Loan denials aren’t uncommon. If you’ve received a denial, don’t fall into frustration. In fact, you can even benefit from being turned down for loans. Loan denial indicates you have some problems with your credit or financial situation, so you should take measures to improve the situation and fix the problems.
Considering Small Business Funding?
According to the Small Business American Dream Gap Report, in 2015, 20% of the small businesses surveyed said they had considered shutting down, mainly because of lack of growth or cash-flow issues.
As of 2016, 20% of small businesses having applied for funding over the past 60 months reported being rejected. 45% of those denied reported they’d been rejected more than once. 23% of these businesses didn’t know the reason for such denial. The primary reason small businesses can’t obtain bank loans is that they don’t understand their business credit score.
Merchants on the lookout for reliable and low-cost business funding should consider turning to First American Merchant (FAM), a reputable business loan provider and payment processor that specializes in the high risk sector. First American Merchant offers exceptional merchant funding to merchants of any type: bad credit isn’t a problem for FAM. First American Merchant is an award-winning alternative online lender that boasts an A+ rating with the BBB.
After You’ve Been Denied
Due to the Equal Credit Opportunity Act, you should receive a letter from the lender that tells you the reason you’ve been denied. Review the letter so to have an idea why you didn’t meet the lender’s criteria and what you should do to solve the problem. However, you shouldn’t sit and wait for the letter to arrive since this may take a few weeks. What should you do?
- Check Your Credit Score
Check your credit reports from the 3 major credit reporting agencies — Equifax, Experian, and TransUnio. At AnnualCreditReport.com, you can get your credit reports copies once every 12 months for free. You can not only see the type of records you have but also find out if everything is accurate. In case, your records are inaccurate, you can file a dispute so that your credit report can be fixed.
- Take a Look at Your Credit Scores
Pay attention to your credit scores. They are affected by the following factors:
- Payment history
- Credit utilization (how much debt you have in relation to your total credit limit)
- Average age of your credit accounts
- The variety of credit accounts you have
- The number of inquiries on your credit profile
You can get a free credit report snapshot and gain a better understanding of how these factors impact your credit so to figure out how you can make improvements.
- When the Loan Denial Letter Arrives
Now that you have the explanation letter, you can compare the information you’ve gathered with the points and reasons mentioned in the letter to see whether they match. If you see some differences, you should talk to your lender for more details.
Wondering when you can apply for a new loan? Be aware you can do this after reviewing your credit, the explanation letter, and taking measures to improve the situation so that not to end up with another loan denial.