SBA loan refused? Here’s what to do next

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Being denied an SBA loan application can be a frustrating experience for business owners in need of financing. These loans often come with some of the best interest rates available and are partially guaranteed by the US Small Business Administration, making them very competitive.

If you are denied a SBA loan, the correct course of action depends on the reason for the refusal and the current state of your business finances.

Find out why your request was denied

If your SBA loan application is denied, you should receive an explanation of the decision. If you don’t have one or have any questions, contact the lender where your claim was processed to find out more.

The SBA has a set of Loan conditions that you will need to meet to qualify for a loan. If your business does not meet any of the following conditions, the loan could be refused:

  • Size of the company : If your business does not meet the SBA criteria for a small business, the application may be denied. Requirements differ by industry, but generally include the number of employees as well as the average annual income.

  • Funding needs: To qualify for an SBA loan, you should research other financing options before applying. You must also demonstrate a need for the funds and how you plan to use the money.

  • Commercial operations: Your business must be legally lucrative and all registration requirements met. You will also need to operate a business in an eligible industry. Ineligible industries include loans, gambling, and religious services.

  • Trade area: The SBA requires borrowers to be physically based in the United States and that the primary business is also located in the country.

  • Existing investment: To meet SBA standards, you will need to demonstrate that you have made a personal investment in your business, whether it’s time or money.

  • Commercial character: Businesses must demonstrate that bills are paid on time, that they are not overdue on existing loans, and that no partner who is at least 20% detained is currently incarcerated, on probation, on parole, or not. is accused in criminal proceedings.

Additionally, individual lenders will likely also have requirements and criteria. Make sure you know what is required before you apply.

Work on personal and professional credit

Typically, SBA loans go to applicants with good credit (at least a FICO score of 690). While some SBA loan programs, such as SBA start-up loans, are aimed at business owners with lower credit, an application will likely have a better chance with a higher credit score. If Your SBA Loan Is Denied Due To A Low Credit Score, Consider These Tips For build credit quickly.

If your business has been in business for long enough, you will likely have a business credit score also. This will also be taken into account in your application. Although there are different credit scores for businesses, the SBA uses the small business rating service FICO, or SBSS, for its 7 (a) program. This score ranges from 0 to 300, and the SBA looks for at least 155 in most applicants. However, individual lenders may have different minimums.

Review and improve finances

Your business and personal finances, beyond just credit history, can play a role in SBA loan approval. Since the SBA partially guarantees every loan, it wants to be sure that every business will be able to repay it. The more income your business generates and the healthier its cash reserves, the more likely you are to be approved.

Your personal finances also play a role here, especially if your business is too new to have a credit history. The SBA determines the impact of your own financial situation on your business and may reject you if you are personally overburdened with debt or fail to generate predictable, recurring income.

The more money you make – and keep in the business – will demonstrate to SBA lenders that you can afford to pay off what you’ve borrowed. Plus, it shows that your business is successful and resilient.

Reapply with a stronger application

The SBA requires that potential borrowers wait 90 days from the denial notice before they can reapply. If you can wait three months, take this opportunity to strengthen your application in the above areas. Work with your lender to make sure your new application meets all the requirements.

If you can’t afford to wait 90 days, consider other financing options.

Consider SBA Loan Alternatives

If you can’t wait to reapply, there are alternatives from traditional and online lenders.

Online lenders often have lower acceptance thresholds, but this option could also come with higher interest rates and shorter repayment periods. Traditional lenders may offer more competitive rates and terms, but business owners might have a harder time getting approved than the SBA or other creditors.

Common types of loans include term loans and lines of credit; However, if you have a more specific need for funds, you may also want to consider other financing options. For example, if you need to buy a new walk-in freezer for your restaurant, you might be able to get equipment financing instead of. With an equipment loan, you can get the money you need to buy a specific item. This item also serves as collateral on the loan, which can make approval easier.


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