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The Bank Turned You Down for a Small Business Loan. Now What?

Although it’s been years since the days of the last financial crisis, the rate at which big banks lend to small businesses has never really recovered. As a result, many businesses today that want or need fast-track access to capital find that they just can’t get it.

It’s a now-common scenario: You walk into a bank with reams of papers in-hand and all the proof you need that your small business is a safe bet for a loan. You have good credit and a solid business plan, and yet, you can’t get that small business loan you need to help the business grow.

Some reasons a bank might turn you down include credit history, the loan amount being too small, being in business less than two years, losses on your tax return, or your business being based at home. Sometimes, the bank won’t even explain its reasoning for turning you down at all.

It’s a frustrating and disheartening experience for any business owner, and it can feel like the odds are against you. Even if you worked hard to build your business the right way, it could slip away simply because the banks don’t want to play.

There is a solution that small businesses owners don’t know enough about: alternative lending. These alternative lenders are willing to take risks that banks aren’t, because they are not constrained by the same regulations that stifle innovation at big banks.

Of course, there is one catch — higher interest rates, which can range from 8% to 25%. These are higher than traditional bank loans, but they’re usually assigned appropriately with the risk involved, depending on your credit score, business plan, collateral, and other factors.

The key thing to remember: Don’t lose hope if a bank turns down your loan application, because there are a lot of alternative lenders out there that are eager for your business. Fundera can do the hard work of helping you navigate the waters of alternative lending; submit a simple application and the very best alternative lenders could be sending you offers in as little as two days.

Image: Ben Thompson/Flickr

Meredith Wood

Meredith Wood

Editor-in-Chief at Fundera
Meredith is Editor-in-Chief at Fundera. Specializing in financial advice for small business owners, Meredith is a current and past contributor to Yahoo!, Amex OPEN Forum, Fox Business, SCORE, AllBusiness and more.
Meredith Wood