20 Jan What Makes a Lender Say NO to a Business Startup Loan?
It’s a challenge nearly every startup faces. But it’s often difficult for new companies to find a lending partner. This is due to the strict lending rules put in place by traditional providers that limit access due to risk. Turning to other trustworthy providers can help your startup gain the funding it needs to grow at an early stage. QuickBridge provides loans to qualified businesses that have operated for as few as six months. And we’ll start the discussion even sooner.
Understanding why business startup loan applications get declined helps you make thoughtful decisions to increase your chances of approval. If your business has been open for at least three months, you can get in touch to learn more. Let’s look a little closer at a few key factors that help explain why business startup loans get declined.
Why Traditional Lenders Often Decline Business Startup Loans
In general, banks don’t like to take risks. This strategy for lending money is at the core of many banks’ operations.
Traditional lenders also tend to look at new businesses as especially risky recipients of loans, as The Balance pointed out. It’s difficult to get banks to change this perception. That’s true even if you have a great business plan and strong early results.
A number of factors used to grade potential small business loan recipients tend to go against the situations many company owners find themselves in. A poor or slim personal credit history, lack of cash flow, and a short time in business can all influence a lender’s decision. You’ll face even more obstacles if your business doesn’t have much in the way of collateral or capital.
The U.S. Small Business Administration as Another Option
The U.S. Small Business Administration acts as a bridge between a variety of lenders and new businesses. The backing of the SBA helps lenders feel more secure in providing loans. This can mean less strict requirements. If you’re trying to figure out why business startup loans get declined for your enterprise, the SBA may provide a viable alternative.
The SBA also requires that companies attempting to use this program exhaust all other funding options, however. This can eat up a lot of time for anyone, especially for business owners just getting started.
It’s also important to note that each lender will have individual rules that can complicate the process. Seeking out a loan through the SBA lending program also isn’t a guarantee of funding.
The Value of Alternative Lenders for Startups
If you’re still wondering why your business startup loans get declined, there’s another option out there. Alternative lenders are valuable to startups because they aren’t as strict in their lending rules.
Remember that the specifics can vary from one company to the next. Similarly, there is no absolute guarantee of funding. However, the more flexible nature of alternative lenders means there’s more room to find a small business loan agreement that works for everyone involved. Many of the reasons why startup business loans are declined by banks don’t apply in the same way to alternative lenders.
Some key facts to keep in mind as you start considering alternative lenders:
- Being declined by a bank doesn’t mean an alternative lender will do the same.
- You don’t need perfect credit or a long history to qualify for a loan from an alternative lender.
- You can use a loan from an alternative lender for nearly any business purpose.
QuickBridge welcomes the chance to work with startups that have as few as six months of business history. We pride ourselves on finding effective solutions that support emerging companies in this critical stage of growth. To learn more about how we can support your growing enterprise with a small business loan, get in touch with us today.
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