What To Do When Your Small Business Loan Is Denied

It is a common experience that kills many small businesses before they have a chance to get going. A loan gets denied, and the hopeful entrepreneur loses all morale. After all, no matter how grand your planning has been, you will not get anywhere without capital. And many businesspeople do not start with a plan B in mind when it comes to financing.

Not only does a loan denial leave an individual or business with no set plan for financing, but it can also cause the person to rethink the whole idea. Maybe their business plan is naive or based on mistakes. Or maybe they are the problem, and their inability to handle finances could sink their business.

Chances are, none of this is true, but your mind will go down many unfortunate avenues when your small business loan is denied.

In order to keep going and find another way for your business to thrive, you need to know the important first steps to take. Then you can find alternative loan options on bestsmallbusinessloans.com, or search for other ways to finance your dream. Here is how you can get started.

Get more information from the lender

It is all-too-easy for you to make assumptions about why your loan was denied. Some of these thoughts may even deter you from getting the real story. What if your worst case scenario is actually the truth?

However, if you are to make it in business, you need to confront these fears. Mistakes are inevitable on the way to success, and you need to know for sure what you are doing wrong. Find out exactly why your loan was denied, and ask the lender what you could have done differently.

Some of the information might not be great to hear, but knowing where you went wrong will help you improve. You will also get a clear idea of whether applying for another loan is worth your while or whether you are better off going in a different direction.

Find a business mentor (or VC)

You should already have a mentor in business, as the most successful people learn from their predecessors. You are more likely to make it in business if you are following the guidance of someone who has already learned the ropes.

But if you do not have a mentor as yet, it becomes crucial once your loan gets denied. Denial of a loan does not mean your business is not a safe bet, but it can mean that you are not ready. You may not have had the necessary information, a good enough credit score, the right approach, or even knowledge of the best possible loan.

In some cases, a mentor would have told you that your loan would not be approved in the first place, and you would have gone about things differently.

Finding a good mentor is not easy, but if you have created a network, it should be more than a possibility. If you have a former boss with whom you cultivated a good relationship, this might be a good place to start.

The best case scenario is perhaps that you find a venture capitalist who is looking to invest both time and money in another entrepreneur. These angel investors will serve as your mentor in order to ensure that their financial investment gets used as effectively as possible.

Find other financing options

The circumstances of why your loan was denied will determine whether another similar loan is an option. If not, you will need to find other financing options and weigh up the best way forward.

These days, there are a number of options. There are not only many traditional types of small business loans, but there are also newer ideas like peer-to-peer lending. You can even try getting an SBA loan that comes with low interest rates and a fair amount of counseling and support.

Alternatively, you can fund your business through a different means, by looking for investors, finding partners, or saving up through a so-called side hustle.

Having your small business loan denied is morale sapping. However, it should by no means signal the end of your business idea. There are so many more ways to finance your business, and you will find your way there with the right people on board to help.

This article does not necessarily reflect the opinions of the editors or management of EconoTimes.