Funded and Denied by Lending Club? Here's What To Do Next
The application process for business loans can often be confusing and imprecise—especially when you’re dealing with new, tech-based lenders like Lending Club. As a result, many business owners find themselves assuming that they’re approved for a loan, but end up being denied in the end.
This confusion is especially prevalent with Lending Club. Many business owners have to deal with assuming their Lending Club funded, but being denied this loan in subsequent steps.
But we’re here to help clear up the confusion—and, of course, help you move forward in securing the funding you ultimately couldn’t access from Lending Club.
Here’s what to do if your Lending Club Loan funded but was denied in the end.
How Is It Possible to Be Funded but Denied in the End?
Again, the application process that business owners need to go through can be convoluted. And many times, this process can amount to a lot of confusion about the status of your application for a loan.
So much so that there are multiple scenarios that you could’ve assumed that your Lending Club loan funded, only to have it ultimately denied in later steps.
Which of the following three scenarios had you convinced that your Lending Club loan funded, only to have your application later denied?
Lending Club Pre-Qualified You but Denied Your Formal Application
Like many other players in the industry, Lending Club often prequalifies borrowers based on information they access from credit bureaus. If the information they accessed about you made Lending Club suspect that you’d be eligible for funding from them, they likely reached out with marketing materials stating that you were pre-qualified to borrow from them.
Now, this is where the confusion will start to creep in—many recipients of these marketing assume that the term “pre-qualified” means that they formally qualify for funding and don’t have to go through a formal application process. Unfortunately, this is far from the case. Even if you pre-qualify for a Lending Club loan, you’ll still need to submit formal documentation and fill out an application.
Through these materials, Lending Club will work to get to know your business’s finances better beyond the information they accessed that pre-qualified you. And during this step, Lending Club often finds details that will disqualify applicants, even if they were initially pre-qualified.
As a result, many prequalified Lending Club applicants think that their prequalification means that they’ve fully funded with a Lending Club loan, only to be ultimately denied in later rounds of the application process.
Lending Club Denied Your Application for Renewal
Another scenario in which you might find yourself with a Lending Club loan that was originally funded but subsequently denied? If Lending Club denies your request to renew your loan with them.
If you’ve already had a Lending Club loan funded, and you’ve already paid down most of your debt to them, then you’ll likely be eligible to renew your funding. However, if you’re behind schedule on repaying your debt—or your business’s financials have taken a dip since you first applied for a Lending Club loan—then Lending Club could very well deny your request for renewal.
This scenario is particularly likely for borrowers who have taken on additional debt since they first had their Lending Club loan funded.
Lending Club Denied a Draw from Your Line of Credit
One last instance in which many business owners think they’ve got a Lending Club loan fully funded, only to realize that the lender has denied them the funds they need? With a Lending Club line of credit. With this form of funding, you’ll not only need to qualify for initial funding, but you also might need to re-apply for each draw you make on your line of credit. As a result, you might qualify for a Lending Club line of credit, but if your credentials dip and you later request a draw on this line of credit, Lending Club might deny your draw request.
Will a Denied Loan Application Affect Your Credit?
Now, no matter which of these three scenarios you find yourself in, if your application for a Lending Club loan has been denied, you might be wondering whether or not your credit score has been affected by the process.
Fortunately, because Lending Club only performs soft pulls on your credit, you won’t see any changes to your personal credit score because of their application process.
Bouncing Back from a Denied Lending Club Application
Regardless of which way you might’ve found yourself expecting to be funded with a Lending Club loan—but ultimately denied—your next steps will be pretty straightforward.
Follow these three easy steps to bouncing back from a denied Lending Club loan application, even if you originally thought you had funded.
#1. Get Feedback from Lending Club
If you find yourself with a denied Lending Club loan application, it will be useful to know the exact reasons why you were denied funding. You’ll be able to secure this feedback from your denied loan application through your Adverse Actions paperwork.
For whatever reason your Lending Club loan application was ultimately denied, be sure to take note. Moving forward, keep this reason for your Lending Club in mind. If you need funding now, then search for another lender that will approve you despite this imperfection in your application.
Or, if you’re able to hold off on funding, take some time to improve this imperfection, and then seek funding from Lending Club—they won’t require that you wait a certain amount of time before re-applying, as other lenders tend to.
#2. Consider Applying to a Lending Club Partner
If Lending Club denies your application for a loan, they’ll allow you to immediately apply for funding with one of their partners. Though you’re not guaranteed to qualify for funding with one of these Lending Club partners, this application might be more streamlined than if you were to start from scratch elsewhere—Lending Club will likely pass on all of the information you provided for their application to whichever partner of theirs you decide to apply for funding with.
#3. Look for Funding Elsewhere
Alternatively, looking for funding elsewhere might be worth the extra bit of effort. Because you’ll have had to tidy all of your documentation and credentials for your Lending Club application, you’ll be pretty much ready to go to apply for funding from other, non-partner lenders. Plus, because your declined Lending Club loan application didn’t affect your credit, you’ll be working with the same credit score as before. Just make sure to figure out whether or not your reason for being denied for a Lending Club loan won’t keep you from qualifying with your next lender.
Where to Go if Lending Club Denied Your Application
If you’re eager to find the funding that Lending Club ultimately wasn’t able to provide you with, then your best bet will be looking to other online lenders that have different requirements of their borrowers.
Consider the following three alternative lenders as top contingency plans if Lending Club denies your loan application.
Though Fundation will have similar minimum requirements to Lending Club for your personal credit score, your annual revenue, and your time in business, their requirements differ in one, fundamental way. While Lending Club will require that your business be profitable, Fundation won’t.
So, if Lending Club denied your loan application because your business isn’t cash-flow positive, and you still want to access similar funding, then consider Fundation a go-to plan B.
Similarly, Funding Circle is another online lender that provides small businesses with medium-term loans. And though they’ll have similar requirements of their applicants’ personal credit, annual revenue, and time in business, Funding Circle won’t require that your business be profitable to qualify for funding from them.
LoanBuilder, a PayPal Service
Another short-term lender to consider if Lending Club denied your loan application is LoanBuilder, a PayPal Service. This lender will also be more lenient than Lending Club with their minimum requirements—you’ll just need a personal credit score of 600+, at least $120,000 in annual revenue, and at least nine months in business. And just like your other Lending Club alternatives, LoanBuilder won’t require your business to be profitable.
Again, because this Lending Club alternative is short-term funding, it will be more expensive than your other, medium-term loan options. That said, the factor rates attached to LoanBuilder funding are some of the most affordable in the game—they can dip as low as 1.025.