By Evan Vitale
Now that you feel you have made the proper contacts; have the answers to all your important questions, and have all the necessary paperwork and spreadsheets ready (as per your banker’s recommendations), it’s time to apply for the loan.
Most business owners never apply for a true business loan from their bank because they fear rejection. Loan rejection happens to everyone at one time or another.
A business colleague of mine needed to purchase computer equipment and printers for his growing business. Unfortunately, he was rejected. Fast-forward two years later, the same bank – and other banks – were taking him to lunch and begging him for his business and offered him loan opportunities. He laughs and says “the banks wouldn’t help me when I needed them. Now that I don’t need them, they are always ready to give me a loan.”
Establishing credit for a new business is very difficult. You need collateral to secure the loan (in most cases, property is the best collateral).
However, getting rejected for a bank loan isn’t necessary the end of the world and it’s not bad either. Here’s why:
Your banker will tell you the reason why your loan was rejected and that let’s you know what financials you need to work on. You may have a bad mark on your credit that shouldn’t be there and perhaps it’s something you can fix. The bank may need for you to have more years in business or might need some other source of collateral in order to secure the loan. Regardless, you’ll find out the reasons for rejection and you can start taking steps to make financial improvements for you and your business.
In our next blog post, we’ll look at some credit alternatives in case your bank denies your loan application.