- Here’s what you can do to move forward after your financing application was denied
- Take control of your cash flow.
Getting turned down for business financing can hit hard, especially after you’ve put in the work to get your documents in order and apply. The good news?
| “A denial doesn’t define your business—or your future. Sometimes, it’s just a signal to fine-tune your approach or try a different path,” said Credibly Founder Ryan Rosett. “A denied application gives you the chance to pause, reassess, and get strategic.” |
You’ve already shown the drive and determination to launch your business. Now it’s time to make a few smart changes like improving your credit, exploring alternative financing options, or getting clear on your financial story. Let’s take a look at your options.
Here’s what you can do to move forward after your financing application was denied
Feeling uncertain since your financing application was denied? Know that you’re far from alone! Around 20% of all business loan applications get denied. Being denied financing can feel like a setback, but it’s also a turning point. The key is to dig into the reasons behind the decision and use that insight to chart your next move.
Here’s how to break down what happened and open up new options for your business.
1. Find out why your financing application was denied
Don’t let a denial keep you in the dark. If your application was declined, you’ll receive a notification listing the reason(s). This notification is called an Adverse Action Notice or AAN.
You can also often find minimum requirements on the financing provider’s website and see where your application might have missed the mark. If you need more detail, ask directly.
Here are some potential reasons your inquiry may have been denied:
Are you an early-stage business?
Most financers want to see steady sales, a solid revenue stream, and 6 months or more in business before they’ll say yes. That doesn’t close the door.
If you’ve built strong personal credit, options like SBA funding may still be in reach. Many new owners bridge the gap by turning to friends, family, or crowdfunding to start and then re-apply once they have built up their financial history. If your business has a strong mission, nonprofit funding could also be worth exploring.
Is your cash flow inconsistent or low?
For most financers, cash flow is the biggest piece of the puzzle. They want to see money coming in from regular business activity—not one-off sales or delayed payments.
If your books show strong, sustainable earnings, you’re more likely to get approved.
Watch out for accounting tactics that shrink your profit on paper. While it may save you on taxes, it can make you look less appealing to financers.
| Plan ahead with these resources: |
2. Take a look at your business debt
If your business is carrying a lot of debt, financers might hit the brakes on your next financing request. Too much debt signals risk. It raises red flags about whether you can handle more.
Start by evaluating your finances. Is taking on additional financing the right next step for you? Can you pay down any existing debt before applying again? Making payments on some financing products can help build your credit score as well.
Your existing financing providers are often the best sources for additional financing. Reach out to them first to understand your options before turning to new sources.
Spot the signs of debt overload.
Take a close look at your business. Are you scrambling to cover payroll or bills? Is profitability slipping? Are financers asking for stricter terms, like personal guarantees?
If your financial ratios don’t look strong, you may need to consider making changes to your current budget.
What healthy debt looks like
There’s no magic number, but financers use ratios to decide if you’re in the safe zone. Two that matter most:
- Debt Service Coverage (DSC) ratio: This shows how easily you can cover your monthly debt payments. A DSC of 1.25 or higher is the goal.
- Working capital ratio: This compares your current assets to your current debts. Below 1.0 is a red flag. Closer to 2.0 means you’re on solid ground and have enough cushion to handle what comes next.
3. Consider crowdfunding your business
If traditional funding isn’t coming through, you can rally a crowd behind your business. Crowdfunding puts your vision in front of supporters—giving you more ways to get the capital you need and build buzz at the same time.
- Reward-based crowdfunding lets people back your business in exchange for something tangible, like your next big invention or a special perk. Platforms like Kickstarter and Indiegogo help you showcase what makes your offer stand out and connect with early fans.
- Debt crowdfunding, or peer-to-peer lending, pools funds from multiple supporters who expect repayment with interest. Prosper is one of the top choices here.
- Equity crowdfunding brings in investors who get a stake in your company. You raise more capital, and your backers share in your growth. If your business is built for expansion, platforms like SeedInvest and CircleUp can help you reach investors who believe in your future.
- Donation crowdfunding lets people give because they believe in your purpose. There’s no payback—just support from a community that wants to see you succeed. Platforms like GoFundMe help you share your story and make an impact.
4. Improve your finances and reapply
Before you go for financing again, get a handle on your credit standing. Pull your business credit report from the big three: TransUnion, Experian, and Equifax.
Look for any weak spots or errors and get to work fixing them. Every point you add to your score improves your odds of approval.
Establish your business story.
Know exactly how much you want to borrow, what you’ll do with the funds, and how you’ll handle remittance. Outline your plan and back it up with real numbers. Use clear cash flow projections to show you can manage the new obligation.
Build better financial habits.
Consistent, healthy business habits matter. Chase new sales, tighten up collections, and keep cash flow strong. Stay on top of your bills. The effort pays off now and in the long run, makes your business look solid to any financier.
Manage your finances through a business bank account.
At Credibly, one mistake we often see is businesses running their finances through a personal bank account.
Every financing provider requires statements from a business bank account, rather than a personal bank account. Also, don’t co-mingle your personal and business funds and expenses; keep them separate. If you don’t have a business bank account today, opening one might be a great step in the right direction.
Be open with your financer.
Honesty builds trust. If there are hiccups in your financial history, put them on the table up front. Financers value transparency—and being proactive about challenges shows you know your business inside and out. They might have great suggestions to help you get approved next time. Set the record straight from the start and turn last time’s “no” into your next “yes.”
Once you’ve strengthened your finances and built a stronger foundation, you’re ready to take the next step.
