Getting a traditional bank business loan can be a long and frustrating process. For many businesses, the gain just doesn’t outweigh the pain.
This means they apply less often than they could. And some don’t apply at all. Because of this, many firms are missing out on funds to smooth cash flow, renew vital business equipment and support expansion plans.
Recent figures from the British Business Bank (BBB) and the Federation of Small Business (FSB) back this up.
The BBB’s Small Business Finance 2017/18 report says that although the small business loan rejection rate is 20% (business loan and overdraft applications), first-time applicants refused a bank loan is much higher at 50%.
Further research from the FSB showed that just 60% of small firms that apply for credit are successful. The figures are the lowest since Q4 in 2015, and down considerably from the 74% recorded in the same quarter in 2017. The report also found that the proportion of smaller firms describing the availability of new credit as ‘poor’ (40%) in Q2 2018 is at its highest for two years.
What to do if you've been refused a bank loan
Firstly, don’t panic and know your options. Just because a bank won’t fund you doesn’t mean your business isn’t a good one or that there aren’t alternative options available to you.
The BBB's report also showed that just 10% of smaller businesses carried out any research into the finance products available to them, with fewer than 5% speaking to a financial advisor. This means that most smaller business are not aware of the finance options available to them.
However, alternative finance is now mainstream, as Andy Davies, Group Sales Director at White Oak UK explains:
Businesses have a lot more choice in the marketplace when it comes to access to finance, and that is something that we have seen grow significantly over recent years.
Long gone are the days when everything would hinge exclusively on your bank. For small business owners, it’s become more about simplicity, speed and service. When you are running a business, these are vital requirements.
Make money work for your business
The second point is to know just how you can make alternative finance work for your business. Alternative lenders have been developing a wider range of business loan and asset finance products, that has given rise to a new wave of opportunity, with many businesses now choosing to spread the cost of many essential cash flow burdens.
Business loans are now available to cover a variety of costs (such as VAT, corporation tax, marketing costs, as well as to inject working capital) and asset finance can help business get the equipment they need, when they need it.
To learn about the benefits of using finance as an everyday business tool and find out why our customers come back to White Oak UK again and again, by downloading our free guide, 11 Ways to Make Money Work for Your Business.