Why Your SBA Loan Was Denied & What To Do Next
Did you apply for an SBA loan but your application was denied? Find out why it was declined and learn what you can do to get funded.
Small Business Administration (SBA) loans are popular with business owners due to their competitive rates and favorable terms. However, these low-interest loans are only available to businesses that meet stringent requirements.
Unfortunately, this means that some small businesses will have their SBA loans denied and will need to seek alternative options or apply again in the future.
If you received a denial letter for your SBA loan, you’re in the right place. In this post, we’ll break down why SBA loans are denied, how to reapply, and the next steps you need to take to obtain funding for your small business.
Table of Contents
- Common Reasons Why SBA Loans Are Denied
- How To Find Out If Your SBA Loan Was Denied
- What To Do If Your SBA Loan Application Is Declined
- Reapplying For An SBA Loan
- Alternatives To SBA Loans
- FAQs About SBA Loan Denials
- The Bottom Line On SBA Loan Denials
Common Reasons Why SBA Loans Are Denied
If your SBA loan was denied, you’re not alone. According to one research study, 49% of SBA loans are approved at small banks and just 25% are approved by large banks.
Here are the most common reasons why SBA loans are denied.
How To Find Out If Your SBA Loan Was Denied
Per federal law, you will receive a notice of denial when your SBA loan isn’t approved. This notice will be sent by the SBA or your lender and should include the reason why your loan was denied.
Unfortunately, the reason given may be vague (i.e., your loan was denied because you didn’t meet SBA requirements). If you have questions about the specific reason you were denied, try reaching out to your lender to find out more information.
While it isn’t guaranteed, your lender may have insight as to why your loan was denied and can suggest the next steps you can take, such as reapplying at a later time or applying for another type of funding.
What To Do If Your SBA Loan Application Is Declined
Getting denied for an SBA loan is disappointing, but now is the time to take action. Whether you plan to reapply for an SBA loan or pursue another loan, here’s what you need to do before your next loan application.
Reapplying For An SBA Loan
If you received a notice of denial for your SBA loan, you’ll be required to wait for 90 days before reapplying. This applies even if a minor error resulted in your loan denial.
During this time period, you can work to improve your credit score, prepare your documentation, and take other steps to increase your odds of approval. However, if you’re unable to wait 90 days to reapply (plus the 30 to 90+ days it takes to receive an SBA loan), you might want to consider alternative funding.
Alternatives To SBA Loans
If you need funding and don’t want to wait to reapply for an SBA loan, there are other options worth considering. Whether you face credit score issues, operate a startup, or need cash in a hurry, here’s a breakdown of the funding alternatives available to you.
|Loan Type||What It Is|
|Term Loans||Also known as installment loans, these loans provide a lump sum that is repaid over a specific period of time.|
|Lines Of Credit||This is a flexible form of financing that allows you to make multiple draws and only pay interest on used funds.|
|Short-Term Loans||These loans are repaid over a shorter period of time. They have lower borrowing requirements than SBA loans and are often funded within days.|
|Equipment Loans||These loans are used for the purchase of equipment. The equipment typically serves as the collateral to secure the loan.|
|Microloans||Microloans are small loans of $50,000 or less.|
|Crowdfunding||Crowdfunding allows borrowers to use a platform to solicit funding from investors.|
|Merchant Cash Advances||MCAs are advances on future sales. These come at a high cost and are typically used by new businesses or borrowers with poor credit.|
|Invoice Financing||Invoice financing provides upfront cash in exchange for unpaid customer invoices.|
The terms, fees, and rates vary by lender, credit score, and other factors. Make sure to carefully evaluate your options to find the best small business loans for your situation.
FAQs About SBA Loan Denials
The Bottom Line On SBA Loan Denials
Having your SBA loan application denied can be disappointing, but there are other funding options available. Whether you take the time to rebuild your credit or seek alternative funding, make sure to do your research, weigh out the pros and cons of each funding option, and take the time to determine the best course of action for your business’s unique financial needs.