Turned down for a business loan? What to do next

Lenders have become more careful this year. Prices are high, interest rates are up and the economy is growing slowly, so every loan committee is asking the same question: will this borrower still be able to pay us back? See what's happening in the economy.

For most lenders, being careful means wanting something solid behind the loan, usually property. Unsecured loans, where you pledge nothing, are what they've cut back on most. So if you applied for an unsecured loan this year and were turned down, you're far from alone.

There are two kinds of no, and each one has a different fix.

The lender isn't a fit. Every lender decides what it wants to lend to, and that changes over time. It may have already lent all it wants to your industry. It may not accept your kind of property, or may value it lower than other lenders would. It may only make loans of a certain size, or may have stopped unsecured lending altogether. None of this means your business is bad. It means your business doesn't fit that lender right now, and the fix is to go to a different lender.

Your application has gaps. Missing documents, a title that isn't clean, no clear plan for the money, or margins that look too thin to cover the payment. These are yours to fix, so fix them before you apply again.

Ask the lender for the reason. Many will tell you, at least in general terms. Write it down exactly as they say it. It tells you which kind of no you got, and it's the most useful thing you can bring to your next application.

Get your titles in order. If you own property, find the titles and make sure they're clean and clear. Title problems slow down or stop more loans than almost anything else.

Have your numbers ready. Two to three years of sales records, tax filings and bank statements. You don't need to interpret them, just have them.

Be specific about the money. “To grow the business” is vague. “To buy this equipment, which will earn this much a month” is a plan a lender can say yes to.

Show your margins, not just your sales. With costs and rates up, lenders want to see that your business can absorb higher costs and still make the payment.

If your first application was unsecured, applying with security changes the conversation. Lenders are far more comfortable when something backs the loan, and a secured loan is often cheaper too.

Most lenders mean property: a house and lot or condo, a store or office, a warehouse or factory, or farm land. Not all of these are equal in a lender's eyes. Residential property is the most widely accepted, and farm land is the hardest. But even the harder kinds work with the right lender.

Starting secured can also open the door to borrowing a little more on top that isn't tied to the property. It doesn't always happen, but once a lender is comfortable, the conversation gets easier.

Don't just walk into the next bank on the street and start over. Go to the lenders that want a business like yours, with security like yours, right now.

And if you can, get more than one interested. A lender won't lend you the full value of your property; it lends a portion and keeps a cushion. That portion is negotiable. With one lender looking at your loan, you take what they offer. With two or three competing for it, each has a reason to offer more.

Buhay works with a network of SEC- and BSP-registered banks and lenders. We see which of them are open to which kinds of business and which kinds of security, and that changes as the economy does.

So instead of you knocking on one door at a time, we take you to the lenders most likely to say yes, and where we can, to more than one so they compete for you. If you've been turned down, tell us why. It often tells us exactly which lender is the right fit.