Why was my business loan declined?

The decline itself is not recorded. The credit search the lender made is, on the company’s file and on any director’s file it checked, and later lenders can see it. Several searches in a short period can count against a new application. Before your next application, ask whether the lender or broker starts with a soft search, which only you can see.

There is no set period. Apply again when the reason for the decline has changed: a new set of accounts filed, a judgment marked satisfied, an existing loan cleared, or a lender found whose criteria the business meets. Reapplying to the same lender with the same figures leads to the same answer and another search on the file.

Ask the lender whether it has an appeals or review process, and what it needs to see. Some banks review a decline if you supply information the first decision did not have, such as up-to-date management accounts or an explanation for a period in the statements. A review does not change the lender’s criteria, so if the business falls outside them, spend the effort on a different lender.

Profit is one input. A lender also tests cash after tax against all repayments, the conduct of the bank account, the time trading, the sector, the credit files and the security. A profitable company that runs its account over the limit, pays tax late or already carries heavy finance repayments can fail on any of those. Why a profitable business can be short of cash.

It depends on the reason. A decline on sector, trading age or loan size is specific to that lender’s criteria, and another lender may set different ones. A decline on affordability or a recent judgment will follow the business to any lender until the figures or the file change.

A lender reads the company's bank statements and works out whether its cash covers every loan repayment with room to spare. It then checks the trading history, the Companies House record, the credit files of the company and its directors, and what the money is for. The full answer.

Often you can, from a narrower set of lenders and at a higher cost. A lender reads two kinds of file: the company’s, which carries any County Court Judgment against it, and each director’s personal file, because a director may be asked to guarantee the loan. The full answer.

A lender sets the limit from your debt service cover: the cash the business generates in a year divided by a year’s repayments on all its loans. Work backwards from the minimum cover a lender accepts and you reach the largest yearly repayment, and from that the largest loan. The full answer.

A broker helps when you are unsure which type of funding fits, when your bank has said no, or when you want several lenders’ offers set side by side in pounds. Before you share your figures, ask how the broker is paid and which lenders it can reach. The full answer.