Wednesday, May 5, 2010

Getting turned down for a business loan

As we've mentioned many times in this blog and our other educational channels (like, Extension courses, educational materials, etc), you must have a well-developed business plan BEFORE applying for a loan. What should you do if you've prepared a business plan but still get turned down for a loan?

In an article, author Trent Hamm discusses what you should do if you're turned down for a loan. First, ask your banker for honest feedback as to why your loan was denied. If you are told some not-so-positive things about your plan or idea, DON'T TAKE OFFENSE. You are of course very passionate about your business idea and may not be able to objectively see flaws. It's better to get honest constructive criticism and make changes now than in 2 years from now when your business is failing. Take all of the feedback and arrange it into a checklist so that you can update your business plan accordingly. You may also want to practice your presentation skills by joining a club like Toastmasters. By improving your speaking skills, you may be able to present your idea more clearly with to banker.

What if the problem isn't with your idea or business plan? It could be possible that your bank is having cash flow problems and might not be able to make the loans it normally would. Research other banks and ask your banker to recommend another bank that may be able to help. Whatever the reason, be sure to stay positive. Being told "no" doesn't mean that your dream can never happen. You will most definitely see other major road blocks in your journey as an entrepreneur, so be sure to view this as a learning experience and not a failure.

As an entrepreneur, have you ever been turned down for a loan? Did you ask for feedback on why you were denied? Did you use the feedback to improve your business plan and then reapply for the loan?

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