Business Loan Declined? It Doesn't Have to Be the End of the Funding Journey

Getting a business loan declined can feel fairly final.

You may have spent weeks putting information together, answering questions and waiting for a decision, only to receive a no.

The natural reaction is often to assume that if one lender won't support the proposal, another lender probably won't either.

That isn't necessarily the case.

A decline is important and the reasons behind it shouldn't be ignored. Sometimes there is an underlying issue that needs to be addressed before further borrowing should be considered.

But a decline can also mean that the particular application, structure or funding requirement simply didn't fit that lender's appetite.

And that's an important distinction.

Different lenders look at businesses differently

There isn't one set of criteria used across the entire funding market.

Different lenders have different appetites for sectors, security, loan sizes, trading history and the purpose of the funding. A proposal that doesn't fit comfortably with one lender may be viewed differently elsewhere.

But that doesn't mean the next step should simply be sending the same application to another lender.

Before doing anything else, it's worth understanding why the first application didn't progress.

Was repayment capacity the issue? Was there insufficient security? Was the amount or term unsuitable? Was there something within the financials that caused concern? Or was the proposal simply outside that lender's current appetite?

Knowing the answer can completely change what happens next.

Sometimes the funding structure needs to change

This is an area that is often overlooked.

A business may approach a bank looking for one facility to cover its entire funding requirement. But when that requirement is properly broken down, different elements may be better suited to different types of funding.

Equipment, working capital, property, refinancing and investment in growth don't necessarily need to be funded in the same way.

Depending on the business and the project, there may be mainstream bank finance, asset or invoice finance, alternative lenders, State-backed schemes, grant support or even external investment to consider.

In some cases, the strongest solution can involve more than one funding source.

The important part is determining which route, or combination of routes, actually makes sense for that particular business.

Don't lose another few weeks

This is particularly important after a decline.

It can be tempting to immediately approach another bank or lender and start the process again. But if the underlying issue hasn't been identified, the business could spend another number of weeks answering questions before arriving at the same outcome.

The objective shouldn't be to find somebody who will lend at any cost.

It should be to understand what went wrong, establish whether the requirement is genuinely fundable and, if it is, determine how best to approach the market.

Sometimes that means another lender.

Sometimes it means changing the structure of the funding request.

And sometimes the right advice is that the business isn't ready to borrow yet.

A decline is a decision, not necessarily the end of the road

Having spent more than 20 years working in SME and commercial lending, one thing I've learned is that funding decisions are rarely as simple as "good business" or "bad business".

A lender saying no is a decision on a particular proposal, structured in a particular way, at a particular point in time.

It doesn't automatically mean the business has reached the end of its funding options.

At NextStep Business Solutions, I work with businesses both before they approach lenders and after applications have stalled or been declined. I look at why the original proposal didn't progress, reassess the overall funding requirement and give a straightforward view on whether there is a realistic alternative route or structure worth pursuing.

If your business has recently had a funding application declined, don't automatically assume that's the end of the journey.

Before submitting the same proposal somewhere else, it may be worth taking a fresh look at the funding strategy.