When the Bank says NO

 When the Bank says "No"

Being Rejected for a Loan from the Bank doesn't mean your Business is Bad

Steve Grice, Director

For small business lending, all mainstream banks use some form of credit scoring. 

This works by your business being allocated a score based on a number of parameters, such as which industry you’re in, Balance Sheet worth, number of years trading, connected businesses etc. 

If the score gets over a threshold then the loan is granted. Some banks also use this score to set interest rates on loans.

This approach is used by banks because of the sheer numbers of small business customers they have. 

Banks' costs are under pressure because of regulatory changes made following the crash – they now need to keep more cash to one side than previously to offset any bad debts. Hence they seek to service business customers in the cheapest way, as well as setting the scoring threshold higher so they don’t agree so many loans. 

This works fine for the banks, but not so well for business. 
It means that your business doesn’t get an individual appraisal; you’re effectively ranked against thousands of other businesses. 

One thing I have learned through many years working with small companies is that they seldom fit into neat boxes. Peer-to-Peer lending typically reverts to the old-style bank manager model where an experienced lender will visit your business, talk to you in some detail and analyse your figures. 

A simple example of this is where accounts have been prepared to minimise tax: It is exceptionally difficult for a computer to understand the underlying profitability, but very easy for an experienced lender. 

Being rejected for a loan by your bank does not mean your proposal or business is bad; just that it doesn’t fit the portfolio parameters that the bank is currently seeking. 

An individual appraisal by someone with enough commercial nous to understand individual circumstances may be the way forward. 

With over thirty+ P2P platforms - each having a different bias - speak to an expert who knows the market to get the best deal.  

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