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3 Steps To Take When Denied For An SBA Loan

SBA loans are among the best possible loan options for small businesses, with low interest rates and long, flexible repayment terms. However, SBA loans can also be difficult to obtain due to how selective the application process is.

Although it can be discouraging to be denied, here is what to do when you still need business financing after being denied for an SBA loan.

Find Out What Went Wrong

When you understand why an SBA loan was denied to you, then you can work on fixing those issues and be better prepared for your next financing application.

Common reasons for not being approved include:

  • Your credit score is too low, or credit history is too short or contains a recent bankruptcy

  • You did not provide enough collateral

  • Your business does not have the financial capability to pay back the loan

When your SBA loan application has been denied, you will receive a denial letter that may provide vague reasons as to why you were denied. You should contact your lender or a third-party loan specialist to better understand why your application was denied.

Improve and Reapply

Once you realize why your business was denied an SBA loan, you can attempt to improve your business to make yourself a more enticing prospect.

Since you are unable to reapply for an SBA loan for at least 90 days, you can take this time to start building your business credentials, such as your business credit score. Building up your business credit score, increasing revenue, reducing expenses, and paying down existing debt can help make your business more appealing to a lender.

While start-ups are not blocked from applying for an SBA loan, they are much more likely to be denied because they are often not established enough to prove that they can make timely repayments.

If your loan was denied due to your industry, then you might be better off looking for alternative funding options.

Alternative Financing

SBA loans may have some of the best payment terms and conditions, but there are other financing options available. Alternative financing options tend to have looser restrictions than an SBA loan.

Online lenders can be a suitable substitute for an SBA 7(a) loan as they provide business loans that can also be used as working capital. In addition, online lenders have less stringent requirements for business loans: they are willing to accept lower credit scores and work with businesses with just a few months of operating history.

If your company relies on invoices, invoice factoring or accounts receivable financing are another two flexible financing options that utilize your unpaid invoices.

If you are looking for a smaller SBA microloan, a business credit card can be an easy-to-qualify-for business line of credit that provides funding, other rewards, and a way to build your business credit score.


Having access to funding is important for any business. SBA loans can be an enticing option, despite how difficult it can be to qualify. When your SBA loan application is denied, it is crucial for you to understand why you were denied to better prepare your business for future financing options.


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