If you’re in need of funding for your small business, your bank probably seems like the logical place to start. Unfortunately, it isn’t easy to qualify for small business loans. According to the Washington Post, regional banks tend to approve only about 49 percent of the loan applications that cross their desks. Forbes reports that larger banks are only approving about 26 percent of the loan applications they review. So if you’ve been rejected for a small business loan, you’re in good company.
Don’t take a loan rejection personally, and don’t despair. Here are some things you can consider doing to secure funding for your business, even if your loan was rejected:
Review your rejected application with a sharply critical eye to determine where it could be improved. Then fix the areas that need improvement, and try again with a different financial institution.
Perhaps there was a mismatch between your business and the financial institution you initially sought funding from. For example, restaurants are high-risk businesses that some financial institutions may automatically be inclined not to lend to; many new restaurants fail, and lenders are often hesitant to fund them unless the business plan presented to them is airtight. There are, however, lenders who routinely lend to restaurant owners. If the business you’re running is a restaurant, your challenge would be to find a financial institution that would be receptive to funding that type of business.
Banks are not your only option for borrowing money. Peer-to-peer lending networks are connecting entrepreneurs with investors — without any involvement from financial institutions being necessary. If this sounds interesting to you, check out Lending Club, Upstart and Prosper to discover several of the peer-to-peer lending networks you could use.
Finding an angel investor for your business could be a win-win situation for both you and the investor. You’d benefit by receiving access to funding. Your investor might also provide input into your business operations that could help the business to become more successful. In return, you’d repay the investor’s money with an additional healthy profit margin included in the repayment.
Individuals frequently have different criteria than banks do for lending, so you may be able to find an investor who believes in your business and wants to see it succeed.
If you have valuable personal assets, you could consider selling them and using the resulting funds to run your business. Assets like boats, motorcycles, jewelry and even designer handbags could yield considerable amounts of cash to use for your business needs. Another salable asset that might not immediately come to mind is your life insurance policy. You could consider doing either a life settlement or viatical settlement transaction; then you could use the settlement funds you receive for your business. Get more information here from a specialist life settlement provider if you’re interested in exploring it further.
As you can see, you have multiple options available for securing funding for your business. It isn’t a disaster if your bank denied your small business loan; if your bank has said no, be sure to explore your other options to find a suitable source of funding.
John Pearson is a serial entrepreneur and writer who is passionate about helping small businesses launch and grow. His work has been featured in Huffington Post, Entrepreneur, and Forbes.