Getting denied for business credit is frustrating, but knowing why you were turned down can help improve your chances next time. From your cash flow to your utilization ratio, this infographic breaks down the common reasons small businesses are turned down and explains steps to take before reapplying.

 

Bank of America Business Advantage

BUSINESS CREDIT:
IF YOU GET DECLINED

When a bank considers your application for business credit, they take a close look at your history with creditors and billers—as well as reviewing your company’s financials. These are some of the reasons applications are declined.

YOUR CREDIT

REASON FOR DECLINE 02-mini-icon-x.png
Your payment history is unsatisfactory.

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Your personal or business credit report shows a pattern of late or missed payments.

WHAT YOU CAN DO 02-mini-icon-star.png
Always pay on time. It can take years for blemishes to fall off your report completely, but consistent, on-time payments will help.

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REASON FOR DECLINE 02-mini-icon-x.png
You have a lack of established revolving credit.

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Your credit report doesn’t show a long history with credit cards or other creditors.

WHAT YOU CAN DO 02-mini-icon-star.png
Time is one of the most important factors in your credit history. The longer you can show a pattern of on-time payments, the better. Applying for a secured credit card is one way to build your history.

REASON FOR DECLINE 02-mini-icon-x.png
You’re using too much of your credit.

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Lenders dislike when you’re using all—or even most—of the credit that’s available to you.

WHAT YOU CAN DO 02-mini-icon-star.png
If you can, keep your utilization ratio—the percentage of credit you’re using vs. total available credit—as low as you can.

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REASON FOR DECLINE 02-mini-icon-x.png
You’ve filed for bankruptcy.

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A past personal or business bankruptcy may affect your chances of securing new credit.

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In the coming months and years, work to improve cash flow, boost revenue, cut expenses and improve your credit score. You can also look into a Community Development Financial Institution (CDFI) loan, which may have different requirements.

YOUR BUSINESS

REASON FOR DECLINE 02-mini-icon-x.png
Your business has insufficient revenue.

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The lender is concerned that your revenue can’t support increased credit.

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Consider a smaller amount or a collateral-backed loan or credit line.

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REASON FOR DECLINE 02-mini-icon-x.png
Your business doesn’t qualify.

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Not every service or business is eligible. For instance, to qualify for certain credit products, Bank of America requires your business to be under current ownership for at least two years. And some products have minimum revenue requirements.

WHAT YOU CAN DO 02-mini-icon-star.png
If your business hasn’t been around long enough, try again when it has. Or consider a CDFI loan, which may have different requirements.

REASON FOR DECLINE 02-mini-icon-x.png
Your business has insufficient cash flow coverage.

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The lender thinks you don’t have enough cash flow to make payments on new debt.

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Consider a smaller amount or a collateral-backed loan or credit line.

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YOUR BANKING RELATIONSHIP

REASON FOR DECLINE 02-mini-icon-x.png
You have sufficient credit with your bank already.

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Even if you have great qualifications, a bank may not want to exceed a certain amount of credit exposure.

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If you have unused credit lines, close them. If not, you may need to consider other sources.

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ADMINISTRATIVE REASONS

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REASON FOR DECLINE 02-mini-icon-x.png
It’s a duplicate application.

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If you’ve applied for the same product within the last 90 days, it’s considered a single application.

WHAT YOU CAN DO 02-mini-icon-star.png
Wait it out.

Getting turned down for business credit is frustrating, but knowing why it happened can help improve your chances next time.

To discuss your needs and find the solutions that work best for your business, please contact a small business banker.

 

 

 

Click here to download a PDF version of this infographic.

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