If your big bank has turned down your application for a small business loans, they are legally obligated to refer you to an alternative provider under the Small Business, Enterprise and Employment Act 2015 as part of the bank referral scheme.
The scheme exists to ensure that owners of businesses have somewhere to go for financial help.
The issue is, the referral is not always great. It is sometimes to another large bank who, once again, will reject your application for finance.
This is unfair. If you have an established business, a workable business model and finances that show you can repay, you should be approved for a loan. You should also be recommended lenders who are more likely to accept your application.
Why did your bank reject you?
The next step to take is to find out why your bank turned down your application for a small business loan in the first place. The reason may be something as innocent as spelling the name of a director wrongly. Or it might be something as alarming as the bank being unhappy with your balance sheets. Either way, you need to know why you were rejected so you can submit a better application the second time around.
Look beyond the bank for funding
Taking matters into your own hands is sometimes the only option. The good news is you have access to a wide range of independent lenders if you do so.
Looking beyond the bank, it is independent lenders who offer the best products. In fact, they are often better than those offered by high-street banks. This type of lending is sometimes referred to as ‘alternative lending’ because the lenders are by very definition an alternative. The benefits to using an independent lender include:
- Lower interest rates
- Flexible repayment terms
- Secured and unsecured funding
- The ability to refinance assets
- Specialist loans for your industry
Independent lenders are also willing to take risks big banks are not. That is why independent lenders have a much higher application approval percentage.
Loans to fund any aspect of a business
Perhaps the real draw of independent lenders is their wider range of loan offerings. Standard business loans are still a big deal, but specialist start-up loans, franchise loans, equipment loans, vehicle loans, tax loans, VAT loans and more are available to you. These cater for virtually every business requirement.
Don’t lose hope in your search for new funding
The important takeaway from this article is to never lose hope in your search. If your business is struggling financially or you can’t afford to invest where you want to, there is always a lender out there willing to take you on.
Do yourself a favour and forget big banks. If one has turned you down, it is more than likely another one will. Approach smaller lenders who specialise in business loans. They will be much more accommodating of you and your business.