Don't Qualify for a Small Business Bank Loan? Here's What You Can Do

If you don’t qualify for a traditional bank loan for your small business, it can be a challenge to get funding. Thankfully, there are a variety of other lenders and methods for getting the money you need for your business.

Alternative Lenders

Lenders, like Kabbage and Bond Street, help fill the funding gap for business owners that can’t qualify for a traditional term loan or line of credit. Many of these online lenders require lower credit scores or no credit scores, lower minimum annual revenues and a fewer number of years in business than a bank or credit union. These more lenient qualifications typically mean that annual percentage rates (APRs) are higher, sometimes more than 30%. One major benefit with online lenders is that their application and funding process has a fast turnaround time, meaning borrowers can get access to funds in as quickly as 24 hours.

Non-Profit or Government Microloans

There are a variety of nonprofit and governmental organizations that provide financing options to small businesses. Some nonprofit microlenders, like Kiva, offer interest-free loans to small businesses up to $10,000 and require no credit score to qualify. The Small Business Administration (SBA) also has a microloan program for new or existing businesses with loans up to $50,000. SBA microloans are issued through community-based organizations, so eligibility requirements differ from lender to lender. In addition, many state governments offer various microloan programs for businesses operating within their state.


Crowdfunding can be a great option to raise funds if your small business is making a product or creative project. Sites like Indiegogo and Kickstarter let individuals create projects with specific funding goals and reward backers by offering copies of the product or other items. If a project is funded, the site may take a percentage of the funds raised (around 5% or more) and charge payment processing fees for each donation to the project, for fees totaling between 8% and 10%. Some crowdfunding sites only allow all-or-nothing funding, meaning that any project that doesn’t meet its funding goal will not receive any money (money is returned to the donors).

Other Considerations

Besides the funding options above, there are other actions you should be taking to increase your chances of getting financing. For instance, having a good to excellent credit score and solid business plan/history is essential in getting the best financing options.

If Your Credit Score Is an Issue, Take Steps to Improve It

If you have a poor credit score, you should be taking steps to rebuild your credit in order to qualify for better financing. This includes making on-time payments for credit cards and loans, paying off any existing debt, keeping your credit utilization low and avoiding any negative marks on your credit report (e.g., bankruptcy, foreclosure, tax liens). Even though it can take years to improve your credit score, you should be acting now to benefit yourself and your business in the long run.

If Your Business Is New, Get Help Writing a Business Plan

When you apply for a loan or other type of financing as a new business, many lenders will want to see a business plan. Business plans are documents that should clearly identify what you are going to do for your business, why you think it is viable and how you are going to accomplish your goals—and they will normally include some level of financial analysis on top of this. The better your business plan, the better your chance at receiving funding from a lender. Many organizations, such as SCORE, provide business plan preparation and counseling services, sometimes free of charge. You can also speak with a CPA for assistance with financial analysis.

The article Don’t Qualify for a Small Business Bank Loan? Here’s What You Can Do originally appeared on ValuePenguin.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

More Related Articles

Info icon

This data feed is not available at this time.

Sign up for Smart Investing to get the latest news, strategies and tips to help you invest smarter.