If your SBA loan application was denied by your bank, you may still be eligible for SBA business financing. Here’s what to do next if you’re SBA loan was denied but you’re still interested in using the loan program for business financing.
Why Your SBA Loan Could Be Denied at One Bank and Approved at Another
The SBA sets baseline eligibility requirements for their loan programs. However, eligibility for SBA loans varies from lender to lender based on internal credit policies.
Why?
In 2023, the SBA released new SBA loan underwriting rules for lenders. The rules delegated more responsibility to lenders, requiring each lender to determine its own criteria for SBA loan eligibility at their institution based on existing internal business lending policies.
Meaning, each SBA lender shares a baseline set of SBA eligibility requirements, but each lender has slightly different business credit criteria for SBA loan approvals.
This opens up the marketplace for increased financing choices, but can also make it more complicated to find an SBA lender.
The new SBA underwriting requirements also coincide with a tightening credit environment, which already presents an abnormal challenge on the SMB community seeking business financing. More banks are tightening their internal business credit criteria, which impacts SBA loan approvals, too.
The upside: if lenders each have different credit policies for determining SBA loan eligibility, you could still find a lender where you’re eligible even if your SBA loan is denied at one bank (or a few). You just have to be strategic about your choices.
Here’s some additional context on why varying credit requirements have historically made it so difficult to get an SBA loan:
How to Decide What to Do After Your SBA Loan Is Denied
The first step after your SBA loan is denied: determine if your denial was based on SBA standards or lender policy. From there, you can decide if your business should seek out a new lender, try to fix shortcomings in an SBA loan application, or seek a different financing program altogether.
Determine If You Meet Standardized SBA Loan Eligibility
Set by the SBA, these are the requirements you must meet at any lender to be eligible for an SBA business loan:
- Be an operating business.
- Operate for profit.
- Be located in the U.S.
- Be small under SBA Size Requirements
- Not be a type of ineligible business
- Not be able to obtain the desired credit on reasonable terms from non-Federal, non-State, and non-local government sources.
- Be creditworthy and demonstrate a reasonable ability to repay the loan.
Source: Small Business Administration
If you do not meet these requirements, the SBA loan will not be a good fit for your business. If you do believe you meet the above standards, you may want to continue seeking SBA financing.
Why Was the SBA Loan Denied?
If your loan was denied even though you met the SBA’s standard eligibility requirements, the denial likely has to do with your lender’s internal SBA loan criteria. It may be something you can fix, or you may be able to find a lender where you will qualify for SBA financing.
Improve Your Application or Find a New Lender
First, request feedback on your SBA loan application. Your lender may cite an issue that is fixable over time, like a low credit score or unacceptable debt service coverage ratio (DSCR).
If you have the time to wait and the resources to do so, it is possible to return to a lender with an improved application to get approved for a previously denied SBA loan.
However, your current business financials may still qualify you for SBA financing at another lender. You may want to seek out other SBA lender options if you need capital within the next 30-60 days.
Streamline Your Search For SBA Lenders with BankLink: 1 Application for 150+ Active SBA Lenders
Using a tool like BankLink to find your next lender supercharges the SBA financing process.
Historically, business owners have always had to submit multiple, complex, document-heavy applications to understand their SBA lender options. Often, racking up a number of “no’s” before finally getting a “yes”. BankLink requires you to submit your information only once.
Once your documents are in our portal, they can be processed for any lender in our network. Our experts match you directly to the lender where you’re most likely to qualify for financing based on proprietary knowledge of the lender’s credit policies, industry expertise, and region.
Our platform is powered by Windsor Advantage, the nation’s leading lender service provider. Our experts underwrite SBA loans for 150+ lenders nationwide. We know what lenders look for and facilitate direct matches between borrowers and lenders to drastically reduce any unexpected SBA loan denials. A BankLink Bonus: You’ll work with our one consistent team of experts from start to finish until your SBA loan is funded.
BankLink is a free platform to support SBA financing within the SMB community. We created BankLink to streamline the search for an SBA lender, opening up access to SBA financing while saving business owners time and resources. Our goal: to strengthen the SBA financing community by maximizing efficiency at every step of the process.
Get Started: Prequalify for SBA Financing in the BankLink Network
Use the form below to get in touch with our SBA experts and start your financing process with BankLink.
