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If you’ve applied for a small business loan but had your application rejected, you might be wondering: “what now?”. While it’s certainly a position no SME owner wants to find themselves in, it’s not the end of the world.

Instead, you can use this setback to help you understand what lenders look for in your application, as well as the areas you can improve in to increase your future chances of finance. Today, we’re going to reveal 12 of the most common reasons why your business loan might have been rejected to help set you on the right path.

1. Your Annual Turnover Doesn’t Meet Minimum Requirements

More often than not, a lender will want a small business to meet a certain minimum turnover each year to qualify for a loan. This not only ensures that there’s enough cash flow to help the business pay back the loan, but it also proves that the business is viable.

2. You Haven’t Been in Business Long Enough

This is the number one reason why startups often fail to get loans, as they just simply haven’t been in business long enough. The longer you’ve been in business, the less risky you appear to a lender, so time really is on your side with this one.

3. Your Business Isn’t Registered in Your Country

While each lender is different, this is also a prerequisite that some small business owners may overlook. At Lumi, for example, we simply ask that a business has an ABN or ACN to make them eligible for qualification.

4. Your Credit Score is Too Low

A low credit score is also a very common reason why a lender may reject your business loan application. Every lender will have different criteria regarding what they deem to be ‘low’, so don’t lose heart if you’re rejected once. It is possible for a business owner to have a very successful company, but have poor personal credit history. Instead, brush up on what steps you can take to boost your credit score, as well as the things you can avoid.

5. Your Industry is Deemed ‘Risky’

Some lenders (particularly traditional lenders) will deem your industry as “too risky” to loan to. As an example, this might include specific agricultural or construction based businesses, however this will also depend on each individual lender. If this is the case, you’re certainly not to blame, but keep in mind that you may be able to seek finance through a government grant instead.

Read more: The Complete Guide to Small Business Grants

6. You Don’t Have Sufficient Collateral

If you’re trying to apply for a secured business loan but lack the appropriate collateral to do so, then your lender will reject your application pretty quickly. If this is the case, then it may be worth considering an unsecured business loan instead, as this type of finance doesn’t require collateral.

Read more: How to Get a Small Business Loan Without Collateral

7. You Can’t Prove Strong Cash Flow

When you’re applying for a business loan, your lender will ask for certain financial documents to learn more about your company. Some of these aim to provide evidence of strong cash flow. Poor cash flow isn’t just a major cause of business failure, but can also point to poor cash management skills.

Lenders want to find out more about your business’ cash flow to ensure you can stay on top of your business expenses, plus it shows them that you can also afford to meet your repayments without any issues.

8. You’re Not Asking for Enough Money

This one mostly applies to traditional lenders, such as banks. Sometimes, the cost of servicing small loans (i.e. under $100,000) is just not worth it for a bank, meaning that they won’t move forward with your application. Here at Lumi, we believe every small business deserves quick and easy access to the capital they need to grow their company. This is why we take on unsecured business loans from just $5,000 all the way up to $100,000 (Find out more).

9. There’s Issues With Your Debt Utilization

Sometimes, lenders want you to be using no more than 30 percent of the total credit available to you. If you use more than this, they may consider you to be overextended, fearing that you can’t meet your repayments. If you use too little, however, then you run the risk of lacking a history of using credit responsibly.

10. Your Application or Paperwork is Incomplete

Did you accidentally send your business loan application before completing all of its sections? Understandably, some business owners simply have too little time on their hands and fail to complete their application correctly.

The best advice we can offer is this: you should always get your required paperwork (such as a business plan, three to five years of business and personal tax returns, business bank account statements, etc.) in order before you begin filling in your application.

If seeking a business loan through a bank, this application could take 20 to 30 hours just to complete! If you’re after convenience, however, try seeking an unsecured business loan through an alternative lender instead. Here at Lumi, business owners can complete their loan application online in as little as 10 minutes. In order to get the ball rolling, we simply ask that you have your ABN / ACN, Driver’s License, and business bank account details (for online banking) on-hand.

11. You’re Applying for the Wrong Type of Loan

Perhaps you applied for one type of loan, only to realise that it wasn’t something your business qualifies for. Or, you may have not even known that you applied for the wrong type of loan for your business. Whatever the reason, it’s best to brush-up on your business loans knowledge before you seek out finance. Check out our Business Loans page or chat to a financial professional to find out what type of business loan suits your needs.

12. The Lender Isn’t the Best Choice for You

Have you ever heard the saying, “it’s not you, it’s me”? This might also apply to your failed business loan application, as perhaps the lender you’re trying to seek finance from just isn’t for you. Your lender should take the time to learn more about your business, as well as what you’re hoping to achieve with financing.


Remember, with Lumi, you’re not a loan. To chat to an alternative lender who truly understands the needs of small business owners, call 1300 00 LUMI today or get your business loan application started at

Have any questions about small business finance? Ask us in the comments section below!

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Post Author: Luiz Bevilacqua

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