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Rejected by your bank for commercial finance?

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In the hustle bustle world of running a business, securing the right funding can often feel like navigating a maze with constantly shifting walls.

 

You may have a solid business plan, a promising venture, or a growth opportunity knocking at your door, yet finding a willing financier is harder than you thought?

If you’ve ever been met with a rejection from your bank, you’re not alone. This feels even more frustrating when you might already have multiple personal accounts through the same bank for many, many years, so you feel as though you’ve been a loyal customer.

Understanding why banks may reject your finance application and knowing what steps to take next can make all the difference.

Common reasons banks reject commercial loans

Having your application for finance rejected can feel quite disheartening. Particularly when said finance was likely to help you expand through purchasing new machinery, hiring more staff, or increasing capacity to take on larger projects.

There are many reasons why some banks reject finance including:

  • Limited trading history – Some banks want to see a minimum of 2 years’ trading history for a business before they will approve a loan.
  • Poor credit history – One of the business owners or directors has a bad personal credit history through missed payments, outstanding debts, or making too many loan applications.
  • Weak cashflow – A bank will want to understand your ability to not only repay the loan, but also to cover your own operational expenses.
  • Industry uncertainty – Certain industries such as blockchain, crypto or cannabis could be subject to future changes through government policy, making them risky to lenders.
  • Asking for the wrong amount – You might think this just covers those who ask for too much, but in fact, you can also ask for too little.
  • Issues with documentation – Submitting incomplete or inadequate paperwork with your loan application can see your application not properly considered by the lender.
  • Wrong loan application – With so many different types of loan available, it can be tricky to ensure you’ve selected the right loan type.

It is important to note that if you identify with any of the above points, it does not mean that you cannot get commercial finance. It just means that we need to find the right lender for your individual situation.

 

Understanding bank criteria

Just as every business is unique, so too are the criteria set forth by different financial institutions. While one bank might eagerly finance a tech startup, another may be hesitant due to perceived risks associated with the industry. Similarly, a bank may have specific requirements regarding revenue, credit history, collateral, or even geographic location. These criteria often stem from the bank’s risk assessment models and internal policies.

It is our job as a commercial finance broker to assist you with navigating these criteria, and sometimes it means avoiding the banks altogether and going for a different type of lender.

 

Variations in lending appetites

Not all lenders have the same appetite for certain lending types. For example, while some banks or lenders specialise in equipment financing or real estate loans, others may focus on line of credit or cashflow financing.

It is also worth nothing that factors such as economic conditions, regulatory changes, or shifts in market trends can influence a lender’s willingness to engage in certain types of lending at any given time. This nuanced landscape highlights the importance of having an experienced finance broker in your corner who can not only identify potential lenders for you, but who also understands their specific areas of expertise and interest.

Navigating documentation requirements

When it comes to navigating the documentation requirements for a commercial loan, a lot of people can become quite overwhelmed.

In terms of what documentation will be required for an application, different types of loans and lenders will require varying levels of documentation, ranging from business plans and financial statements, to tax returns and personal credit histories.

While navigating a paperwork maze can seem daunting when you are busy trying to run your business, a knowledgeable finance broker can help to make this process easier. We can help you gather and organize the required documentation, even working with your accountant to get what we need to ensure that your loan application is complete, accurate, and has the highest chance of getting approved.

 

Partnering with Alegra Financial Solutions

When you are faced with the frustrating reality that your bank may not finance your business needs, please get in touch with us here at Alegra Financial Solutions.

With our expertise in the commercial finance space, we can help you navigate the lending institutions out there and secure the funding that your business needs to thrive.

We are armed with an extensive network of over 50 lenders, and we have a deep understanding of their lending criteria meaning that we can identify the lenders most likely to finance what you need, and when you need it.

Whether you’re seeking startup capital, expansion funding, or specialised equipment finance, we’ll match you with lenders will align with your needs.