basic guidelines you have to follow whenever you’re planning to try again, after your business loan application has been declined. Some of these guidelines include:

  • Find out exactly why your business loan was declined

The very first thing you must do as soon as you receive the confirmation that your business loan was declined is to find a way to deal with emotionally. Do not break down in despair and give up all hopes of your business ever achieving success. Instead, console yourself, go back to the drawing board and attack this new impediment with logic. The most important question you must ask yourself during this period is not, “is it too late to stop this whole entrepreneurship thing and go and get that nine-to-five?” but, “why exactly has my business loan been declined?”

It is important to find out the exact reason or reasons why your lending institution has decided to decline your application for a business loan because only then can you know exactly what it is that you might be doing wrong. Knowing the reasons why this has happened will go a long way in helping you to fix up your current situation, thereby raising your chances of acceptance upon the submission of subsequent loan applications.

You can find out the reason why your business loan application has been declined in one – or more – of the following ways:

  1. By reading through the content of the letter sent to convey the denial of the business loan.

A lot of the time, the reason why your application for a business loan has been declined may be written in the body of the letter sent to convey the response of the financing institution. However, at times, not all financing institutions will disclose their reasons for turning down your application.

  1. Call them up and ask

In instances like this, when the reasons are not readily disclosed within their letter – or if there is no letter at all – it may be better for you to call them up and speak to a representative about why your application has been declined. But if and when you do call them up, try to be very polite and remember; the primary purpose of that discussion is not to try and change the mind of the financing institution on their position on your application, rather, the goal of the discussion is to find out exactly why you application for a business loan has been declined. Sometimes, you may have to set up an appointment for a zoom meeting or a face- to-face meeting with a representative of the financing institution; particularly if you have your heart set on obtaining your business loan from that particular company or institution.

Ultimately, when you do make the decision to call up the financing institution in order to discover their reasons for declining your business loan, you must be careful to ask them the right questions, using the right professional and polite tone; particularly if you have your heart set on obtaining a business loan from that particular financing institution. And when they tell you their reasons for declining your application for a business loan, stay cheerful and politely ask them what you have to do to obtain approval on your next application.

  • Improve your credit scores

Low credit scores are one of the most common reasons why applications for business loans are being declined. Therefore, it is a very important thing to look into and fix when you plan on trying for another business loan. If you have a good business idea and plan, as well as good credit scores as a business owner and your business is also doing well financially – without debt or plenty of debt, and having a high income to cost ratio – financial institutions will be more amenable to approving your business loan applications. So, if your application has previously been declined, you should examine your business and see how you can improve its financial standings as well as your own credit scores before applying for a new business loan.

  • Find another financing institution

In some cases, the reasons why your application for a business loan has been declined may have more to do with the policies of the lending institution than with your actual application; especially if you have good credit scores and your business is in a pretty solid position financially. It might be that the financing institution has limited slots for businesses they can lend money to or the month you sent in your application was not a good one for them internally or a myriad of other reasons. In this case, it might be a good idea to find another financing lender with different policies which might be favorable for you.

But ultimately, you must remain encouraged if your business loan application gets declined and focus on moving on.

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