Why do banks turn down business loan applications?

Common reasons include a short trading history, a weak credit record, existing borrowing that makes repayments look unaffordable, low or uneven turnover, and missing or inconsistent paperwork. Ask your bank which applied to you.

Will applying to several lenders hurt my credit score?

Many applications leave a record on your credit file. Some lenders can check eligibility with a soft search, which doesn't affect your score, before a full application. It's worth asking before you apply.

Can I reapply to the same bank?

You can, but it's usually worth fixing the reason for the decline first, so a second application looks different.

Turned down for a business loan by your bank? What to do next

The short answer

A decline from one lender doesn't mean every lender will say no. Lenders have different appetites and look at different things.
Ask your bank why. Common reasons include trading history, credit record, affordability and gaps in paperwork.
Lots of applications in a short time can leave marks on your credit file.
Specialist lenders may look at your business more broadly than a high-street bank's standard criteria.

Being turned down for a business loan is frustrating, particularly if you've banked with the same place for years. But a refusal tells you about one lender's rules on one day. It doesn't tell you whether your business can be funded.

Step 1: Find out why

Ask your bank for the reason. You won't always get a detailed answer, but even a general one helps. The most common reasons are:

Short trading history. Many lenders want a year or more.
Credit record. Late payments, defaults or county court judgments on the business or the directors.
Affordability. Existing borrowing that makes new repayments look too tight.
Turnover. Sales that are low, falling or very uneven.
Paperwork. Missing statements, accounts that are out of date, or figures that don't match.

Step 2: Check your own credit information

Look at your business and personal credit reports. Errors are more common than you'd think, and they can sink an application. If you spot a mistake, ask the credit reference agency to correct it before you apply again.

Step 3: Fix what you can

Some causes are quick to fix and some take time:

Paperwork. Get statements and filed accounts in order. Our guide to the documents you need for a business loan lists them.
Existing debt. Paying down expensive borrowing can improve affordability.
Trading history. Time is the only cure, but you can show growth with recent figures.

Step 4: Look beyond the high street

Banks are only one part of the market. Specialist and alternative lenders often judge a business differently. For example:

Secured lenders may focus on the value of the property or assets offered. See secured vs unsecured business loans.
Already struggling with repayments? That is a different problem. See what happens if you can't repay a business loan.
Merchant cash advance providers look at your card takings. See how a merchant cash advance works.
Invoice and asset finance are tied to the invoices or equipment, not just your overall credit profile.

These options can cost more than a bank loan, so compare the total repayable and be sure you can afford it.

Step 5: Many applications at once

Every full application can leave a footprint on your credit file, and a run of declines can make the next one harder. Some businesses prefer to find out where they're likely to be accepted before making a full application.

Where a broker can help

A broker doesn't lend its own money. We're a commercial finance broker, so we introduce your business to the lenders on our panel who may consider your circumstances, so you aren't guessing. It's free to check, and any fee is confirmed before you proceed.

If you've been declined, you can check your options in a few minutes, with no obligation. For the full picture, read our guide to getting a business loan in the UK.

Common questions

Why do banks turn down business loan applications?: Common reasons include a short trading history, a weak credit record, existing borrowing that makes repayments look unaffordable, low or uneven turnover, and missing or inconsistent paperwork. Ask your bank which applied to you.
Will applying to several lenders hurt my credit score?: Many applications leave a record on your credit file. Some lenders can check eligibility with a soft search, which doesn't affect your score, before a full application. It's worth asking before you apply.
Can I reapply to the same bank?: You can, but it's usually worth fixing the reason for the decline first, so a second application looks different.

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This guide is general information for UK businesses. It is not financial advice, and business funding must be repaid. Kapitl Business Finance Limited is a commercial finance broker, not a lender; all funding is subject to eligibility and credit assessment.