The sound of the word “no” is the absolute worst. Especially when you hear it in context of being rejected for a small business loan. Getting rejected for financing can be a big blow to someones ego as with being rejected for a date, but there’s so much more at stake this time around. In the end, your business is your living.
If you’re afraid to apply for a business loan because you’re worried about getting rejected, or you come with an loan application in and you’re dreading hearing back from your loan specialist or lender, here’s what ought to know about facing your fear.
You Know THE WORD: Absolutely nothing Ventured, Nothing Gained
Trying to get a business loan is nerve-wracking, but oftentimes, it’s also necessary. You will need financing to grow any business. In the event that you won’t even try for a loan, you’ll end up left with options that could cost you more over time.
Without a business loan, your financing opportunities may be limited to high-interest bank cards, generous friends and family members, or private equity investors who’ll give you an inch today to have a mile tomorrow. Those financing options include costs. Furthermore to steep interest payments, you additionally have a human component to take into account, particularly if it could take you some time to pay everyone back in full.
However , there’s more.
Succumbing to worries of being rejected for a business loan can in fact hurt your small business in some other way.
If you become so immobilized by fear of being turned down with a lender that you never bother to apply for a loan, you’re severely limiting your business options. You could forget multiple locations, new lines business, or any other major expansion. You won’t have the ability to increase your company.
Really the only equipment you will ever buy will be seller-financed. The only inventory you will ever stock will all emerge from pocket (or worse, your savings). The one specific location you will ever have is a rented space. Your business will have little actual equity and it’ll never expand beyond a certain point.
The moment you think about it this way, that fear could become more expensive when compared to a loan!
Facing Your Concern with Rejection
Concern with rejection is correctly natural and reasonable. After all, not absolutely all business loan applications are approved. Small business loans approvals remain 25%. Even institutional lenders only approve 64% of applications. You must understand that you might not hit a home run during your first-time at bat. That’s no reason never to try, though!
You will need to modify your thinking-and this is particularly important for female borrowers. Data from research conducted at Penn State shows that women apply for loans 20% less often than men-and these are 20% much more likely to be denied trade credit.
Although women do get home loans just as often as male business owners, female business owners are significantly less more likely to pursue leases, loans, or lines of credit. Instead, they often times put what their business needs on credit cards and make monthly payments-and they pay the bigger interest rates that include them. When female entrepreneurs do borrow money, their average loan size is nearly half that of men ($57,097 in 2017 in comparison to $103,604).
Putting It Off
In some instances, concern with rejection may cause you to put off requesting funding when you understand it’s time. “In business, it could be difficult to go and have for funding-or even when negotiating a contract with a vendor, a business owner might not ask for all that they want because they’re afraid of a ‘no’ answer. So these tasks, though they are important, are avoided so long as possible,” explains Tom Panaggio, author of The Risk Advantage. “They tell themselves that they need to make their plan better, their presentation better. They keep on pushing it off.”
The truth is that you may not know if your lender will say yes, but you can say for certain that you won’t get a dime if you don’t apply. Instead, approach getting a loan the same you did your business. Make an idea and see it through.
Remember: It’s Not Personal
If your business loan application is approved, retain in mind that isn’t personal; it’s business. “There is completely nothing personal about requesting money and not setting it up. It’s just a little bit of paper (or numbers on a computer screen),” explains finance expert Amanda Abella. “The simple truth is, we’re the ones who inject emotion and meaning into money. If someone rejects our offer we’re those entering a tailspin over how it’s a rejection of us as a person when nothing could be further from the truth.”
But, sometimes getting your loan rejected can actually assist you in the long term.
Learn from Rejection
Instead of spending your time and effort fretting about whether you will get approved for a business loan, put your attention on determining why lenders approve certain business loan applications. Check out your business plan, run the numbers (again), and discover where your enterprise stands from a more objective standpoint.
In the event that you do receive a rejection, don’t quit right away. Ask why right now isn’t a great time for the lender to increase financing. Generally, you’ll get a detailed answer and that will help inform the next time you apply for a loan.
For example, if the lender says that your business plan is missing certain information or that your small business doesn’t meet up with the minimum number of months with positive cash flow with the institution to provide you a business loan, you’ll know that you can come back confidently when you do meet those standards.
Now, Go Apply for That Business Loan!
At the end of your day, you often need to invest money in order to seriously level up. Business financing can certainly help at key stages of business growth. Though no-one likes being turned down, retain in mind that it’s very common when seeking business financing.