In a perfect world, every business would secure its funding choice immediately without a hitch.
However, this is often not the case. Lenders and investors have set criteria they stick to when considering businesses, and not everyone will meet them. Funding isn’t an infinite pool, meaning they must be selective about who they support.
Having your funding application turned down is never ideal. However, it doesn’t mean it’s the end of the road.
Fortunately, there are still options to meet your goals. We explore the next steps to take after funding rejection.
- Understand why you were rejected
The first step after being rejected for finance is understanding the reasons why. This will allow you to solve any issues moving forward and find an option that is more likely to help.
Common reasons for rejection include:
- Having a weak application
- Not meeting the lender’s criteria (such as being deemed too risky, being at the wrong stage of development or having too low a turnover)
- Not having security to utilise
- Asking for too much funding
The financer may have already provided feedback. If not, it’s worth requesting it to identify why you were rejected.
- Re-optimise your application
Many funders require you to apply by completing an online or physical form or creating a pitch for your business. If you get turned down, it may be due to an issue with your application.
A great application should highlight your venture favourably. It must explain what you intend to achieve with the funding while demonstrating a solid value proposition and business plan. You also need to showcase that you will generate enough revenue to pay it back or provide a return on investment.
If you aren’t confident in your application or supporting documentation, consider working on it with a business advisor who will be able to tell you what the lender is looking for.
- Try other funders
Different lenders and investors have different criteria when considering companies for funding. If you have been turned down by one, you may have more success with another.
Research similar funders who offer the funding you’re pursuing. If their criteria are already available, it is worth reviewing to ensure you’re eligible before applying.
You could still get the funding you want by attempting other lenders despite previous rejections.
- Explore other funding types
Today’s market has a spectrum of financial options designed to suit various business needs. If you have failed in one avenue, consider another.
If you are pursuing debt funding but have failed to get a traditional loan, it might be worth considering other debt options, such as stock, invoice or trade finance. Similarly, if you seek equity solutions, consider options like angel investment, venture capital or crowdfunding to see if they are more suitable.
If you have exhausted your debt options, you may switch to equity, which tends to be more open to risk. If you can’t get accepted for equity, debt options are more common, so could improve your accessibility.
Remember to spend time understanding the implications of any option to determine if they fit your business and goals.
- Consider alternative finance
Alternative finance is becoming increasingly popular among businesses, offering flexible terms and improved accessibility. If you have struggled to raise finance from conventional routes, such as via banks, it’s worth considering alternative solutions.
Examples of alternative finance include:
- Peer-to-peer lending
- Invoice finance
- Venture capital
Alternative financiers are often agile and less risk-averse. There are also constant developments in the sector, meaning there’s a better chance of finding the right solution for your business.
- Accept smaller amounts
Another common reason for funding rejection is if you ask for too much or the lender won’t offer you the maximum amount based on your risk factor. However, they may be willing to provide you with a smaller unsecured loan.
You might have to accept a lower offer if you can’t get the total amount you desire. Although it won’t wholly reach your goals, it will be better than nothing.
You also have the option of other financial avenues to top up your funding.
- Work with an advisor
If you have experienced rejection and aren’t sure where to turn to next, working with a financial specialist is recommended. They will discuss your company’s unique needs and eligibility to pinpoint the best options.
They often have expertise across a wide range of funding types, so they may be able to advise solutions that you have not yet considered. They will also support you in optimising your application to improve your chances of success.
If you are considering your next financial step, get in touch with a UKBA advisor to find out how they can assist.