5 steps to improve your situation when you’ve being denied Business FinancePublished on 23rd March 2018 2018-03-23T11:55:52+00:00 - Last update on 17th August 2019 2019-08-17T23:06:09+00:00
One of the biggest challenges for you to overcome is ensuring that your business has access to sufficient cash reserves. However, applying for business finance can be an intimidating process. If you’re a small business owner whose previous application has been declined, the experience may have left you feeling as if you’ve been left hanging with no idea where to turn next. As a result, you may decide to use your own funds or postpone key projects. This could place undue strain on your finances and risk allowing your competitors to overtake you which, in the long-run, could prove disastrous for your business. However, being rejected needn’t be the end of the road. So, whether you’re looking to boost growth, support your finances or receive a cash injection, you could turn a decline into an acceptance by following these 5 steps.
- Request an explanation
- Review your business credit score and profile
- Improve your financial standing
- Assess what other products might be suitable
- Apply carefully next time
What reasons did the lender have for rejecting your application?
If your application for Business Finance has been previous declined, you can ask the lender to give you a written explanation. In fact, doing so is highly recommended. Although it’s tempting to try and persuade them to change their mind, lenders rarely go back on their decision once it’s been made. As such, you should focus your energy on understanding what factors lead to their decision and what requirements your business failed to meet. This will offer you vital information that will allow to identify and remedy any areas of concern so that your next application stands a higher chance of getting accepted.
How strong is my Personal and Business Credit Profile?
When applying for Business Finance, lenders will usually request permission to review both your Personal and Business Credit Score, allowing them to form a stronger understanding of your performance and current financial situation. So, before applying for Business Finance, you should take the time to assess your Credit Profile, which can be achieved through agencies such as Experian, Equifax or TransUnion. Go through their report and check for any issues which may affect your application. If you spot any details that are out of date or inaccurate, contact the concerned agency as soon as possible in order to have them rectified and not hinder any future finance applications. However, be careful not to check it too many times in a short period. The number of time your Credit Profile has been checked can be seen by lenders and could lead to them believing that there are issues, even if there aren’t.
So when reviewing your Credit Score, lenders will look at whether you have any outstanding or past CCJs, Accelerated Payment Notices, Arrears, unpaid debt and whether you have a history of settling debt on time. Therefore, if you’re aware of any issues that may negatively affect your application, you need to consider what action can be taken to get them resolved.
How can I improve my business’ financial standing?
As well as your Credit Score, you also need to take in account how well your business is performing financially in areas such as Annual Revenue, Monthly Income, and whether you have any savings (which is why you should avoid using your own funds). Lenders will factor this into their decision and it will also allow them to evaluate your business’ ability to afford the concerned product. One way of checking affordability is by calculating your Debt Service Coverage Ratio (DSCR), which can be done by using this formula:
(Annual net operating income + depreciation and other non-cash charges)
Divided by interest + current maturities of long-term debt = DSCR
If your business has a low Debt Service Coverage Ratio, boosting your monthly revenue in a short time frame to accommodate for this can be difficult. This may even be the reason why you’re applying for business finance in the first place. However, you could get around this by asking for a lower amount of funding or assessing what other Business Finance products are available.
Are there more suitable products available?
One reason for why your business was turned away could have been because the product you were applying for may not have been suitable. Thanks to the Alternative Finance Industry, there is a wide range of business finance products available, all of which work in different ways to support your business. As such, assessing if other finance products could be more aligned with your goals, you could source an agreement that’s more suitable for how your business operates. Plus, there’s also a large number of business lenders that you can choose from. So a rejection from one lender may not lead to the same result from another. If you wish to learn more about what finance solutions are on offer, speaking with a qualified Business Finance professional could prove invaluable.
Did I complete the application form properly the first time around?
Finally, one of the most common reasons for being rejected is because the application form was incorrectly filled in. As a business owner, your main focus will be running your day-to-day operations, which is understandable. Yet, although it can be difficult, you must dedicate a sufficient amount of time to your application that’ll allow you to provide sufficient information and correct any mistakes. Are you submitting the correct documentation? How accurate is the information you’re providing? Are your balance sheet, profit and loss statements, bank statements and tax returns up to date? How reliable are your figures? Sure it can be time-consuming, but by taking the time to triple-check your application you may stand a higher chance of receiving the funds your business requires.
Thinking about reapplying for Business Finance?
Making sure that you have access to sufficient cash reserves is one of the most important responsibilities of any business owner. But if you’ve been previously been rejected, the experience may have discouraged you from applying for business finance any time soon. However, this can lead to weak growth and an inability to support your day-to-day operations. But, it doesn’t need to get to this point. If you’ve previously been turned down, speaking with a qualified Business Finance professional could help. At Rangewell, we work with over 300 lenders to offer you an overview of more than 23,000 business finance products. Our services are free to use and we’ll also guide you through the entire application process. So if your business needs funding, regardless of the reason, apply for a Business Finance solution today or find out more with Rangewell.
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