Turned down for a business loan? What to do next

Why lenders say no

Every lender has its own appetite for risk, so a decline says as much about that lender's criteria as about your business. The British Business Bank lists a low credit rating, lack of collateral, a weak business plan and poor cash flow forecasts among the common culprits, and notes that newer businesses are often declined for a short track record or no assets to offer as security.

Knowing which reason applied to you matters, because each one points to a different next step.

Your first steps after a decline

Before applying anywhere else, take a breath and gather information. A second rushed application can do more harm than good.

• Ask for the reason in writing. The Lending Standards Board's standards say firms should, as a minimum, give business customers the primary reason for a decline in writing.
• Consider an appeal. The same standards say lenders should tell you about your right of appeal and have a fair process to review declines. This is most useful where the lender missed or misread something.
• Check your credit files. The British Business Bank names Experian, Creditsafe, Credit Passport and Dun & Bradstreet among the agencies that hold business credit data. Directors' personal files matter too.
• Check for judgments. GOV.UK explains that CCJs stay on the Register of Judgments, Orders and Fines for six years, and you can search the register for a small fee.
• Don't spray applications. The British Business Bank warns that several applications in a short period leave multiple search footprints, which can suggest you're struggling to find funding. Ask for quotes rather than full applications where you can.

If the reason was an error on a credit file, getting it corrected before you reapply can make a real difference.

The Bank Referral Scheme

If one of the large high street banks turns you down, it is generally required to offer to refer you to government-designated finance platforms, which then try to match you with other providers. The British Business Bank sets out the eligibility rules: businesses with turnover up to £25 million and a UK address, applying for loans, overdrafts, invoice finance, asset finance (excluding operating leases) or credit cards.

There are exclusions, for example applications under £1,000, facilities needed for less than 30 days, or where you turned down the bank's offer purely on price. The British Business Bank also makes clear that you can approach other platforms, brokers and finance providers yourself at any time, without waiting for a referral.

Why asset refinance often works when an unsecured loan doesn't

An unsecured business loan has nothing behind it except the business's promise to pay and, usually, a director's personal guarantee. The British Business Bank notes that for unsecured lending you'll typically need a good credit rating as well as a guarantee. If your credit file has a blemish, or the business is asset-rich but cash-light, that model can be a poor fit.

Asset refinance turns the question around. The British Business Bank describes it as freeing up cash from assets your business already owns while you keep using them, and points out that you don't need to own 100% of the asset, so kit that's still on finance can sometimes qualify. Because the lender has the asset to fall back on, it can often look past things an unsecured lender wouldn't.

Depending on what you own, the main routes are asset refinance across mixed equipment, sale and leaseback where you sell the asset to a funder and lease it back, vehicle refinance for vans, trucks and fleets, and plant and machinery refinance for diggers, telehandlers, CNC machines and production lines. Our guide to asset refinance vs a business loan compares the two side by side.

Lenders will still check that the business can afford the repayments, and refinancing usually costs more than using cash you already have. The asset can be repossessed if repayments aren't kept up, and a personal guarantee may still be requested.

Other routes worth a look

Asset refinance is one of several options. Which one fits depends on why you were declined and what you need the money for.

• Invoice finance if you invoice other businesses on credit terms, because the lender looks closely at the quality of your customers.
• Secured business loans using commercial or residential property as security, with a clear risk to that property if repayments are missed.
• Government-backed lending such as the Growth Guarantee Scheme, delivered through accredited lenders that still make their own decisions.
• Community Development Finance Institutions, which the British Business Bank describes as non-profit lenders typically offering £25,000 to £250,000 with a relationship-based approach.
• Merchant cash advance for card-taking businesses. It can be quicker to access, but costs are often higher than mainstream borrowing.

When more borrowing isn't the answer

If the decline was about affordability and the business is already struggling to meet existing repayments, new borrowing can make things harder. In that situation it's worth talking to someone impartial before applying again. GOV.UK lists Business Debtline as a free, independent debt advice service for self-employed people and small business owners, and our guide on what happens if you can't repay a business loan explains the early steps.

How we can help after a decline

Nexgen Business Finance is a credit broker, not a lender. We compare 100+ lenders, from high street banks to specialist and niche funders, so a no from one of them doesn't define what's possible. We'll ask why you were declined, look at the assets the business owns and any finance already on them, and tell you honestly whether refinancing, another product or waiting a few months makes most sense.

We start with a conversation and indicative quotes rather than sending your details to every lender. Call our team on 01604 355800.