Dear M & M: My bank has just denied my request for a loan. What can I do? -Henry
The first thing you want to do is find out why? Many times there can be a specific problem you can fix and reapply with the same institution. You must find out the specific reason why you were turned down. Maybe they don’t loan to start-ups or loan to the specific type of business you are trying to get a loan for. Every bank just like every business has different reasons for not conducting business.
You need to understand lenders restraints. Many lenders try to vary the types of loans they do as well as they types of businesses they are lending to. Diversifying their portfolios’ is a common lending practice. Many banks have minimums and maximum loan amounts they will lend. There are many reasons why you could be turned down. You must do some homework before you approach a lender.
One of the first things that should be done is to check your credit report to make sure it is accurate. The higher you credit score the better chances you have to get approved. However, a person’s credit score isn’t the only thing a bank is concerned with. Here are some questions you should know the answer to before you even approach a lender. What are you planning to do if you cannot make the payments?
Do you have adequate collateral to secure the loan if something happens? How much money do you need? How will you pay it back? What are you spending the money you are asking for on? Does the reason you are borrowing the money make sense? Does the loan make you a more profitable company? In the beginning and throughout the whole process you should be upfront with your lender, do not try to hide anything.
You should also expect the lender to be upfront with you and tell you why they choose not to do business with you. Remember all banks are in business to make money. Why would they take a risk on you if you don’t have a solid plan and show they can rely on you to pay them back?