Declined for a business loan? What to do next

Banks lend within tight credit policies. Common reasons for a no include a short trading history, a loss in the latest accounts, financial statements that are out of date, IRD arrears, a credit default, not enough security, or a purpose the bank does not lend for.

A deadline the bank's process cannot meet is, in practice, another kind of no. So is an approval for less than you need.

Online unsecured and cash flow lenders mostly assess your bank statements: turnover, how regular the deposits are, dishonoured payments, overdrawn days and the repayments you already make to other lenders. A quiet month, a few failed direct debits or an existing loan can be enough to fall outside their model.

Because these loans are unsecured, amounts are usually smaller and repayments are often taken daily or weekly. If you already have one or more of these loans, adding another can make cash flow harder, not easier.

Ask the lender why. Many will give you a reason, and it tells you what to fix. Then check your credit report: Centrix, Equifax and Experian will each give you a free copy, and you can ask them to correct anything that is wrong. Avoid applying to lender after lender in quick succession, because each application can add an enquiry to your credit file.

Talk to your accountant about whether the numbers support more borrowing. If the business has a temporary gap and a clear way to repay, a different kind of lender may help. If the business cannot afford its current debts, more borrowing is unlikely to fix that, and getting advice early matters.

HomeSec's loans are secured by a first or second mortgage over residential or commercial property, so the decision rests on the security, the business purpose and the plan to repay, rather than only on a credit score or recent bank statements. That lets us consider scenarios other lenders decline, including tax debt, a past default or a short trading history.

Owners use a property-secured loan to pay IRD, to replace expensive unsecured debt that has frequent repayments, or to fund the opportunity they were declined for. Approved facilities may offer up to six months with no scheduled payments, which can give cash flow room to recover. Interest still accrues, and approval is never guaranteed.