A bank rejection is painful particularly if your company is under a time crunch to get new equipment or in need of working capital. Many businesses leave the financing step as the last thing on their agenda which may not allow enough time for an alternate plan in case things don’t go smoothly.
Commercial lenders operate within certain strict parameters and guidelines. Understanding them will help you stop jumping from bank to bank expecting a different outcome from your same request. So, what should you do if your loan or equipment lease request is rejected?
Step 1 – Don’t grab your paperwork, withdraw your funds and go running down the street. Instead, request a short meeting with your lender and take the time to fully understand specifically why you were rejected and take notes. You may lack time in business, have credit below their standard, suffer insufficient cash flow or carry too much debt. These standards are the same for banks across the board so dumping your lender will usually not help. Plus a long term relationship with one institution is best for your business in the long run. It is better to understand why you were declined so you can develop a strategy.
Step 2 – Ask your lender what it would take to get approved with them. Here is where the value of a seasoned personal banker will be useful. Many of them will have worked for various banks so their knowledge will be invaluable. Perhaps moving assets from one area to another will get the job done or bringing on a partner with good credit will help. Ask which issues are complete roadblocks; these will be red flags for all lenders. For instance, 9 months in business for most lenders is a complete dead end. Understand what the show-stoppers are and take more notes.
Step 3 – Talk to a finance specialist, like myself, who works with wholesale lenders and investor groups which can offer a variety of programs and funding solutions. Our lenders have more flexibility and work under different guidelines than commercial banks therefore; the declines are less frequent since they specialize in working with a wider variety of credit profiles.
Our best advice; provide your notes based on your past rejections so we know exactly where you stand and what type of lender is most likely to approve you. That way your strengths can be accentuated and your request proposed in the best light. We can offer “A” credit clients the lowest rates competitive with banks yet can also approve “B” and “C” credits with the best rates for their condition. Plus it won’t cost you any money or fees to find out if you can be approved.