Being able to access the right funding options to support the growth of your business is vital to its success and with banks regularly rejecting business loan applications, it’s a hurdle that many SMEs encounter.
According to recent statistics published by the Small Business Administration, one fifth of start ups fail within the first year and around half of all employer establishments find themselves closing their doors for the last time within five.
Considering that only one third survive long enough to make it to the ten year mark, it’s important to do everything you possibly can to stay afloat and ahead of the ever-growing competition.
Insufficient capital is one of the biggest reasons behind all types of businesses failing – and that’s whether you’re a start up or a seasoned brand.
Ultimately, it’s important to remember that cash is king and without the ability to access working capital when the need arises, most businesses find themselves in an impossible situation.
I Applied for A Commercial Loan… and Got Rejected
Applying for a commercial loan to help your business can be a daunting experience and it’s one that is made a whole lot worse when your application is rejected.
The first step to take is to work out exactly why your business loan application was rejected in the first place. Common reasons are:
Banks will usually refer to your credit history when deciding whether to grant you access to a commercial business loan or not. If your credit rating is not favourable, banks are likely to reject your loan application as this is seen as high risk – something banks don’t generally like to associate with.
At Nucleus Commercial Finance, we prefer to give every business a chance, so even if your business has previously experienced adverse credit, we still encourage loan applications.
You Applied for Numerous Loans Simultaneously
Generally speaking, it’s important to only make one loan application at a time. When an individual fills out countless business loan applications in a short space of time, banks get the impression that your business is desperate for cash – and desperate rarely equates to an approved loan application when the bank is involved.
Lack of Collateral
For businesses that don’t have an abundance of fixed assets, having a business loan with reasonable rates approved by the bank can be almost impossible. There are a lot of secured business loans that the banks can offer, but without a residential or commercial property to secure the loan against, business owners often find that their loan applications get rejected.
Our Property Finance range allow businesses that are low on fixed assets to borrow the amount they need to flourish. If you don’t have a prosperous commercial property portfolio to use as collateral, you can use a charge against your residential property instead.
It’s worth noting that banks may also refer to your personal credit rating. Your business may well have a particularly strong credit rating, but if your personal credit looks unhealthy to the banks, it can potentially impact your business loan application.
If this is the case, it’s important that you make every possible effort to steadily improve your personal credit rating, as it can negatively impinge on the growth of your expanding business.
What’s the Alternative?
You’re likely reading this because your business loan application recently got rejected and you’re exploring the other options available to you.
Whilst banks are traditionally the first point of call for businesses wanting to borrow money, the rise of alternative lenders has meant that SMEs and start ups finally stand a chance of succeeding.
Alternative finance providers like Nucleus are giving businesses a vital lifeline by taking into account that there is no longer a typical business model. This means that realistically, there can’t be a one size fits all solution to business finance and this should be reflected in the options available to potential borrowers.
In recent years, banks have been losing out to alternative business finance providers and it’s a reality that isn’t likely to change moving forward either.
Unlike banks, alternative finance providers recognise that a rigid approach is not always the best approach. Such rigidity results in many fantastic businesses being overlooked simply because they don’t fit into the very black and white approach the banks implement.
The alternative finance industry is also booming because it takes the individual requirements of each business into consideration to create tailored funding solutions.
At Nucleus Commercial Finance, we offer a range of 7 products to enable businesses to thrive. Sometimes a combination of our funding products is the best approach, which is why we take the time to get to know your business before creating a bespoke funding solution.
To find out more about how you can use Property Finance to grow your business, talk to our team of experts.